{"id":"crs_R46111","pid":"crs_R46111_0","input":"\tIntroduction\n\nMedicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS), to a diverse low-income population. This population includes children, pregnant women, adults, individuals with disabilities, and those aged 65 and older. Medicaid is authorized under Title XIX of the Social Security Act (SSA) and financed by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and enrollees' use of services.\nParticipation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. States design and administer their Medicaid programs based on broad federal guidelines. The federal government requires states to cover certain mandatory populations and services but allows states to cover other optional populations and services. In addition, several waiver and demonstration authorities in statute allow states to operate their Medicaid programs outside of certain federal rules. Due to this flexibility, factors such as eligibility, covered benefits, and provider payment rates vary substantially by state. At the federal level, the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) is responsible for administering Medicaid.\nThis report focuses on Medicaid eligibility for adults aged 65 and older\u00e2\u0080\u0094referred to as older adults\u00e2\u0080\u0094and adults under the age of 65 and children with disabilities. Specifically, this report examines the statutory provisions that provide Medicaid eligibility for individuals who are considered to be aged, blind, or disabled. These populations are of interest to lawmakers primarily for two reasons: (1) they are more likely to need LTSS, and (2) they account for a large share of Medicaid spending. \nOlder adults and individuals with disabilities are more likely to need LTSS due to physical limitations, cognitive impairment, or chronic disabling health conditions. Those with LTSS needs are a diverse group that range in age from very young children to older adults. Disabilities can be wide ranging, including, for example, physical limitations, visual impairments (i.e., blindness), intellectual or developmental disabilities, cognitive and behavioral health conditions, traumatic brain injuries, and HIV\/AIDS. \nFederal policymakers have an interest in understanding Medicaid eligibility as the program is an important source of coverage for those with long-term care needs. Medicaid provides LTSS coverage (e.g., extended nursing facility care, personal care, and other home and community-based services) that is generally not covered by Medicare or major health insurance plans offered in the private market. As the largest single payer of LTSS in the United States, Medicaid plays a key role in providing LTSS coverage. In 2016, total Medicaid LTSS spending (federal and state combined) was $154 billion, accounting for 42% of all LTSS expenditures nationally. \nBecause many older adults and individuals with disabilities use LTSS, they tend to account for a disproportionate share of Medicaid spending, which has implications for both federal and state budgets. In FY2016, Medicaid provided health care services to about 71 million enrollees, with expenditures of approximately $538 billion (federal and state combined). Although older adults and individuals with disabilities made up only about one-quarter (23%) of all Medicaid enrollees that year, they accounted for more than half (54%) of all benefit spending. Among all Medicaid enrollees, 30% of Medicaid spending in FY2013 was on LTSS, compared with 62% among older adults (i.e., aged) and 36% among individuals with disabilities (i.e., disabled).\nThe next section of this report provides an overview of Medicaid eligibility, followed by a summary of eligibility pathways for older adults and individuals with disabilities. The report then describes specific information about each eligibility pathway for older adults and individuals with disabilities. The Appendix includes summary tables with statutory references and general financial eligibility criteria for each of the eligibility pathways described in this report.\n\n\tOverview of Medicaid Eligibility\n\nEligibility for Medicaid is determined by both federal and state law, whereby states set individual eligibility criteria within federal minimum standards. This arrangement results in substantial variability in Medicaid eligibility across states. Therefore, the ways that individuals can qualify for Medicaid reflect state policy decisions within broad federal requirements. \nIn general, individuals qualify for Medicaid coverage by meeting the requirements of a specific eligibility pathway (sometimes referred to as an eligibility group) offered by the state. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them. Other eligibility groups are optional, meaning states may elect to cover them. Within this framework, states may have some discretion to determine certain eligibility criteria for both mandatory and optional eligibility groups. In addition, states may apply to CMS for a waiver of federal law to expand health coverage beyond the mandatory and optional eligibility groups specified in federal statute.\n\n\t\tEligibility Pathways\n\nAn \"eligibility pathway\" is the federal statutory reference(s) under Title XIX of the SSA that extends Medicaid coverage to one or more groups of individuals. Each eligibility pathway specifies\nthe group of individuals covered by the pathway (i.e., the categorical criteria), the financial requirements applicable to the group (i.e., the financial criteria), whether the pathway is mandatory or optional, and the extent of the state's discretion over the pathway's requirements.\nIndividuals who have met the categorical and financial requirements of a given eligibility pathway and are in need of Medicaid-covered LTSS must also meet additional requirements. In general, they must demonstrate the need for such care by meeting state-based level-of-care criteria. They may also be subject to a separate set of Medicaid financial eligibility rules to receive LTSS coverage. All Medicaid applicants, regardless of their eligibility pathway, must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship.\nNot all Medicaid enrollees have access to the same set of services. An applicant's eligibility pathway often dictates the Medicaid services that a program enrollee is entitled to (e.g., women eligible due to their pregnancy status are entitled to Medicaid pregnancy-related services). Most Medicaid beneficiaries receive services in the form of what is sometimes called \"traditional\" Medicaid\u00e2\u0080\u0094an array of required or optional medical assistance items and services listed in statute. However, states may furnish Medicaid in the form of alternative benefit plans (ABPs). In addition, states may also offer LTSS under traditional Medicaid or through a waiver program for individuals who meet state-based level-of-care criteria for services.\nLow-income older adults and individuals with disabilities may qualify for Medicaid through a number of eligibility pathways. In general, Medicaid data report the following broad categorical eligibility groups: children, adults, aged, and disabled. This report focuses on the eligibility of older adults and individuals with disabilities based on their age or disability status; that is, the pathways where the categorical criteria are being aged, blind, or disabled (sometimes referred to as \"ABD\" or \"ABD eligibility\"). \nIndividuals who qualify for Medicaid on the basis of being blind or disabled include adults under the age of 65 as well as children. Most (but not all) ABD pathways recognize blindness as a distinct condition from other disabilities and, as such, provide separate categorical criteria for this condition. However, when reporting data on broad categorical eligibility groups, CMS includes statutorily blind individuals in the \"disabled\" category. \nIndividuals with disabilities may also be eligible for Medicaid under pathways available more broadly to able-bodied children and adults for a number of reasons; for example, because they do not meet the definition of disability under an ABD eligibility pathway, have income or assets above certain limits, do not meet the state-based level-of-care criteria, or have one or more chronic condition(s) but have not developed a chronic-disabling condition. Adults under the age of 65 and children who qualify for Medicaid on the basis of a reason other than being blind or disabled are classified by CMS as \"adults\" and \"children,\" respectively.\nIndividuals applying for Medicaid may be eligible for the program through more than one pathway. In this situation, applicants may choose the pathway that would be most beneficial to them\u00e2\u0080\u0094both in terms of how income and sometimes assets are used to determine Medicaid eligibility, and in terms of the available services associated with each eligibility pathway. \nThis report classifies the ABD eligibility pathways for older adults and individuals with disabilities into two broad coverage groups: (1) Supplemental Security Income (SSI)-Related Pathways and (2) Other ABD Pathways (see Table 1 ). The SSI-Related Pathways consist of mandatory and optional eligibility groups that generally meet the requirements of the federal SSI program. These groups include older adults and individuals with disabilities who are SSI eligible, are deemed to be SSI eligible, or would be SSI eligible if not for a certain SSI program rule. \nThe Other ABD Pathways consist of optional eligibility groups that have levels of income or resources above SSI program rules. These groups generally use SSI categorical criteria to define older adults and individuals with disabilities and may use certain SSI financial criteria to determine their financial eligibility for Medicaid. Each of the specific pathways under these broad coverage groups are described in more detail below. Table A-1 in the Appendix lists the statutory references and certain eligibility criteria for each Medicaid ABD eligibility pathway.\n\n\t\t\tCategorical Eligibility Criteria\n\nMedicaid categorical eligibility criteria are the characteristics that define the population qualifying for Medicaid coverage under a particular eligibility pathway; in other words, the nonfinancial requirements that an individual must meet to be considered eligible under an eligibility group. Medicaid covers several broad coverage groups, including children, pregnant women, adults, individuals with disabilities, and individuals aged 65 and older (i.e., aged). Each of these broad coverage groups includes a number of distinct Medicaid eligibility pathways.\nHistorically, Medicaid eligibility was limited to poor families with dependent children who received cash assistance under the former Aid to Families with Dependent Children (AFDC) program, as well as poor aged, blind, or disabled individuals who received cash assistance under the SSI program. Medicaid eligibility rules reflected these historical program linkages\u00e2\u0080\u0094both in terms of the categories of individuals who were served, and because the financial eligibility rules were generally based on the most closely related social program for the group involved (e.g., AFDC program rules for low-income families with dependent children and pregnant women, and SSI program rules for aged, blind, or disabled individuals). Over time, Medicaid eligibility has expanded to allow states to extend coverage to individuals whose eligibility is not based on the receipt of cash assistance, including the most recent addition of the ACA Medicaid expansion population (i.e., individuals under the age of 65 with income up to 133% of the federal poverty level). Moreover, Medicaid's financial eligibility rules have been modified over time for certain groups.\n\n\t\t\tFinancial Eligibility Criteria\n\nMedicaid is a means-tested program that is limited to those with financial need. However, the criteria used to determine financial eligibility\u00e2\u0080\u0094income and, sometimes, resource (i.e., asset) tests\u00e2\u0080\u0094vary by eligibility group. These income and resource tests are expressed separately as an income standard and a resource standard . The income standard is expressed as a dollar amount or as a share of the federal poverty level (FPL). The resource standard is expressed as a dollar amount. The ways in which income and resources are counted for the purposes of applying the respective standard are referred to as the income - counting methodology and resource - counting methodology (see text box \"Medicaid Financial Criteria: Terminology\").\nUnder the income-counting methodology, certain types of income may be disregarded before comparing a person's (or household's) income against the income standard, enabling individuals with higher amounts of gross income to meet the income standard and qualify for Medicaid. Similarly, certain rules determine how an applicant's resources (i.e., assets) are counted before they are compared to the specified resource standard.\nFor most eligibility groups\u00e2\u0080\u0094nonelderly and nondisabled individuals, children under the age of 18, and adults and pregnant women under the age of 65\u00e2\u0080\u0094the financial criteria used to determine Medicaid eligibility are based on Modified Adjusted Gross Income (MAGI) income-counting rules. No resource or asset test is used to determine Medicaid financial eligibility for MAGI-eligible individuals. \nAlthough MAGI applies to most Medicaid eligible populations, certain populations (e.g., older adults and individuals with disabilities) are statutorily exempt from MAGI income-counting rules. Instead, Medicaid financial eligibility for MAGI-exempted populations is based on the income-counting rules that match the most closely related social program for the group involved (e.g., SSI program rules for the aged, blind, or disabled eligibility groups). Thus, SSI program rules form the foundation of Medicaid eligibility for older adults and individuals with disabilities under mandatory and optional eligibility pathways and include both an income and a resource or asset test (see the next section for more information on SSI rules).\nHowever, under optional SSI-Related and Other ABD eligibility pathways, states may modify SSI program rules when determining income- and resource-counting methodologies. For example, some optional eligibility pathways allow states to choose their own income- or resource-counting methodology. Other eligibility pathways allow states to use Section 1902(r)(2) of the SSA, which lets them choose more liberal income- or resource-counting methodologies than those under the SSI program. Thus, for certain optional eligibility pathways, a state can choose to include or disregard certain sources of income or resources, in part or in whole, when determining whether an applicant meets the income or resource standards for that optional eligibility pathway. (See Table A-2 in the Appendix , which lists the financial eligibility criteria\u00e2\u0080\u0094income standard and counting methodologies and resource standard and counting methodologies\u00e2\u0080\u0094for each Medicaid eligibility pathway identified in this report.)\nIn addition, state Medicaid programs are required to establish an Asset Verification System (AVS) that meets certain minimum requirements to determine and re-determine Medicaid eligibility for aged, blind, or disabled Medicaid applicants and enrollees. Further discussion of AVS is beyond the scope of this report.\n\n\t\tMedicaid Eligibility and SSI Program Rules\n\nSSI program rules form the foundation of Medicaid categorical and financial eligibility criteria for older adults and individuals with disabilities. Medicaid generally uses SSI categorical criteria to define the ABD populations. In addition, Medicaid often uses or adapts SSI's financial standards and counting methodologies to specify the financial eligibility requirements applicable to the SSI-Related Pathways and the Other ABD Pathways. Thus, understanding SSI program rules is important to understanding Medicaid eligibility rules for older adults and individuals with disabilities. \nSSI is a federal assistance program authorized under Title XVI of the SSA that provides monthly cash payments to aged, blind, or disabled individuals who have limited income and resources. SSI is intended to provide a guaranteed minimum income to adults who have difficulty covering their basic living expenses due to age or disability and who have little or no Social Security or other income. It is also designed to supplement the support and maintenance of needy children under the age of 18 who have severe disabilities. Unlike Medicaid, SSI eligibility requirements and benefit levels are based on nationally uniform standards. SSI is administered by the Social Security Administration but is not part of the Old Age, Survivors, and Disability Insurance program, commonly known as Social Security. \nThe following sections provide a brief overview of SSI's categorical and financial eligibility criteria. For more information on these and other SSI criteria, see CRS Report R44948, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI): Eligibility, Benefits, and Financing . \n\n\t\t\tSSI Categorical Eligibility Criteria\n\nTo be categorically eligible for SSI, a person must be an \"aged, blind, or disabled individual,\" as defined in Title XVI of the SSA ( Table 2 ). The term \"aged\" refers to individuals aged 65 and older. The term \"blind\" refers to individuals of any age who have central visual acuity of 20\/200 or less in the better eye with the use of a correcting lens, or a limitation in the fields of vision so that the widest diameter of the visual field subtends an angle of 20 degrees or less (i.e., tunnel vision). \nAdults aged 18 and older are considered \"disabled\" if they are unable to engage in any substantial gainful activity (SGA) by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. The Social Security Administration uses a monthly earnings standard to determine whether an individual's work activity constitutes SGA. The agency adjusts this standard annually to reflect changes in national wage levels. In 2019, the SGA earnings standard is $1,220 per month. (The SGA earnings standard is a proxy measure for total disability; it is not used to determine financial eligibility for SSI.) Adults generally qualify as disabled if they have an impairment (or combination of impairments) of such severity that they are unable to perform any kind of substantial work that exists in the national economy in significant numbers, taking into consideration their age, education, and work experience.\nChildren under the age of 18 are considered \"disabled\" if they have a medically determinable physical or mental impairment that (1) results in marked and severe functional limitations and (2) can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months. Children typically qualify as disabled if they have a severe impairment (or combination of impairments) that limits their ability to engage in age-appropriate childhood activities at home, in childcare, at school, or in the community. In addition, the child's earnings must not exceed the SGA standard.\nThe Social Security Administration periodically reevaluates blind or disabled SSI recipients to determine if they continue to meet the applicable definition of blindness or disability. In general, the Social Security Administration schedules continuing disability reviews (CDRs) of blind or disabled SSI recipients at least once every three to seven years, depending on the likelihood of medical improvement. In addition, the agency reevaluates child SSI recipients under the adult definition of disability when they attain age 18.\n\n\t\t\tSSI Financial Eligibility Criteria\n\nTo be financially eligible for SSI, a person must have income and resources within certain limits ( Table 2 ). The SSI income standard is equal to the SSI federal benefit rate (FBR), which is the maximum monthly SSI payment available under the program. In 2019, the SSI FBR is $771 per month for an individual and $1,157 per month for a married couple if both members are SSI eligible. Expressed as a share of the federal poverty level (FPL), the SSI FBR in 2019 is about 74% of FPL for an individual and 82% of FPL for a couple. The SSI FBR is adjusted annually for inflation by the same cost-of-living adjustment (COLA) applied to Social Security benefits. The SSI resource standard is $2,000 for an individual and $3,000 for a couple. These amounts are not adjusted for inflation and have remained at their current levels since 1989.\nUnder the SSI program, a person's income and resources are counted against the income and resource standards unless they are excluded by federal law or by the Commissioner of Social Security pursuant to discretionary authority provided in statute. The SSI income-counting methodology excludes, among other things, the first $20 per month of any income, as well as the first $65 per month of earned income plus one-half of any earnings above $65. These amounts are not adjusted for inflation and have remained in place since SSI was enacted in 1972. The SSI resource-counting methodology excludes, among other things, a person's primary residence, household goods and personal effects, one automobile used for transportation, and property essential to self-support.\nFor an eligible individual without an eligible spouse, the SSI income- and resource-counting methodologies are generally person-based, meaning the program counts the income and resources owned or used by the individual to determine eligibility for SSI and the amount of the payment. In certain situations, however, SSI may count a portion of the income or resources of certain ineligible family members toward the eligible individual's income or resource standard. This process, known as \"deeming,\" applies primarily to eligible children under the age of 18 who live in the same household as their ineligible parent(s) and to eligible married adults who live in the same household as their ineligible spouse. SSI deeming rules are complex and beyond the scope of this report.\nThe Social Security Administration calculates a person's countable income and resources (i.e., gross income and resources less applicable exclusions) and then subtracts those amounts from the income and resource standards to determine financial eligibility and the amount of the cash payment (if any). Individuals with countable income and resources at or below the applicable standards are eligible for SSI. The Social Security Administration periodically reevaluates an SSI recipient's financial circumstances (i.e., income, resources, and living arrangements) to determine if the person is still eligible for SSI and receiving the correct payment amount. Automatic redeterminations are scheduled annually or once every six years, depending on the likelihood of change in a recipient's circumstances. \n\n\t\tAdditional Eligibility Requirements for LTSS Coverage\n\nMedicaid enrollees\u00e2\u0080\u0094including the ABD populations\u00e2\u0080\u0094may have long-term care needs as well. In general, to receive Medicaid LTSS coverage, enrollees must also meet state-based level-of-care eligibility criteria. In other words, they must demonstrate the need for long-term care. In addition, such individuals may be subject to a separate set of Medicaid financial eligibility rules to receive LTSS coverage.\nLevel-of-care eligibility criteria for most Medicaid-covered LTSS specify that individuals must require care provided in a nursing facility or other institutional setting. A state's institutional level-of-care criteria, in general, are also applied to Medicaid Home and Community-Based Services (HCBS) eligibility. That is, eligibility for Medicaid LTSS, both institutional care and most HCBS, is tied to needs-based criteria that require an individual to meet an institutional level-of-care need. \nThere is no federal definition for Medicaid institutional level-of-care, and each state defines its level-of-care criteria. To define institutional level-of-care criteria, states may use \"functional\" criteria, such as an individual's ability to perform certain activities of daily living (ADLs). States may also use \"clinical\" level-of-care criteria, such as the diagnosis of an illness, injury, disability or other medical condition; treatment and medications; and cognitive status or behavioral issues, among other criteria. Most states use a combination of functional and clinical criteria in defining the need for LTSS.\nCertain optional ABD eligibility pathways (as described in the section entitled \" Other ABD Pathways \") are available for older adults and individuals with disabilities \u00e2\u0080\u0094Special Income Level, Special Home and Community-Based Waiver Group, Home and Community-Based Services (HCBS) State Plan, and Katie Beckett. These optional eligibility pathways establish eligibility to Medicaid, in general, along with Medicaid-covered LTSS for individuals who receive institutional care, or for those who need the level of care provided in an institution and receive Medicaid-covered HCBS. Medicaid enrollees in other mandatory or optional eligibility pathways may also be eligible to receive LTSS if they meet the level of care criteria.\nApplicants seeking Medicaid-covered LTSS are subject to a separate set of Medicaid financial eligibility rules (e.g., limits on the value of home equity and asset transfer rules). These additional financial rules are in place to ensure that program applicants apply their assets toward the cost of their care and do not divest them to gain eligibility sooner. In addition, Medicaid specifies rules for equitably allocating income and assets to non-Medicaid-covered spouses to determine LTSS coverage eligibility for nursing facility services and some HCBS. Commonly referred to as spousal impoverishment rules , these rules are intended to prevent the impoverishment of the spouse who does not need LTSS.\nMedicaid has another set of rules for the treatment of income after an individual is determined eligible for certain Medicaid-covered LTSS, referred to as Post-Eligibility Treatment of Income (PETI) rules. In general, eligible beneficiaries whose income exceeds specified amounts are required to apply their income toward the cost of their care. Within federal guidelines, a participant may retain a certain amount of income for personal use based on the services he or she receives. This amount varies by care setting (i.e., institutional versus HCBS). These specific financial eligibility rules for Medicaid-covered LTSS are not described in this report; for more information, see CRS Report R43506, Medicaid Financial Eligibility for Long-Term Services and Supports .\nIn addition, most states offer Medicaid-covered LTSS under waiver programs that operate outside requirements under the Medicaid State plan. Under SSA Section 1915(c), states can cover HCBS, which includes a wide variety of nonmedical, social, and supportive services that allow individuals who require an institutional level of care to live independently in the community. SSA Section 1915(c) authorizes the HHS Secretary to waive requirements regarding comparability of services and offering services statewide (i.e., referred to as statewideness). In addition, states may waive certain income and resource rules applicable to persons in the community, so that a spouse's or parent's income (and, to some extent, resources) are not considered available to the applicant for the purposes of determining Medicaid financial eligibility. States may use Section 1915(c) concurrently with other waiver authorities. For example, states may combine Section 1915(b) and 1915(c) authorities to offer mandatory managed care for HCBS. States may also limit or cap program enrollment in the waiver. For each Section 1915(c) waiver program, states must identify the Medicaid eligibility groups receiving waiver services from those groups already covered under the Medicaid State plan. In doing so, states may include both mandatory and optional groups.\nTo expand LTSS coverage, states may use Section 1115 of the SSA to waive certain state plan requirements. States have used Section 1115 waivers to expand eligibility to groups beyond those the statute allows, to cap program enrollment, and to impose waiting periods prior to enrollment. States have also used Section 1115 waiver programs to modify the income- and resource-counting rules and methodologies for specified groups\u00e2\u0080\u0094for example, to encourage participation in managed LTSS, and to otherwise liberalize or limit income-counting rules for specified subpopulations. Moreover, states have used Section 1115 waiver authority to modify spend-down requirements, and to modify periods of retroactive eligibility and\/or periods for eligibility redeterminations, among other eligibility-related purposes. Further discussion of Medicaid eligibility under these waiver programs is beyond the scope of this report.\n\n\tSSI-Related Pathways\n\nSSI-Related Pathways consist of mandatory and optional eligibility groups that meet the general requirements of the SSI program. These groups include aged, blind, or disabled individuals who are SSI eligible, deemed to be SSI eligible, or would be SSI eligible if not for a certain SSI program rule. This report organizes the SSI-Related Pathways into three subgroups, each of which contains multiple eligibility pathways: (1) SSI Recipients, (2) Special Groups of Former SSI Recipients, and (3) Other SSI-Related Groups.\n\n\t\tSSI Recipients\n\nThe pathways for SSI Recipients extend Medicaid coverage to individuals who are enrolled in the SSI program and who either receive SSI, are deemed to receive SSI, or receive only state supplementary payments (SSPs, discussed below). States are generally required to provide Medicaid coverage for SSI recipients. However, states may use more restrictive eligibility criteria than those of the SSI program if they were using such criteria in 1972. Individuals in receipt of SSI for a given month are usually eligible for Medicaid for that month. SSI recipients typically become ineligible for Medicaid whenever their cash payments are suspended or terminated. In December 2018, 8.1 million individuals received SSI or federally administered SSP. \n\n\t\t\tSSI Recipients in \"1634 States\" or \"SSI Criteria States\"\n\nUnless states elect the option discussed in the next section, they must provide Medicaid coverage for all SSI recipients. Most states that provide Medicaid coverage for all SSI recipients do so automatically. Section 1634 of the SSA allows states to enter into an agreement with the Social Security Administration for the agency to conduct Medicaid eligibility determinations and redeterminations for SSI recipients on the state's behalf. In these states, an SSI application is also an application for Medicaid, and an SSI redetermination is also a redetermination of Medicaid eligibility. States that choose to contract with the Social Security Administration under Section 1634 of the SSA are known as \"1634 states.\" In 2019, 34 states and the District of Columbia provide Medicaid coverage for SSI recipients using this option (see Table 3 ).\nSome states that provide Medicaid coverage for all SSI recipients choose to conduct their own Medicaid eligibility determinations and redeterminations. These states use the same standards and methodologies of the SSI program to determine Medicaid eligibility but require SSI recipients to file a separate Medicaid application with the state or local Medicaid office. States that elect this option are known as \"SSI criteria states.\" In 2019, eight states provide Medicaid coverage for SSI recipients using this option (see Table 3 ).\n\n\t\t\tSSI Recipients and Other ABD Individuals in \"209(b) States\"\n\nUnder Section 1902(f) of the SSA, states have the option of applying eligibility criteria that are more restrictive than those of the SSI program in determining Medicaid eligibility for SSI recipients. However, any more restrictive eligibility criteria that are applied to SSI recipients may not be more restrictive than those contained in the state's Medicaid plan that was in effect on January 1, 1972. States that provide Medicaid coverage for only those SSI recipients who meet more restrictive eligibility criteria than SSI criteria are known as \"209(b) states,\" after the section of the Social Security Amendments of 1972 (P.L. 92-603) that established the option. In 2019, eight states provide Medicaid coverage for SSI recipients using this option (see Table 3 ).\n209(b) states apply at least one eligibility criterion that is more restrictive than SSI criteria in determining Medicaid eligibility for SSI recipients, such as a stricter definition of blindness or disability, a lower income or resource standard, a less generous methodology for counting income or resources, or some combination of those factors. For example, New Hampshire imposes a longer duration-of-impairment requirement for individuals with a disability other than blindness (48 months instead of SSI's 12-month standard), and Virginia limits ownership of property contiguous to an individual's home (i.e., land other than the lot occupied by the home) to $5,000. 209(b) states may also use eligibility criteria that are more liberal than those of the SSI program under the authority provided in Section 1902(r)(2) of the SSA; however, they must retain at least one eligibility criterion that is more restrictive than SSI criteria to remain in 209(b) status.\n209(b) states are required to deduct the value of SSI and any optional state supplementary payments (discussed below) from an SSI recipient's income in determining Medicaid eligibility. They must also allow SSI recipients to \"spend down\" or deduct incurred medical expenses from their income to the point where they meet the applicable income standard needed for Medicaid eligibility. Because SSI program rules form the foundation of Medicaid eligibility criteria for the ABD populations, 209(b) states may apply their more restrictive eligibility criteria to most other eligibility pathways for ABD individuals, subject to the same terms and conditions discussed above.\n\n\t\t\tIndividuals Eligible for Only Optional SSPs\n\nSome states complement federal SSI payments with optional state supplementary payments (SSPs), which are made solely with state funds. SSPs are intended to help individuals whose basic needs are not fully met by the SSI federal benefit rate (FBR). States may provide SSPs to all SSI recipients, or they may limit payments to certain individuals, such as residents of domiciliary-care facilities or blind individuals. SSP amounts, standards, and methodologies are determined by the states, pursuant to certain federal requirements. States may self-administer their SSP program (i.e., state administered SSP), or they may contract with the Social Security Administration for the agency to administer the program on the state's behalf (i.e., federally administered SSP). In 2019, 44 states and the District of Columbia provide optional SSPs to some or all SSI recipients.\nStates have the option to provide Medicaid coverage for individuals who receive only an optional SSP. Individuals receive an optional SSP, but no SSI payment, if their countable income is at least equal to the SSI income standard but less than the state-established income standard used to determine optional SSPs. The \"SSP income standard\" is effectively the combined amount of the SSI FBR and the maximum applicable SSP. For example, in 2019, the SSP income standard for a disabled individual living independently in California is $931.72 per month: the SSI FBR of $771 per month plus the maximum applicable SSP of $160.72 per month. In this case, the disabled individual would receive only an optional SSP if his or her countable income were at least $771 per month but less than $931.12 per month.\nIn general, states must apply the same standards and methodologies to individuals under this pathway that they apply to individuals receiving SSI, including any standards or methodologies that are more restrictive than those of the SSI program in the case of 209(b) states. However, 209(b) states and SSI criteria states that self-administer their SSP program may apply a more restrictive income-counting methodology to individuals under this pathway than the one they apply to individuals receiving SSI. According to the Medicaid and CHIP Payment and Access Commission (MACPAC), 43 states and the District of Columbia provide Medicaid for individuals who receive only an optional SSP.\n\n\t\t\tIndividuals Receiving Mandatory SSPs\n\n(This pathway is closed to new enrollment and applies to relatively few people.)\nSection 212 of P.L. 93-66 requires nearly all states to maintain the December 1973 income levels of individuals who were transferred from the former federal-state cash assistance programs for the aged, blind, and disabled (hereinafter \"former adult assistance programs\") to the SSI program in January 1974. To receive federal Medicaid funding, states must provide a special payment, known as a mandatory SSP, to individuals who were converted from the former adult assistance programs to the SSI program if the individual's SSI payment plus other income from the current month is less than his or her December 1973 state grant amount plus certain other income. The amount of the mandatory SSP is the difference between the current SSI payment and the individual's December 1973 payment under the former adult assistance program. Section 13(c) of P.L. 93-233 requires states to provide Medicaid coverage for individuals who receive mandatory SSPs. \n\n\t\t\tIndividuals with Earnings Above Certain Limits (1619[a] and 1619[b])\n\nAll states (including 209[b] states) are required to provide Medicaid coverage for individuals who are enrolled in the SSI program but have earnings above certain SSI limits. Under Section 1619(a) and 1619(b) of the SSA, individuals who would continue to be eligible to receive SSI if not for their earnings may be deemed to be receiving SSI for Medicaid eligibility purposes if they continue to work and meet certain other requirements. To qualify under the 1619 provisions, individuals must have been eligible for and received SSI for at least one month before the month the 1619 determination is made. (Adults aged 65 and older may qualify for the 1619 provisions, provided they meet the SSI definition of blindness or disability.) Individuals who live in 209(b) states must also have been eligible for Medicaid in the month immediately prior to becoming eligible for 1619 status.\nSection 1619(a) of the SSA provides for the continuation of cash payments for disabled SSI recipients with earnings that would otherwise disqualify them from SSI. Under this provision, disabled individuals who have earnings at or above the substantial gainful activity (SGA) standard ($1,220 per month in 2019) but whose countable income is less than the SSI income standard are eligible to receive special SSI payments in lieu of regular SSI payments. (SSI does not require blind individuals to meet the SGA standard; thus, 1619[a] does not apply to blind SSI recipients.) These 1619(a) payments are calculated in the same manner as regular SSI payments and are payable for as long as an individual performs SGA and meets all other SSI eligibility criteria. In addition to providing special payments, Section 1619(a) requires all states to provide Medicaid coverage for 1619(a) recipients on the same basis as they provide Medicaid coverage for regular SSI recipients. \nSection 1619(b) of the SSA requires all states to provide Medicaid coverage for blind or disabled individuals who would continue to be eligible for regular SSI payments or 1619(a) payments if not for their earnings. Under this provision, blind or disabled individuals who lose SSI eligibility because their countable income exceeds the SSI income standard (or applicable SSP income standard) due to excess earnings are deemed to be receiving SSI for Medicaid eligibility purposes. To qualify under this pathway, individuals must (1) continue to be blind or disabled, (2) meet all SSI financial eligibility requirements except for earnings, (3) need Medicaid to continue working, and (4) have earnings that are considered insufficient to provide a reasonable equivalent of the benefits that would be provided if they did not have those earnings (i.e., SSI, SSP, Medicaid, and publically funded personal or attendant care).\nThe Social Security Administration uses an annual earnings standard to determine when 1619(b) eligibility ends. The agency calculates this standard based on the sum of\nthe amount of gross earnings that would reduce the SSI payment (or the combined amount of the SSI payment and the SSP) to zero for an individual living independently with no other income, and the state's average annual per capita Medicaid expenditures for blind or disabled SSI recipients. \nThe standard varies from state to state, depending on the amount of the SSP (if any) and per capita Medicaid expenditures. In 2019, the annual earnings standard for disabled 1619(b) participants ranges from $27,826 in Alabama to $66,452 in Connecticut, with the median being $36,548. If an individual's annual earnings exceed the predetermined standard, then the Social Security Administration will determine his or her eligibility using an individualized standard that takes into account the person's actual Medicaid expenditures, as well as the value of any publicly funded personal or attendant care that the individual receives from a program other than Medicaid.\n\n\t\tSpecial Groups of Former SSI Recipients\n\nThe pathways for Special Groups of Former SSI Recipients extend Medicaid coverage to special former SSI\/SSP recipients who would continue to be eligible for SSI\/SSP if not for receipt of certain Social Security benefits. Special former recipients are deemed to be receiving SSI\/SSP for Medicaid eligibility purposes; however, unlike 1619 participants, they no longer have a current connection to the SSI program (i.e., they have been formally terminated from the rolls). In determining Medicaid eligibility, most states must disregard the applicable Social Security benefit or increases in that benefit from the special former recipient's countable income. In most instances, 209(b) states have the option to disregard all, some, or none of the applicable Social Security benefit or increases in that benefit from the special former recipient's countable income in determining Medicaid eligibility. However, 209(b) states must provide Medicaid coverage for special former recipients on the same basis as they provide Medicaid coverage for individuals who receive SSI\/SSP.\n\n\t\t\tRecipients of Social Security COLAs After April 1977 (\"Pickle Amendment\")\n\nSection 503 of P.L. 94-566 generally requires states to provide Medicaid coverage for individuals who would continue to be eligible for SSI\/SSP if not for increases in their Social Security benefits due to COLAs. Individuals qualify under this pathway it they\nare receiving Social Security benefits, lost SSI\/SSP but would still be eligible for those benefits if Social Security COLAs received since losing SSI\/SSP were deducted from their income, and were eligible for and receiving SSI\/SSP concurrently with Social Security for at least one month after April 1, 1977.\n209(b) states may exclude all, some, or none of the Social Security benefit increases that caused ineligibility for SSI\/SSP. This pathway is often known as the \"Pickle Amendment\" after the late Representative J.J. Pickle.\n\n\t\t\tDisabled Widow(er)s Receiving Benefit Increases Under P.L. 98-21 (\"ARF Widow[er]s\")\n\n(This pathway is closed to new enrollment and applies to relatively few people.)\nSocial Security provides widow(er)'s benefits starting at age 60, or at age 50 if the individual is disabled and meets certain other criteria. The amount of the aged or disabled widow(er)'s benefit is based on the deceased insured worker's past earnings from covered employment, subject to a permanent reduction for each month of entitlement before the widow(er)'s full retirement age (65-67, depending on year of birth). Under P.L. 98-21 , lawmakers eliminated the additional reduction factor (ARF) for disabled widow(er)s aged 50-59, meaning their reduction penalty for claiming benefits before their full retirement age was capped at the percentage applicable to aged widow(er)s who first claim at age 60.\nAll states (including 209[b] states) are required to provide Medicaid coverage for individuals who would continue to be eligible for SSI\/SSP if not for increases in their widow(er)'s benefits due to the elimination of the ARF (known as \"ARF Widow[er]s\"). Individuals qualify under this pathway if they\nwere entitled to Social Security benefits in December 1983 and received disabled widow(er)'s benefits and SSI\/SSP in January 1984, lost SSI\/SSP eligibility because of the elimination of the ARF, have been continuously entitled to widow(er)'s benefits since January 1984, filed for Medicaid continuation before July 1, 1988 (or a slightly later date in some cases), and would continue to be eligible for SSI\/SSP if the value of the increase in disabled widow(er)'s benefits under P.L. 98-21 and any subsequent COLAs were deducted from their countable income. \n\n\t\t\tDisabled Adult Children\n\nDisabled adult children of retired, disabled, or deceased insured workers typically qualify for Social Security disabled adult child's (DAC) benefits if they are at least age 18 and became disabled before they attained age 22. States are generally required to provide Medicaid coverage for individuals who lose eligibility for SSI\/SSP due to entitlement to or an increase in DAC benefits. Individuals qualify under this pathway if they\nlose eligibility for SSI\/SSP due to receipt of DAC benefits on or after July 1, 1987, and would continue to be eligible for SSI\/SSP if not for their entitlement to or an increase in DAC benefits.\n209(b) states may exclude all, some, or none of the DAC benefit or increases in that benefit that caused ineligibility for SSI\/SSP.\n\n\t\t\tWidow(er)s Not Entitled to Medicare Part A (\"Early Widow[er]s\")\n\nStates are generally required to provide Medicaid coverage for individuals aged 50 to 64 who lose eligibility for SSI\/SSP due to entitlement to Social Security widow(er)'s benefits but who are not yet entitled to Medicare Part A (Hospital Insurance). Individuals qualify under this pathway if they\nare at least age 50 but have not yet attained age 65, received SSI\/SSP in the month before their widow(er)'s benefits began, are not entitled to Medicare Part A, and would continue to be eligible for SSI\/SSP if not for their entitlement widow(er)'s benefits. \nEligibility for Medicaid under this pathway continues until the individual becomes entitled to Medicare Part A. 209(b) states may exclude all, some, or none of the widow(er)'s benefit that caused ineligibility for SSP\/SSI. \n\n\t\t\tRecipients of a 1972 Social Security COLA\n\n(This pathway is closed to new enrollment and applies to relatively few people.)\nSection 249E of P.L. 92-603 requires states to provide Medicaid coverage for individuals who would be eligible for SSI\/SSP in the absence of a Social Security COLA enacted in 1972 under P.L. 92-336. Individuals qualify under this provision if they\nwere entitled to Social Security benefits in August 1972, were receiving cash assistance under the former adult assistance programs in August 1972 (or would have been eligible for such assistance in certain instances), and would be eligible for SSI\/SSP had the COLA under P.L. 92-336 not been applied to their Social Security benefits.\n\n\t\tOther SSI-Related Groups\n\nThe pathways for Other SSI-Related Groups extend Medicaid coverage to certain individuals who were eligible for Medicaid just prior to SSI's start in 1974, and to aged, blind, or disabled individuals who would be eligible for SSI\/SSP today if not for a certain requirement in those programs. Although these groups may have received SSI\/SSP in the past, their eligibility for Medicaid under these pathways is not conditional on their prior receipt of such payments.\n\n\t\t\tGrandfathered 1973 Medicaid Recipients\n\n(These pathways are closed to new enrollment and apply to relatively few people.)\nSections 230 to 232 of P.L. 93-66 require states to provide Medicaid to three groups that were eligible for Medicaid in December 1973: (1) essential spouses, (2) institutionalized individuals, and (3) blind or disabled individuals.\nEssential spouses are the spouses of cash assistance recipients under the former adult assistance programs whose needs were included in determining the amount of the cash payment to the recipient. Institutionalized individuals are inpatients of medical institutions or residents of intermediate care facilities who received cash assistance under the former adult assistance programs (or who would have been eligible for such assistance if they were not institutionalized). Blind or disabled individuals are individuals who met the state-established criteria for blindness or disability under the state's Medicaid plan in December 1973.\nStates must provide Medicaid for these groups if they continue to meet the respective eligibility criteria that were in effect in December 1973, in addition to meeting certain other requirements.\n\n\t\t\tIndividuals Eligible For but Not Receiving SSI\/SSP\n\nStates have the option to provide Medicaid coverage for aged, blind, or disabled individuals who meet the income and resource requirements for SSI\/SSP but who do not receive cash payments. Individuals may be eligible for but not receiving SSI\/SSP because they have not applied for benefits. According to estimates from HHS' Office of the Assistant Secretary for Planning and Evaluation, about 60% of single adults aged 18 and older who were eligible for SSI in 2015 participated in the program that year. In 209(b) states, eligibility under this pathway is determined before the deduction of any incurred medical expenses recognized under a state plan (i.e., before spend-down).\n\n\t\t\tIndividuals Who Would be Eligible for SSI\/SSP if They Were Not Institutionalized\n\nResidents of public institutions are generally ineligible for SSI. However, residents of certain medical institutions are eligible for a reduced SSI payment if more than 50% of the cost of their care is paid for by Medicaid (or in the case of a child under the age of 18, by any combination of Medicaid and private health insurance). The reduced SSI payment, known as a personal needs allowance (PNA), is used to pay for small comfort items not provided by the facility. Capped at $30 per month, or $60 per month for couples in certain situations, the PNA is not indexed to inflation and has remained at its current level since July 1988. Some states supplement the PNA (i.e., provide an SSP) for institutionalized individuals who meet certain requirements. Any countable income reduces the PNA for institutionalized individuals; however, the SSI\/SSP income standard is used in determining their eligibility for the SSI program. \nStates have the option to provide Medicaid coverage for institutionalized individuals who are ineligible for SSI\/SSP because of the lower income standards used to determine eligibility for the PNA but who would be eligible for SSI\/SSP if they were not institutionalized. In other words, states may provide Medicaid to individuals who reside in certain Title XIX-reimbursable institutions who have countable income at or above the PNA standard ($30 for an individual) but within the SSI\/SSP income standard ($771 for an individual in 2019).\n\n\t\t\tIndividuals Who Would be Eligible for SSI\/SSP if Not for Criteria Prohibited by\u00c2 Medicaid\n\nStates are generally required to provide Medicaid coverage for aged, blind, or disabled individuals who would be eligible for SSI\/SSP if not for an eligibility requirement used in those programs that is prohibited by Medicaid. For example, Section 4735 of the Balanced Budget Act of 1997 ( P.L. 105-33 ) requires states to exclude from eligibility determinations certain settlement payments made to hemophilia patients who were infected with HIV. However, federal law does not exempt such payments from being counted as income or resources under the SSI program. CMS regulations require states to provide Medicaid coverage for individuals who lost SSI eligibility because they received settlement payments.\n\n\tOther ABD Pathways\n\nStates may extend Medicaid coverage to older adults and individuals with disabilities who have higher levels of income or resources than those permitted by SSI program rules under optional aged, blind, or disabled (ABD) eligibility pathways. In addition, some optional ABD eligibility pathways allow states to choose their own methodology for counting income and resources; others permit states to use less restrictive income- or resource-counting methodologies compared with SSI rules. As previously mentioned, certain optional eligibility pathways for older adults and individuals with disabilities (e.g., Special Income Level, Special Home and Community-Based Waiver Group, Home and Community-Based Services [HCBS] State Plan, and Katie Beckett) establish eligibility to Medicaid, in general, along with Medicaid-covered LTSS. In addition, Medicaid gives states the option to extend eligibility to individuals who \"spend down\" or deplete their income on medical expenses, including LTSS, to specified levels. Therefore, some individuals with higher levels of income and resources compared with those permitted under SSI rules may be Medicaid-eligible. \nThis section describes the following optional Medicaid eligibility pathways for ABD individuals: (1) Poverty-Related; (2) Special Income Level; (3) Special Home and Community-Based Services Waiver Group; (4) Home and Community-Based Services State Plan Option; (5) Katie Beckett; (6) Buy-In Groups; and (7) Medically Needy.\n\n\t\tPoverty-Related\n\nEnacted under the Omnibus Budget Reconciliation Act of 1986 (OBRA '86; P.L. 99-509 ), the optional Poverty-Related eligibility pathway allows states to cover aged and\/or disabled individuals who have incomes that are higher than SSI standards, with family income up to 100% of the federal poverty level (FPL), provided that the state also covers certain eligible pregnant women and children. Aged individuals are defined as being 65 years old and older, and disabled individuals must meet the SSI program's applicable definition of disability. States may employ a reasonable definition of a \"family\" for purposes of the individual's countable income. In general, states must use SSI rules in determining what income is counted or not counted. An individual's resources cannot exceed the SSI resource standard with SSI rules used in determining countable resources. However, states may use Section 1902(r)(2) of the SSA to disregard additional countable income or resources. In 2018, 24 states and the District of Columbia (DC) offered the optional Poverty-Related eligibility pathway. Seventeen states and DC had an income standard that was set at 100% of the FPL under the Poverty-Related pathway; seven maintained a more restrictive income standard than 100% of the FPL. For example, Florida's standard was 88% of the FPL, and Idaho's was 77% of the FPL.\n\n\t\tSpecial Income Level\n\nThe optional Special Income Level eligibility pathway allows states to establish a higher income standard for Medicaid coverage of nursing facility services and other institutional services, sometimes referred to as the special income rule , or the \"the 300% rule.\" To be eligible for Medicaid through this pathway, individuals must\nrequire care provided by a nursing facility or other medical institution for no less than 30 consecutive days, and have an income standard that does not exceed a specified level\u00e2\u0080\u0094no greater than 300% of the SSI FBR (i.e., the maximum SSI payment), which is approximately 222% of the FPL.\nOnly the applicant's income (i.e., no income from spouses) is counted, and all income sources are counted in determining eligibility; there are no income disregards or deductions. For individuals seeking eligibility based on being aged 65 and older, or having blindness, or disability, the SSI resource standard and resource-counting methodology are used to determine eligibility. States may also use Section 1902(r)(2) of the SSA to disregard additional income or resources. Under the Special Income Level pathway, eligibility starts on the first of the 30 days that the individual resides in an institution. Thus, Medicaid can cover all of the care an individual receives in a nursing facility. In 2018, 42 states and the District of Columbia used the Special Income Level to enable persons to qualify for Medicaid coverage of institutional care. \n\n\t\tSpecial Home and Community-Based Services Waiver Group\n\nThe Special Home and Community-Based Services (HCBS) Waiver Group eligibility pathway allows states to extend Medicaid eligibility to individuals receiving HCBS under a waiver program who require the level of care provided by a nursing facility or other medical institution. This eligibility pathway is sometimes referred to as the \"217 Group\" in reference to the specific regulatory section for this group, 42 C.F.R. Section 435.217. States use the highest income and resource standard of a separate eligibility group covered by the state plan under which an individual would otherwise qualify if institutionalized. For example, states that offer the Special Income Level pathway described above can extend eligibility to waiver program participants with income up to 300% of the SSI FBR. States must use the income- and resource-counting methodologies used to determine eligibility for this same eligibility group. States may also apply Section 1902(r)(2)'s more liberal income-counting rules to this group.\n\n\t\tHome and Community-Based Services State Plan Option\n\nStates may establish an independent eligibility pathway into Medicaid through the Home and Community-Based Services (HCBS) State Plan option. This option is made available by extending the required and optional Medicaid state plan services, sometimes referred to as \"traditional\" Medicaid services, to individuals who are also receiving a targeted package of HCBS state plan services. In general, receipt of the Medicaid HCBS State Plan option is conditional on an individual having a need for long-term care (i.e., individuals must meet certain level-of-care criteria). Unlike Section 1915(c) HCBS waiver programs, which require that eligible individuals need the level of care provided in an institution (e.g., hospital or nursing facility), the HCBS state plan option delinks this requirement so that individuals with long-term care needs are not required to meet an institutional level of care need. The HCBS State Plan option was first enacted under the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) and amended under the ACA.\nThe income standard for the HCBS State Plan option applies to individuals who have income no higher than 150% of the FPL. For individuals who otherwise meet the requirements for an approved waiver program, the income standard can be no higher than 300% of the SSI FBR. States may choose to cover individuals under either or both income standards. Generally, states use SSI income-counting methodologies; however, states have some discretion to apply alternative methodologies, subject to the approval of the Secretary of HHS. There are no resource standards for this eligibility group, with the exception for those individuals who seek to establish eligibility based on an approved waiver program. For these individuals, states must use the same income and resource standards and counting methodologies as applied to those individuals eligible under the applicable waiver program. States may also use Section 1902(r)(2) of the SSA to disregard additional income or resources.\nIn 2018, the most recent year for which data are available, 15 states and the District of Columbia offered at least one Section 1915(i) HCBS State Plan option; however, only two states (Indiana and Ohio) used this state plan authority as an independent eligibility pathway to Medicaid. As another option, states may choose to provide HCBS state plan services to those who are eligible for Medicaid under one of the state's existing Medicaid eligibility pathways.\n\n\t\tKatie Beckett\n\nEnacted under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA; P.L. 97-248 ), the Katie Beckett optional pathway provides coverage to severely disabled children whose parents' income is otherwise too high for the child to qualify for Medicaid LTSS at home. Under the Katie Beckett pathway, states may extend Medicaid coverage to disabled children who meet the applicable SSI definition of disability and who are age 18 or younger and live at home. In addition, the state must determine that (1) the child requires the level of care provided in an institution, (2) it is appropriate to provide care outside the facility, and (3) the cost of care at home is no more than institutional care. States electing this option are required to cover all disabled children who meet these criteria.\nStates must use SSI income and resources rules to determine eligibility; however, only the child's income and resources, if any, are counted. Parents' income and resources are not counted. A child's income cannot exceed the highest income standard used to determine eligibility for any separate group under which the individual would be eligible if institutionalized. In general, states set income standards up to 300% of the SSI FBR, which is about 222% of the FPL. States may not use Section 1902(r)(2) of the SSA to use more liberal income- or resource-counting methodologies. In 2018, the most recent year for which data are available, 24 states and the District of Columbia offered the Katie Beckett pathway under their Medicaid state plan. \n\n\t\tBuy-In Groups\n\nThere are several optional Medicaid Buy-In eligibility pathways for working individuals with disabilities or working families who have a child with a disability. In general, individuals eligible under Buy-In pathways would be eligible for Medicaid except for the fact that their income is higher than the income standard allowed by the SSI program under Section 1619(b) of the SSA, which varies by state. Medicaid Buy-In pathways are designed to allow disabled individuals to work and still retain their Medicaid coverage, or to use their Medicaid coverage to access wraparound services that are not covered under an employer-sponsored plan. States can also impose premiums or other types of cost-sharing requirements on eligible individuals, which can be done on a sliding scale based on income. The extent to which states impose premiums and cost-sharing varies by state. \nMedicaid Buy-In pathways include the BBA 97 Eligibility Group, the Basic Eligibility Group, and the Medical Improvement Group. There is also a separate Buy-In pathway for disabled children, called the Family Opportunity Act. In 2018, the most recent year for which data are available, 44 states and the District of Columbia chose to offer coverage through at least one Buy-In pathway.\n\n\t\t\tBBA 97 Eligibility Group\n\nEnacted under Section 4733 of the Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ), this optional pathway is available to individuals with disabilities who work and have family income below 250% of the FPL, based on the size of the family. Individuals with disabilities must meet the SSI program's applicable definition of disability. Each state determines what constitutes a \"family\" for the purposes of this eligibility group. Family income is determined by applying the SSI income-counting methodology. In addition to the family income requirement, the applicant's unearned income must be less than the SSI income standard. All earned income is disregarded. An individual's countable resources must be less than or equal to the SSI resource standard using the SSI resource-counting methodology. However, states may use Section 1902(r)(2) of the SSA to disregard additional income or resources.\n\n\t\t\tTicket to Work Basic Eligibility Group\n\nEnacted under Section 201 of the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA; P.L. 106-170 ), this optional pathway is similar to the BBA 97 Eligibility Group but is available to people with higher levels of income (i.e., above 250% of the FPL). There are no federal income or resource standards for the Basic Eligibility Group; rather, states can determine the income and resource standards, including no standards, rather than using the SSI program's requirements. However, if a state chooses to establish an income and\/or resource standard, SSI income- and resource-counting methodologies apply. States may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard, including disregarding all earned income. Individuals with disabilities eligible under this pathway must be aged 16 to 64 and meet the SSI program's applicable definition of disability.\n\n\t\t\tTicket to Work Medical Improvement Group\n\nThe Medical Improvement Group pathway was also enacted under Section 201 of TWWIIA. For states to cover this eligibility group, they must also cover the TWWIIA Basic Eligibility Group. Individuals eligible under the Medical Improvement Group were previously eligible under the Basic Eligibility Group but lost that eligibility because they were determined to have \"medically improved,\" meaning they no longer meet the definition of disability under the SSI or Social Security Disability Insurance (SSDI) programs but continue to have a severe medically determinable impairment. Eligible individuals must be aged 16 to 64, earn at least the federal minimum wage, and work at least 40 hours per month or be engaged in a work effort that meets certain criteria for hours of work, wages, or other measures, as defined by the state and approved by the Secretary of HHS. As with the Basic Eligibility Group, states may determine the income and resource standards, including no standards, for this pathway. Similarly, states may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard, including disregarding all earned income.\n\n\t\t\tFamily Opportunity Act\n\nEstablished under Section 6061 of the DRA, the Family Opportunity Act (FOA) optional pathway allows families with income up to 300% of the FPL to buy Medicaid coverage for their disabled child aged 18 or younger (states can exceed 300% of the FPL without federal matching funds for such coverage). When determining a child's Medicaid eligibility, states choosing this pathway use the SSI program's applicable definition of disability, as well as SSI's income-counting methodology for a family, based on its size. There is no resource standard or applicable resource-counting methodology. States may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard. States must require certain parents of eligible children under the FOA optional coverage group to enroll in, and pay premiums for, family coverage through employer-sponsored insurance as a condition of continuing Medicaid eligibility for the child. \n\n\t\tMedically Needy\n\nThe Medically Needy option is targeted toward individuals with high medical expenses who would otherwise be eligible for Medicaid except that their income exceeds the income standards for other state-covered eligibility pathways. Individuals may qualify in one of two ways: either (1) their income or resources are at or below a state established standard, or (2) they spend down their income to the state-established standard by subtracting incurred medical expenses from their income. For example, if an individual has $1,000 in monthly income and the state's income threshold is $600, then the applicant would be required to incur $400 in out-of-pocket medical expenses during a state-determined budget period before being eligible for Medicaid. Examples of medical expenses that may be deducted from income include Medicare and other health insurance premiums, deductibles and coinsurance charges, and other medical expenses included in the state's Medicaid plan or recognized under state law. For individuals who spend down to Medicaid eligibility, states select a specific time period for determining whether or not the applicant meets the spend-down obligation, often referred to as a \"budget period,\" which generally ranges from one to six months.\nStates that choose to offer the Medically Needy option must cover pregnant women and children under the age of 18, and may choose to extend eligibility to the aged, blind, or disabled, among other groups. The Medically Needy option allows aged and disabled individuals who need expensive institutional LTSS to qualify for Medicaid nursing facility services. However, nursing facility services are optional services that states may elect to cover for Medically Needy individuals. \nUnder the Medically Needy option, states establish the income eligibility standard; however, it may be no higher than 133\u00e2\u0085\u0093% of the state's AFDC level in 1996. Typically, the AFDC level is lower than the income standard for SSI benefits. For example, in 2015 the median Medically Needy income standard for an individual was $483 per month, or about 49% of the FPL. States use the SSI income-counting methodology for aged, blind, or disabled individuals. States also set the resource standards within certain federal requirements. For aged, blind, or disabled individuals, the resource standard is generally the same as in the SSI program. In general, states must use SSI's applicable definition of disability when determining eligibility for the disabled eligibility group. In 2018, 32 states and the District of Columbia offered coverage to the Medically Needy.\n\n\t\t\tAppendix. Medicaid Eligibility Pathways That Cover Older Adults and Individuals with Disabilities\n\n Table A-1 lists selected Medicaid eligibility pathways that cover older adults and individuals with disabilities. These eligibility pathways are organized into two broad coverage groups: (1) SSI-Related Pathways and (2) Other ABD Pathways. The table includes a brief description of each pathway, the age criterion for eligibility, whether the pathway is mandatory or optional, the Social Security Act citation, and any applicable regulatory citations.\n Table A-2 lists the income and resource standards, as well as the counting methodology, that applies to each standard for the selected Medicaid eligibility pathways that cover older adults and individuals with disabilities. In general, standards or limits on the amount of income and resources required for eligibility are expressed in relationship to the federal poverty level (FPL) or the SSI federal benefit rate (FBR). Where applicable, the income standard is presented as a monthly dollar amount for an individual in 2019. For state-specific information on Medicaid eligibility pathways for older adults and individuals with disabilities, see the following resources:\nM. Musumeci, P. Chidambaram, and M. O'Malley Watts, Medicaid Financial Eligibility for Seniors and People with Disabilities: Findings from a 50-State Survey , The Kaiser Family Foundation, June 2019, https:\/\/www.kff.org\/medicaid\/issue-brief\/medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-findings-from-a-50-state-survey\/ . MACPAC, MACStats: Medicaid and CHIP Data Book , Exhibit 37, pp. 109-111, December 2018, https:\/\/www.macpac.gov\/wp-content\/uploads\/2018\/12\/December-2018-MACStats-Data-Book.pdf .","output":null}
{"id":"crs_R45916","pid":"crs_R45916_0","input":"\tBackground\n\nThe Transportation Investments Generating Economic Recovery (TIGER) grant program is a discretionary program providing grants to projects of national, regional, or metropolitan-area significance in various surface transportation modes on a competitive basis, with recipients selected by the federal Department of Transportation (DOT). It originated in the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ), where it was called \"national infrastructure investment\" (as it has been in subsequent appropriations acts). Beginning with the FY2018 round of grants, DOT renamed the program the Better Utilizing Investments to Leverage Development (BUILD) program.\nUnless otherwise noted, all dollar amounts in this report are expressed in 2019 dollars to adjust for inflation over the life of the program, and all percentages are calculated on that basis. These figures therefore do not correspond to DOT data, which in general are not adjusted for inflation.\n\n\tThe Origin of the Program\n\nThe TIGER program began in the depths of the 2007-2009 recession as a way to both improve transportation infrastructure and stimulate economic activity. For much of its existence it was virtually the only significant discretionary surface transportation grant program, and virtually the only program that allowed local communities to apply for and receive highway funding directly from the federal government rather than through their state's department of transportation, which might have different priorities than the community.\nOne of President Obama's first acts after taking office in January 2009 was to propose an economic stimulus bill. Congress passed ARRA after roughly a month of intense debate. The bill provided over $700 billion to stimulate the economy, mostly through reductions in taxes. It authorized $43 billion for transportation infrastructure, including $1.5 billion for a discretionary grant program to make capital investments in surface transportation infrastructure, which Congress labeled \"national infrastructure investment.\" In implementing this new program, DOT retitled it Transportation Investments Generating Economic Recovery, although the annual DOT appropriations act continues to refer to it as national infrastructure investment.\nThe program initially had two goals: to make investments that would improve the condition of the nation's surface transportation infrastructure, and to do so quickly to provide immediate stimulus to the economy. Thus ARRA required DOT to give priority to projects that were expected to be completed by February 17, 2012, three years after the legislation was enacted. Since it took nearly a year for DOT to set up an office to manage the program, solicit applications, review them, and select which projects to award, the process favored projects that could be completed within two years. The initial awards were announced on February 17, 2010.\nIn that first round, DOT received 1,497 applications requesting $72.5 billion. It awarded 51 grants totaling $1.69 billion. See Table 3 for details about annual applications and awards.\nUnless otherwise noted, all dollar amounts in this report are expressed in 2019 dollars to adjust for inflation over the life of the program, and all percentages are calculated on that basis. These figures therefore do not correspond to DOT data, which in general are not adjusted for inflation.\n\n\tAfter Earmarks Ended\n\nDuring the early 2000s, transportation authorization and appropriations bills included growing numbers of earmarks directing discretionary grants to specific projects. In response to criticism of this practice, in 2011 the Republican conferences in both the House and the Senate prohibited Members from requesting earmarks. In his State of the Union Address on January 25, 2011, President Obama vowed to veto any legislation containing earmarks.\nIn the 2012 surface transportation reauthorization legislation, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), Congress reduced opportunities for earmarking by abolishing most of DOT's discretionary grant programs, providing virtually all federal surface transportation funding to recipients based on formulas. The TIGER grant program, which has been funded in the annual DOT appropriations acts and was not included in MAP-21, became one of the few remaining discretionary transportation grant programs.\nThe Obama Administration did not support continuing the program in its FY2010 and FY2011 budgets, but requested funding in FY2012 and following years. A pattern emerged in which the Republican majority in the House of Representatives proposed cutting funding or eliminating it altogether, the Senate supported the program, and the program ultimately received funding in each year's appropriations legislation. Since the Democratic Party regained the House majority in the 2018 midterm election, the House has supported sizable increases in the program ( Table 1 ).\n\n\tEvolution of the Program's Grant Criteria\n\nSince Congress has continued the TIGER\/BUILD program on an annual basis, the annual DOT appropriations act gives Congress the opportunity to adjust the criteria for the program each year. Some criteria, such as a requirement that DOT must ensure an equitable distribution of grant funds geographically and between urban and rural areas, have been the same since the first year. Other criteria, such as the minimum and maximum grant size, have changed frequently. In general, the trend has been toward distributing the funding to a larger number of grantees (through such measures as lowering the maximum grant size). Table A-1 summarizes the changes in many of the program's grant criteria over the past decade.\n\n\t\tMerit Criteria: Considerations Beyond Economic Stimulus\n\nBorn in the anxious days of early 2009, when there was genuine concern about the state of the U.S. economy, the initial focus of the TIGER\/BUILD grant program was twofold: to make grants to surface transportation projects that would improve the nation's transportation infrastructure and that would be able to spend the money quickly in order to stimulate the economy. Other considerations included the likelihood of on-time completion and the benefits of the project compared to the costs.\nIn subsequent years, as the economy began to recover, DOT added additional merit criteria to its project selection, as shown in Table 2 .These criteria were determined administratively, and have not been specified in appropriations legislation providing funds for the program.\nSome of these criteria can conflict with each other in specific instances. For example, a project could reduce congestion-related emissions on a roadway by supporting alternatives (e.g., transit improvements) or by altering the roadway to reduce congestion (e.g., adding lanes, adjusting traffic signal timing, reshaping intersections). The first option might also reduce dependence on oil, whereas the second might increase dependence on oil while reducing emissions and improving the efficiency of the movement of goods and people. How DOT reconciles such conflicts has not been disclosed.\n\n\tProgram Issues\n\n\t\tDemand and Supply in Program Funding\n\nBeginning with the first round of awards in FY2009, each annual grant announcement has noted that the amount of funding applied for has greatly exceeded the amount of funding available through the program (see Table 3 ). After the relatively large first-year appropriation, in succeeding years the amount provided was around one-third of the first year of funding. The total amount applied for also dropped significantly after the first year. The reasons for the decline in funding may include the opposition of the House of Representatives to funding the program (see Table 1 ), the general limitations on the amounts provided in appropriations bills, and the competition for that funding among the proponents and constituencies of different programs.\nOne possible reason for the dramatic decline in the amount applied for from FY2016 to FY2017 was the reduction in the maximum grant size that Congress decreed for FY2017 (and succeeding years), from a maximum of $100 million in FY2016 to $25 million in FY2017. Of the $9.8 billion applied for in FY2016, $3.8 billion was represented by a total of 87 applications that exceeded $25 million (nominal) and thus exceeded the maximum limit for FY2017. The combination of that lowered cap on grant amounts, combined with the introduction of several new discretionary transportation grant programs beginning in FY2017, may explain part of the decline in the amount applied for in FY2017. The amount applied for rose in FY2018, when the amount of funding available tripled.\n\n\t\tCongressional Directives for Distribution of Grants\n\n\t\t\tGeographic Distribution\n\nOne of the directives Congress gave DOT regarding the distribution of TIGER\/BUILD grants was that DOT \"shall ensure an equitable geographic distribution.\" Beyond using the term \"equitable,\" the only other legislative guidance on this point is the limitation on the amount of the program funding that can be awarded to projects in a single state. That limit ranged from a high of 25% to a single state during the FY2010-FY2015 rounds to a low of 10% during the FY2017-FY2019 rounds.\nThere have been a total of 553 grants awarded over the period FY2009-FY2018. Every state and most territories have received at least one grant; America Samoa and the Northern Marianas Islands have not received a grant. California has received the most funding, 6.9% of the total over that period; that is considerably less than California's share of the total U.S. population (12.1%). Of the top 10 states by share of grant funding received, Texas, New York, Pennsylvania, and Florida also received smaller shares of funding than their shares of the nation's population, while Illinois, Washington, Massachusetts, and Missouri received larger shares of funding than their shares of the population (see Table 4 ).\nIt would be difficult for DOT to match the funding awarded to each state's share of the nation's population, since projects are not distributed proportionally among the states on the bases of cost, merit, and number.\n\n\t\t\tUrban and Rural Area Grants\n\nAnother congressional directive, in place since the second year of the program, is that DOT \"shall ensure an appropriate balance in addressing the needs of urban and rural areas.\" DOT has responded to this directive in different ways over time.\n\n\t\t\t\tFY2009-FY2016\n\nIn the first year (FY2009) of the program, 7% of the funding went to projects in rural areas. Since then, Congress has directed that a specific minimum share of the grant funding go to projects located in rural areas. That share has typically been around 20% to 30% (see Table 5 and Figure 1 ).\nThe definition of rural and urban areas used by the TIGER\/BUILD Grant program has varied from that used by the U.S. Census Bureau. The Census Bureau defines urban areas as both\nUrbanized Areas of 50,000 or more people;\nUrban Clusters of at least 2,500 and less than 50,000 people.\nRural areas are defined as those areas not included within an urban area.\nBy this definition, 81% of the U.S. population lived in urban areas and 19% in rural areas over the 2011-2015 period.\nFor most of its history, the TIGER\/BUILD program has defined urban areas as areas located in an Urbanized Area, and rural areas as everything else. Urban Clusters as defined by the Census Bureau were thus considered rural areas for purposes of the program. By this definition, roughly 70% of the U.S. population lived in urban areas and 30% in rural areas in 2015. During the period FY2009-FY2016, the proportion of TIGER\/BUILD grant funding awarded to projects in rural areas as defined by the program, measured in 2019 dollars, was around 21%.\n\n\t\t\t\tFY2017-FY2018\n\nIn the program's 2017 Notice of Funding Opportunity (NOFO), the new Trump Administration announced that it would give special consideration to projects in rural areas. No rationale for this special consideration has been given, but one is implied in the observation that \"While only 19 percent of the nation's population lives in rural areas, 51 percent of all traffic fatalities occurred on rural roads (2014).\"\nIn announcing the FY2017 round of awards, the Secretary of Transportation noted that \"an effort was made to re-balance the under-investment in rural communities\u00e2\u0080\u0094to address overlooked needs.\" This assertion that there had been under-investment in the transportation needs of rural communities was reiterated in the FY2018 NOFO; that assertion is not included in the FY2019 NOFO, but that document reiterates that special consideration will be given to project applications from rural areas.\nUnder this new policy, the proportion of program funding requested for rural areas rose from 35% in the FY2016 round to 44% in the FY2017 round, and the share of program funding awarded to rural areas rose from 21% to 65% (see Table 5 ). Another factor that may have influenced this shift is that although the amount of grant funding available in the FY2017 round ($500 million) was the same as in the previous couple of rounds, the number of applications and amount of funding applied for dropped significantly in FY2017, particularly from urban areas (see Table 6 ). Why that happened is not clear. The current surface transportation authorization act (MAP-21), which was enacted in December 2015, created several new discretionary grant programs for surface transportation; that, combined with the new lowered cap of $25 million on maximum TIGER\/BUILD grant sizes that took effect in FY2017, may have led sponsors of more expensive projects, which are often located in urban areas, to seek funding from the new grant programs rather than from the TIGER\/BUILD program.\nThe Administration's stated rationales for prioritizing funding for projects in rural areas are open to question. While 71% of the nation's roads are in rural areas, they account for only 30% of total vehicle miles traveled, and over the period FY2009-FY2015, 37% of federal highway funding went to rural roads. Rural roads are on average in better condition than urban roads; in 2012 93% of the vehicle miles traveled on rural roads were on roads with pavement conditions rated as acceptable or good, compared with 78% of the vehicle miles traveled on urban roads.\nThe Administration's claim that safety factors justify directing two-thirds of BUILD grants to rural areas is only partially supported by available data. While a disproportionate share of highway deaths occurs on rural roads, that proportion has been trending downward, declining from around 60% in the early 2000s to 46% in 2017. The number of traffic fatalities in rural areas declined by 18% from 2008-2017, while the number of fatalities in urban areas increased by 17% over the same period. Moreover, road conditions are only one factor among the reasons why the share of highway fatalities in rural areas exceeds the share of population in those areas. Other factors include driver behavior (e.g., higher typical speeds, lower rates of seat belt use, and higher driver fatigue rates), typically longer travel times for emergency medical care, and vehicle condition.\nIn the FY2019 DOT appropriations act, Congress made two changes that may constrain the Administration's discretion to steer funding toward projects in rural areas: limiting the share of program funding that can go to rural areas to 50%, and changing the definitions of urban and rural areas used in the BUILD program. Urban areas would be defined as areas \"located within (or on the boundary of) a Census-designated urbanized area that had a population greater than 200,000 in the 2010 Census.\" Areas outside that are considered rural. By this definition, roughly 60% of the U.S. population lived in urban areas, and roughly 40% in rural areas, in 2015. Thus, some areas that in previous rounds of applications would have been considered urban areas would now be considered rural for the purposes of the BUILD program. How this change will affect the distribution of funds in FY2019 and subsequent years is unclear.\n\n\t\t\tGrants to a Variety of Modes\n\nSince the second year of the program, Congress has directed DOT to ensure that the program makes \"investment in a variety of transportation modes.\" A unique feature of the BUILD grant program is its flexibility: any surface transportation infrastructure is eligible for funding. Throughout most of the program's life, this flexibility has been reflected in the grants awarded; while road projects received more funding than projects in other modes, other modes collectively received two-thirds of the total program funding (see Table 7 ). This situation changed beginning with the FY2017 round of grants; for FY2017-FY2018, road projects received over two-thirds of the funding awarded, with the remainder divided among four other modes, one of which\u00e2\u0080\u0094bicycle-pedestrian projects\u00e2\u0080\u0094receiving no funding at all.\n\n\t\tDistribution Requirements Versus Economic Impact in Grant\u00c2 Awards\n\nFrom the first round of funding through FY2017, Congress directed that grants be made for projects that will have a significant impact on the nation, a metropolitan area, or a region. Surface transportation projects that are likely to have a significant impact on the nation, or even a multistate region, are typically quite expensive; for example, Amtrak's Hudson River Tunnel Project, to replace the deteriorating tunnels that carry Amtrak and commuter trains under the Hudson River between New Jersey and New York, is estimated to cost over $11 billion.\nGiven the relatively modest amounts of funding available for TIGER\/BUILD grants each year and Congress's directive that grant funding be awarded equitably across the nation, between rural and urban areas, and among surface transportation modes, the amount of money any single project is likely to receive limits the ability of the TIGER\/BUILD program to provide more than a small share of the funding needed to complete projects that could have a significant impact on the nation. The largest single grant awarded during the FY2009-FY2018 period was for $118.5 million, and that was for a project that spanned two states (see Table 8 ). Three grants have been awarded for more than $100 million; of the 553 grants awarded, few have been for more than $50 million. Of the 10 largest grants awarded, nine were awarded in the first year of the program, when available funding was far larger than in any subsequent year (see Table 8 ). Even though the maximum grant size permitted was $200 million from FY2010 to FY2015 and $100 million in FY2016, the largest grant awarded since FY2010 has been $25 million.\nThe first year of grants also saw the largest average grant size, $33 million; in subsequent rounds of funding, the average size of grants in each round has fluctuated between $9 million and $17 million (see Table 9 ). In addition to the lower limit on the maximum grant amount, one factor that may have led to the decrease in the average size of grants after the first year was that the total amount of TIGER\/BUILD grant funding available in each year until FY2018 was less than half the amount in FY2009, so DOT may have chosen to make smaller grants in order to distribute the available funding widely.\nIn a 2014 review of the program, the U.S. Government Accountability Office (GAO) reported that while DOT had selection criteria for the TIGER grant program, it had sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so, raising questions about the integrity of the selection process. DOT responded that while its project rankings were based on transportation-related criteria, such as safety and economic impact, sometimes it had to select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards.\n\n\t\tAttempt to Increase the Program's Funding Leverage\n\nIn FY2018, the Notice of Funding Opportunity soliciting grant applications noted two changes to the program under the Trump Administration: the program was renamed the Better Utilizing Investments to Leverage Development (BUILD), and the practical reflection of that name change was a statement that DOT would give priority to grant applicants that provided new, nonfederal revenue for projects for which they were seeking BUILD funding. \"New revenue\" was defined as \"revenue that is not included in current and projected funding levels and results from specific actions taken to increase transportation infrastructure investment.\" Examples given in the notice included sales or gas tax increases, tolling, tax-increment financing, and asset recycling. Borrowing (issuing bonds) did not count as a new revenue source. DOT would not consider any source of revenue that had been authorized prior to January 1, 2015, as new revenue.\nThe Administration presented this new stance as a way of increasing the leverage of federal funding to raise more revenue from other sources. Critics charged that the policy penalized states and localities that had already acted to raise more revenue for transportation projects. Critics also noted the irony of the Administration encouraging states and localities to provide additional revenue for transportation investment when Congress had been unable to increase the federal excise tax on motor fuel, the primary source of federal surface transportation revenues, since 1993. Critics also noted that favoring projects involving additional revenue from new sources posed a particular challenge for rural areas, as the number of residents who might pay a new sales tax or highway toll is by definition relatively low.\nDespite that concern, in the FY2018 round of awards, projects in rural areas received a higher proportion of the program's funding than ever before in the history of the program: 69% (see Table 5 ). The information about the projects receiving grants is not sufficiently detailed to show how much additional nonfederal revenue was raised in connection to the projects. In the FY2019 DOT Appropriations Act, Congress directed DOT not to use an applicant's ability to generate nonfederal revenue as a selection criterion in approving future BUILD grants.\n\n\t\tMeasures of Program Impact\n\nIn 2016 and 2018 DOT published reports measuring the performance of projects that received TIGER grants. The reports state that, given the array of projects that can receive TIGER grants, measuring their performance is challenging and, for the same reason, valuable. DOT has required grantees to develop performance plans and measures for each project, beginning before the construction of the project and continuing for years after the project is completed. The sponsor of each project is responsible for setting up performance measures it considers relevant to its project. There is no requirement for comparability of the measures across projects.\nThe DOT reports do not summarize the projects and their benefits. Rather, each presents a number of case studies of individual projects, including the performance measures chosen by each grantee.\n\n\t\t\tAppendix. TIGER\/BUILD Grant Program Criteria, FY2009-FY2019","output":null}
{"id":"gao_GAO-19-544T","pid":"gao_GAO-19-544T_0","input":"\tTop Leadership Commitment Is Critical to Sustained Progress in Strengthening Management Functions\n\nWith top leadership support and commitment, DHS has made important  progress in strengthening its management functions, but considerable  work remains. As shown in figure 1, as of March 2019, DHS had met  three out of five criteria for removal from our High Risk List\u2014leadership  commitment, action planning, and monitoring progress.\nDHS has partially met the remaining two criteria: capacity (i.e., people  and other resources) and demonstrated, sustained progress. To address  the criteria for capacity, DHS needs to make additional progress in  identifying and allocating resources in certain areas\u2014namely, acquisition,  information technology, and financial management\u2014to fully demonstrate  its capacity. For the criteria for demonstrated, sustained progress, we  reported in March 2019 that DHS had fully addressed 17 out of the 30  outcomes that are the basis for gauging DHS\u2019s progress across  management areas, as shown in table 1.\nTo fully meet the criteria for demonstrated, sustained progress, DHS  needs to continue implementing its Integrated Strategy for High-Risk  Management and maintain engagement with us to show measurable,  sustainable progress in implementing corrective actions and achieving  outcomes. DHS can accomplish this by, among other things, maintaining  a high level of top leadership support and sustained commitment to  ensure continued progress in executing its corrective actions through  completion, and increasing employee engagement and morale.\nExamples of important programs and remaining work in the key  management functions include:  In the key management function of human capital management, DHS  leadership is needed to address skills gaps that have had a significant  role in the DHS management high-risk area. For example, we have  found that DHS lacks guidance on how to identify critical cybersecurity  and acquisition skills needed to support its new information  technology delivery model. We have also found that DHS has  insufficient technical skills to support its biometric identification  services program. Addressing these skill gaps could help DHS fully  demonstrate its capacity to strengthen and integrate its management  functions.\nAdditionally, within human capital management, DHS has struggled  with low employee morale scores since it began operations in 2003.  DHS\u2019s 2018 score ranked 20th among 20 large and very large federal  agencies. Increasing employee engagement and morale is critical to  strengthening DHS\u2019s mission and management functions. DHS has  continued to strengthen its employee engagement efforts by  implementing our 2012 recommendation to establish metrics of  success within components\u2019 action plans for addressing its employee  satisfaction problems. Further, DHS has conducted audits to better  ensure components are basing hiring decisions and promotions on  human capital competencies. In addition, OPM\u2019s 2018 Federal  Employee Viewpoint Survey data showed that in the past 2 years,  DHS\u2019s score on the Employee Engagement Index (EEI) increased by  4 points\u2014from 56 in 2016 to 60 in 2018\u2014which was 1 point more  than the government-wide increase over the same period. While this  improvement is notable, DHS\u2019s current EEI score is 1 point below its  EEI baseline score in 2010, suggesting that DHS is still working to  regain lost ground after an 8 point drop between 2010 and 2015.\nIn the key management function of financial management, DHS  officials have faced challenges modernizing DHS components\u2019  financial management systems and business processes that affect the  department\u2019s ability to have ready access to timely and reliable  information for informed decision-making. Effectively modernizing  financial management systems for the Coast Guard, FEMA, and ICE  would help improve the reliability of their financial reporting.\nAs we have reported, perhaps the single most important element of  successful management improvement and transformation initiatives is the  demonstrated commitment of top leaders, as shown by their personal  involvement in reform efforts. With regard to leadership commitment,  DHS\u2019s top leadership, including leaders at the Secretary and Deputy  Secretary level, has demonstrated exemplary commitment and support  for addressing the department\u2019s management challenges. They have also  taken actions to institutionalize this commitment to help ensure the long- term success of the department\u2019s efforts. One such effort is the Under  Secretary for Management\u2019s Integrated Priorities initiative to strengthen  the integration of DHS\u2019s business operations across the department.\nDuring monthly leadership meetings with the Under Secretary for  Management, the department\u2019s Chief Executive Officers have been  providing status updates on their respective actions to address this high- risk designation. Furthermore, top DHS leaders, such as the Under  Secretary for Management and the department\u2019s Chief Executive  Officers, routinely meet with our management to discuss progress on  high-risk areas.\n\n\tContinued Leadership Commitment Is Critical to Addressing Priority Open Recommendations\n\nIn April 2019, we sent a letter to the Acting Secretary of Homeland  Security detailing 26 open recommendations that we deem highest  priority for implementation. Priority recommendations are those that we  believe warrant priority personal attention from heads of key departments  or agencies. These 26 recommendations fall into six major areas\u2014 emergency preparedness and response, border security, transportation  security, infrastructure and management, cybersecurity, and chemical  and nuclear security. Many of these recommendations cut across DHS\u2019s  mission areas that are critical for national security. Given that these  recommendations are often the most complex and difficult to implement,  top DHS leadership will play a critical role in addressing them.\nFourteen of the 26 priority open recommendations we identified in the  April 2019 letter are directed to acting officials serving in vacant positions.  We have issued 12 recommendations to the Secretary of Homeland  Security who is currently an acting official. We have also issued two  recommendations to FEMA which is currently operating under acting  leadership.\nCommitted and consistent leadership at the department and component  levels will be critical for addressing our priority recommendations. For  example:  In September 2014, we recommended that the Secretary of  Homeland Security work jointly with the Administrator of the General  Services Administration to strengthen management of the ongoing  acquisition project to develop the multi-billion dollar headquarters  facilities at the St. Elizabeth\u2019s campus in Washington, D.C.\nLeadership is critical in this effort, given the magnitude of the project  and the impact of headquarters consolidation on DHS operations.\nIn October 2008, we recommended actions that FEMA should take to  improve its administration of the National Flood Insurance Program  high-risk area. We also recommended in September 2012 that  FEMA develop a methodology to better assess a jurisdiction's  capability to respond to and recover from a disaster without federal  assistance. In July 2015, we further recommended that the  Mitigation Framework Leadership Group establish an investment  strategy to identify, prioritize, and guide federal investments in  disaster resilience. Implementing these actions could limit the  federal government\u2019s fiscal exposure and increase the nation\u2019s  resilience to extreme weather events as the costs and impacts of  weather disasters resulting from floods, drought, and other events are  expected to increase in significance as previously \u201crare\u201d events  become more common and intense.\nIn July 2018, we recommended that U.S. Customs and Border  Protection (CBP) analyze the costs associated with future barrier  segments along the southwest border and include cost as a factor in  the Impedance and Denial Prioritization Strategy. Obtaining this key  information could help CBP evaluate designs and prioritize locations  for future border barrier segments to deter cross-border illegal  activity.\nIn February 2017, we recommended that DHS establish metrics and  methods by which to evaluate the performance of DHS\u2019s National  Cybersecurity and Communications Integration Center in relation to its  statutorily-required cybersecurity functions. Until it develops metrics  and methods to evaluate its performance, the center cannot ensure  that it is effectively meeting its statutory requirements, while cyber- based intrusions and attacks on federal systems and systems  supporting our nation\u2019s critical infrastructure are becoming more  numerous, damaging, and disruptive. We also recommended in  February 2018 that DHS take steps to better manage and assess its  cybersecurity workforce gaps and areas of critical need. Given its  important role in the nation\u2019s cybersecurity, taking steps to address  these issues will be critical.\nWe will continue to monitor DHS\u2019s progress in strengthening  management functions and addressing priority recommendations. We  also plan to continue to meet quarterly with DHS management to gauge  leadership commitment, discuss progress, and review DHS\u2019s goals and  corrective action plans in its Integrated Strategy for High-Risk  Management, which DHS issues twice per year.\nThank you, Chairman Thompson, Ranking Member Rogers, and  Members of the Committee. This concludes my testimony. I would be  pleased to answer any questions.\n\n\tGAO Contact and Staff Acknowledgments\n\nFor further information on this testimony, please contact Christopher 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. Other individuals making key contributions  to this work include Alana Finley, Assistant Director; Luis E. Rodriguez,  Analyst-in-Charge; Karin Fangman; Andrew Howard; and Thomas  Lombardi. Key contributors for the previous work that this is based on are  listed in each product.\nThis 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.","output":null}
{"id":"crs_RL31675","pid":"crs_RL31675_0","input":"\tCongressional Notification Requirements\n\nThis report reviews the process and procedures that currently apply to congressional consideration of foreign arms sales proposed by the President. This includes consideration of proposals to sell major defense equipment, defense articles and services, or the retransfer to other states of such military items. In general, the executive branch, after complying with the terms of applicable U.S. law, principally contained in the Arms Export Control Act (AECA) (P.L. 90-629, 82 Stat. 1320), is free to proceed with an arms sales proposal unless Congress passes legislation prohibiting or modifying the proposed sale. The President has the obligation under the law to submit the arms sale proposal to Congress, but only after he has determined that he is prepared to proceed with any such notifiable arms sales transaction.\nThe Department of State (on behalf of the President) submits a preliminary or informal notification of a prospective major arms sale 20 calendar days before the executive branch takes further formal action. This informal notification is provided to the committees of primary jurisdiction for arms sales issues. In the Senate, this is the Senate Foreign Relations Committee; in the House, it is the Foreign Affairs Committee. It has been the practice for such informal notifications to be made for arms sales cases that would have to be formally notified to Congress under the provisions of Section 36(b) of the AECA. The informal notification practice stemmed from a February 18, 1976, letter from the Department of Defense making a nonstatutory commitment to give Congress these preliminary classified notifications. Beginning in 2012, the State Department implemented a new informal notification process, which the department calls a \"tiered review,\" in which the relevant committees are notified between 20 and 40 calendar days before receiving formal notification, depending on the system and destination in question. \nDuring June 2017 testimony, Acting Assistant Secretary of State Tina Kaidanow described this process as \nCongressional review period during which the Committees can ask questions or raise concerns prior to the Department of State initiating formal notification. The purpose is to provide Congress the opportunity to raise concerns, and have these concerns addressed, in a confidential process with the Administration, so that our bilateral relationship with the country in question is protected during this process.\nIf a committee \"raises significant concerns about a sale or [export] license,\" the State Department \"will typically extend the review period until we can resolve those concerns,\" Kaidanow explained.\nUnder Section 36(b) of the AECA, Congress must be formally notified 30 calendar days before the Administration can take the final steps to conclude a government-to-government foreign military sale of major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with the sale. However, the prior notice threshold values are higher for NATO members, Japan, Australia, South Korea, Israel, or New Zealand. These higher thresholds are $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of states. Section 36(i) requires the President to notify both the Senate Foreign Relations Committee and House Foreign Affairs Committee at least 30 days in advance of a pending shipment of defense articles subject to the 36(b) requirements if the chairman and ranking member of either committee request such notification. Certain articles or services listed on the Missile Technology Control Regime are subject to a variety of additional reporting requirements.\nCommercially licensed arms sales also must be formally notified to Congress 30 calendar days before the export license is issued if they involve the sale of major defense equipment valued at $14 million or more, or defense articles or services valued at $50 million or more (Section 36(c) AECA). In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with such a sale. However, the prior notice threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand, specifically: $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of states. Furthermore, commercially licensed arms sales of firearms (which are on category I of the United States Munitions List) valued at $1 million or more must also be formally notified to Congress for review 30 days prior to the license for export being approved (15 days prior notice is required for proposed licenses for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand).\nSection 36(b)(5)(A) contains a reporting requirement for defense articles or equipment items whose technology or capability has, prior to delivery, been \"enhanced or upgraded from the level of sensitivity or capability described\" in the original congressional notification. For such exports, the President must submit a report to the relevant committees at least 45 days before the exports' delivery that describes the enhancement or upgrade and provides \"a detailed justification for such enhancement or upgrade.\" This requirement applies for 10 years after the Administration has notified Congress of the export. According to Section 36(b)(5)(C), the Administration must, in the case of upgrades or enhancements meeting certain value thresholds, submit a new notification to Congress and the export will be considered \"as if it were a separate letter of offer ... subject to all of the requirements, restrictions, and conditions set forth in this subsection.\" The threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand.\nA congressional recess or adjournment does not stop the 30 calendar-day statutory review period. It should be emphasized that after Congress receives a statutory notification required under Sections 36(b) or 36(c) of the AECA, for example, and 30 calendar days elapse without Congress having blocked the sale, the executive branch is free to proceed with the sales process. This fact does not mean necessarily that the executive branch and the prospective arms purchaser will sign a sales contract and that the items will be transferred on the 31 st day after the statutory notification of the proposal has been made. It would, however, be legal to do so at that time.\n\n\tCongressional Disapproval by Joint Resolution\n\nAlthough Congress has more than one legislative option it can use to block or modify an arms sale, one option explicitly set out in law for blocking a proposed arms sale is the use of a joint resolution of disapproval as provided for in Section 36(b) of the AECA. Under that law, the formal notification is legally required to be submitted to the chairman of the Senate Foreign Relations Committee and the Speaker of the House. The Speaker has routinely referred these notifications to the House Foreign Affairs Committee as the committee of jurisdiction. As a courtesy, the Defense Department has submitted a copy of the statutory notification to the House Foreign Affairs Committee when that notification is submitted to the Speaker of the House. Under this option, after receiving a statutory Section 36(b) notification from the executive branch, opponents of the arms sale would introduce joint resolutions in the House and Senate drafted so as to forbid by law the sale of the items specified in the formal sale notification(s) submitted to Congress. If no Member introduces such a measure, the AECA's provisions expediting congressional action, discussed below, do not take effect.\nThe next step would be committee hearings in both houses on the arms sale proposal. If a majority of either the House or the Senate committee supported the joint resolution of disapproval, they would report it to their respective chamber in accordance with its rules. Following this, efforts would be made to seek floor consideration of the resolution.\n\n\t\tSenate Procedures\n\nAt this point, it is important to take note of procedures crafted to expedite the consideration of arms sales resolutions of disapproval. Since 1976, Section 36(b)(2) of the AECA has stipulated that consideration of any resolution of disapproval in the Senate under Section 36(b)(1) of the AECA shall be \"in accordance with the provisions of Section 601(b) of the International Security Assistance and Arms Export Control Act of 1976\" ( P.L. 94-329 , 90 Stat. 729). Since 1980, this stipulation has also applied to resolutions of disapproval in the Senate relating to commercially licensed arms sales under Section 36(c)(1) of the AECA. The purpose of Section 601(b) was to establish rules to facilitate timely consideration of any resolution of disapproval in the Senate. The rules set forth in Section 601(b) supersede the standing rules of the Senate and include the following:\nGive the committee with jurisdiction [the Senate Foreign Relations Committee] 10 calendar days from the date a resolution of disapproval is referred to it to report back to the Senate its recommendation on any such resolution (certain adjournment periods are excluded from computation of the 10 days); Make it in order for a Senator favoring a disapproval resolution to move to discharge the committee from further consideration of the matter if the committee fails to report back to the Senate by the end of the 10 calendar days it is entitled to review the resolution (the AECA expressly permits a discharge motion after 5 calendar days for sales to NATO, NATO countries, Japan, Australia, South Korea, Israel, and New Zealand); Make the discharge motion privileged, limit floor debate on the motion to one hour, and preclude efforts to amend or to reconsider the vote on such a motion; Make the motion to proceed to consider a resolution of disapproval privileged and preclude efforts to amend or to reconsider the vote on such motion; Limit the overall time for debate on the resolution of disapproval to 10 hours and preclude efforts to amend or recommit the resolution of disapproval; Limit the time (one hour) to be used in connection with any debatable motion or appeal; provide that a motion to further limit debate on a resolution of disapproval, debatable motion, or appeal is not debatable.\nThe Senate is constitutionally empowered to amend its rules or to effect a rule change at any time. The fact that an existing rule is in Section 601 of the International Security Assistance and Arms Export Control Act of 1976 is not an obstacle to changing it by Senate action alone should the Senate seek to do so.\n\n\t\tHouse Floor Procedures12\n\nThe House of Representatives is directed by Sections 36(b)(3) and 36(c)(3)(B) of the AECA to consider a motion to proceed to the consideration of a joint resolution disapproving an arms sale reported to it by the appropriate House committee as \"highly privileged.\" Generally, this means that the resolution will be given precedence over most other legislative business of the House, and may be called up on the floor without a special rule reported by the Rules Committee. Unlike for the Senate, however, the AECA contains no provision for discharge of the House committee if it does not report on the joint resolution. If reported and called up, the measure will be considered in the Committee of the Whole, meaning that amendments can be offered under the \"five-minute rule.\" Nevertheless, amendments to joint resolutions disapproving arms sales have apparently never been offered in the House.\nThe Rules Committee usually sets the framework for floor consideration of major legislation in the House of Representatives, however, and could do so for a joint resolution of disapproval. Upon receiving a request for a rule to govern consideration of such a resolution, the House Rules Committee could set a time limit for debate, exclude any amendments to, and waive any points of order against the resolution. If the House adopted the rule reported by the committee, it would govern the manner in which the legislation would be considered, superseding the statutory provision.\n\n\t\tFinal Congressional Action\n\nAfter a joint resolution is passed by both the House and the Senate, the measure would next be sent to the President. Once this legislation reaches the President, presumably he would veto it in a timely manner. Congress would then face the task of obtaining a two-thirds majority in both houses to override the veto and impose its position on the President.\n\n\tCongressional Use of Other Legislation\n\nCongress can also block or modify a proposed sale of major defense equipment, or defense articles and services, if it uses the regular legislative process to pass legislation prohibiting or modifying the sale or prohibiting delivery of the equipment to the recipient country. While it is generally presumed that Congress will await formal notification under Section 36(b) or 36(c) of the AECA before acting in opposition to a prospective arms sale, it is clear that a properly drafted law could block or modify an arms sale transaction at any time\u00e2\u0080\u0094including before a formal AECA notification was submitted or after the 30-day AECA statutory notification period had expired\u00e2\u0080\u0094so long as the items have not been delivered to the recipient country.\nCongressional use of its lawmaking power regarding arms sales is not constrained by the AECA reporting requirements. In order to prevail, however, Congress must be capable of overriding a presidential veto of this legislation, for the President would presumably veto a bill that blocked his wish to make the arms sale in question. This means, in practical terms, that to impose its view on the President, Congress must be capable of securing a two-thirds majority of those present and voting in both houses.\nThere are potentially important practical advantages, however, to prohibiting or modifying a sale, if Congress seeks to do so, prior to the date when the formal contract with the foreign government is signed\u00e2\u0080\u0094which could occur at any time after the statutory 30-day period. These likely advantages include (1) limiting political damage to bilateral relations that could result from signing a sales contract and later nullifying it with a new law; and (2) avoiding financial liabilities which the U.S. Government might face for breaking a valid sales contract. The legislative vehicle designed to prohibit or modify a specific arms sale can take a variety of forms, ranging from a rider to any appropriation or authorization bill to a freestanding bill or joint resolution. The only essential features that the vehicle must have are (1) that it is legislation passed by both houses of Congress and presented to the President for his signature or veto and, (2) that it contains an express restriction on the sale and\/or the delivery of military equipment (whether it applies to specific items or general categories) to a specific country or countries.\n\n\tPresidential Waiver of Congressional Review\n\nIt is important to note that the President also has the legal authority to waive the AECA statutory review periods. For example, if the President states in the formal notification to Congress under AECA Sections 36(b)(1), 36(c)(2), 36(d)(2) that \"an emergency exists\" which requires the sale (or export license approval) to be made immediately \"in the national security interests of the United States,\" the President is free to proceed with the sale without further delay. The President must provide Congress at the time of this notification a \"detailed justification for his determination, including a description of the emergency circumstances\" which necessitated his action and a \"discussion of the national security interests involved.\" AECA Section 3(d) (2)(A) provides similar emergency authority with respect to retransfers of U.S.-origin major defense equipment, defense articles, or defense services.\nSection 614(a) of the Foreign Assistance Act of 1961 (FAA), as amended, also allows the President, among other things, to waive provisions of the AECA, the FAA, and any act authorizing or appropriating funds for use under either the AECA or FAA in order to make available, during each fiscal year, up to $750 million in cash arms sales and up to $250 million in funds. Not more than $50 million of the $250 million limitation on funds use may be made available to any single country in any fiscal year through this waiver authority unless the country is a \"victim of active aggression.\" Not more than $500 million of cash sales (or cash sales and funds made available combined) may be provided under this waiver authority to any one country in any fiscal year. To waive the provisions of these acts related to arms sales, the President must determine and notify Congress in writing that it is \"vital\" to the \"national security interests\" of the United States to do so. Before exercising the authority granted in Section 614(a), the President must \"consult with\" and \"provide a written policy justification to\" the House Foreign Affairs and the Senate Foreign Relations Committees and House and Senate Appropriations Committees.\nIn summary, in the absence of a strong majority in both houses of Congress supporting legislation to block or modify a prospective arms sale, the practical and procedural obstacles to passing such a law\u00e2\u0080\u0094whether a freestanding measure or one within the AECA framework\u00e2\u0080\u0094are great. Even if Congress can pass the requisite legislation to work its will on an arms sale, the President need only veto it and secure the support of one-third plus one of the Members of either the Senate or the House to have the veto sustained and permit the sale.\nIt should be noted that Congress has never successfully blocked a proposed arms sale by use of a joint resolution of disapproval, although it has come close to doing so (see section below for selected examples). Nevertheless, Congress has\u00e2\u0080\u0094by expressing strong opposition to prospective arms sales, during consultations with the executive branch\u00e2\u0080\u0094affected the timing and the composition of some arms sales, and may have dissuaded the President from formally proposing certain arms sales.\n\n\t\t2019 Sales to Jordan, Saudi Arabia, and the United Arab Emirates\n\nOn May 24, 2019, Secretary of State Michael Pompeo stated that he had directed the State Department \"to complete immediately the formal notification of 22 pending arms transfers\" to Jordan, Saudi Arabia, and the United Arab Emirates. In a determination to Congress, Pompeo invoked the AECA Section 36 emergency provisions described above. The transfers included a variety of defense articles and services, as well as an agreement to coproduce and manufacture components of Paveway precision-guided munitions in Saudi Arabia. On June 20, 2019, the Senate passed S.J.Res. 36 , which prohibited both the Paveway coproduction agreement described above and the transfer of additional such munitions, and S.J.Res. 38 , which prohibited transfers of \"defense articles, defense services, and technical data to support the manufacture of the Aurora Fuzing System for the Paveway IV Precision Guided Bomb Program.\" The same day, the Senate passed en bloc another 20 resolutions of disapproval prohibiting the remaining notified transfers. \nThe House passed S.J.Res. 36 and S.J.Res. 38 on July 17, 2019. The same day, the House also passed S.J.Res. 37 , which prohibited the transfer to the UAE of \"defense articles, defense services, and technical data to support the integration, operation, training, testing, repair, and operational level maintenance\" of the Maverick AGM-65 air-to-surface guided missile and several Paveway systems for use on a number of Emirati-operated aircraft. The resolution also prohibited the transfer of a number of Paveway munitions to the UAE. President Donald Trump vetoed the three bills on July 24. A July 29 Senate vote failed to override these vetoes. \n\n\t\tExamples of AECA Resolutions of Disapproval\n\nOn October 14, 1981, the House adopted a resolution ( H.Con.Res. 194 ) objecting to President Reagan's proposed sale to Saudi Arabia of E-3A airborne warning and control system (AWACS) aircraft, Sidewinder missiles, Boeing 707 refueling aircraft, and defense articles and services related to F-15 aircraft. An October 28, 1981, Senate vote on identical legislation failed, however, after President Reagan made a series of written commitments to Congress regarding the proposed sale. Congress later enacted legislation requiring the President to certify that the commitments made in 1981 regarding the proposed sale had been met prior to the delivery of the AWACS planes (Section 127 of the International Security and Development Cooperation Act of 1985; P.L. 99-83 ).\nOn April 8, 1986, President Ronald Reagan formally proposed the sale to Saudi Arabia of 1,700 Sidewinder missiles, 100 Harpoon missiles, 200 Stinger missile launchers, and 600 Stinger missile reloads. On May 6, 1986, the Senate passed legislation to block these sales ( S.J.Res. 316 ) by a vote of 73-22. The House concurred with the Senate action on May 7, 1986, by passing H.J.Res. 589 by a vote of 356-62. The House then passed S.J.Res. 316 by a voice vote and (in lieu of H.J.Res. 589 ) sent it to the President. On May 21, 1986, President Reagan vetoed S.J.Res. 316 . But, in a letter that day to then-Senate Majority Leader Robert Dole, President Reagan said he would not include the controversial Stinger missiles and launchers in the sales proposal. On June 5, 1986, the Senate, by a 66-34 vote, sustained the President's veto of S.J.Res. 316 , and the sale of the Sidewinder and Harpoon missiles to Saudi Arabia proceeded.\nMore recently, on March 10, 2016, the Senate Foreign Relations Committee rejected a motion to discharge a joint resolution ( S.J.Res. 31 ) prohibiting the sale of several defense articles, particularly eight F-16 Block 52 aircraft. H.J.Res. 82 was the House companion bill. On May 5, 2016, a State Department spokesperson, noting congressional objections to using Foreign Military Financing funds for the aircraft, told reporters that the United States had \"told the Pakistanis that they should put forward national funds for the purchase.\" In late May, the U.S. offer expired after Islamabad failed to submit a letter of acceptance by the required deadline.\nOn June 13, 2017, the Senate voted to reject a motion to discharge from the Senate Foreign Relations Committee a joint resolution ( S.J.Res. 42 ) prohibiting certain proposed defense exports to Saudi Arabia, such as \"technical data, hardware, and defense services\" to support the Royal Saudi Air Force's deployment of the Joint Direct Attack Munition and integration of the FMU-152A\/B JPB Fuze System into several warhead types. The bill also would have prohibited the transfer of \"defense articles, defense services, and technical data to support the assembly, modification, testing, training, operation, maintenance, and integration\" of certain precision guided munitions for the certain Royal Saudi Air Force planes. H.J.Res 102 was the House companion bill.","output":null}
{"id":"gao_GAO-20-99","pid":"gao_GAO-20-99_0","input":"\tBackground\n\n\t\tU.S. Missions in Afghanistan\n\nThe United States currently has two primary missions in Afghanistan: the  U.S-led counterterrorism mission and the NATO-led Resolute Support  mission to train, advise, and assist the ANDSF. For U.S. purposes, both  of these missions are a part of Operation Freedom\u2019s Sentinel,  commanded by U.S. Forces-Afghanistan. Combined Security Transition  Command-Afghanistan is the command under NATO\u2019s Resolute Support  mission that conducts the train, advise, and assist mission in Afghanistan.  These efforts are carried out via the regional Train Advise Assist  Commands (TAACs) that collectively cover all of Afghanistan.  Specifically, Train Advise Assist Command\u2013Air (TAAC-Air) focuses on  developing and advising the Afghan Air Force.\n\n\t\tThe Afghanistan Security Forces Fund\n\nThe ASFF is generally a 2-year appropriation that is used to provide  assistance, with the concurrence of the Secretary of State, to the security  forces of Afghanistan, including the provision of equipment, supplies,  services, training, facility and infrastructure repair, renovation,  construction, and funding. The ASFF presently comprises four budget  activity groups: Afghan National Army, Afghan National Police, Afghan Air  Force, and Afghan Special Security Forces. Each budget activity group  includes four sub-activity groups: sustainment, infrastructure, equipment  and transportation, and training and operations. According to officials, the  training and operations sub-activity group encompasses most of CSTC- A\u2019s efforts to train the ANDSF, including the Afghan National Army.\n\n\tDOD Processes for Identifying Afghan National Army Training Needs and Associated Funding Requirements\n\nCSTC-A has established processes to identify capability gaps within the  ANDSF, develop and select training needed to address those gaps, and  identify associated funding requirements. To do so, CSTC-A works with  various requiring activities\u2014partner organizations, such as the Train  Advise Assist Commands\u2014to identify ANDSF training needs. CSTC-A  then incorporates these needs and associated funding requirements into  the ASFF budget request, typically a year or more before the training is  initiated.\n\n\t\tCSTC-A Works with Its Partner Organizations to Identify ANDSF Capability Gaps and Training Needs\n\nCSTC-A has established processes to identify capability gaps within the  ANDSF, develop and select training needed to address those gaps, and  identify associated funding requirements for inclusion in ASFF budget  justification documentation. To help execute these processes, CSTC-A  has developed standard operating procedures and other guidance for  planning, resourcing, and executing the ASFF. These procedures and  other guidance include information on processes to validate training  requirements and associated resources. CSTC-A works with various  partner organizations\u2014referred to as \u201crequiring activities\u201d\u2014to identify  capability gaps and training needs for the ANDSF. Requiring activities are  the organizations that request the resourcing of ANDSF capability needs  through ASFF. They include CSTC-A, the TAACs, and other U.S. or  NATO organizations partnered with the ANDSF.\nAccording to DOD officials, a partner organization can identify capability  gaps in a number of ways. For example, Train Advise Assist Command\u2013 Air, which develops and advises the Afghan Air Force, works with subject  matter experts from the relevant U.S. military services and other  organizations to identify potential Afghan Air Force capability gaps.\nAdditionally, according to DOD officials, in 2015 DOD tasked the MITRE  Corporation to conduct a study of Afghan Air Force capabilities.  According to DOD officials, MITRE\u2019s November 2015 study highlighted  capability gaps within the cadre of Afghan Air Force fixed- and rotary-wing  pilots and maintenance personnel. Further, officials stated that the study  concluded that the training of additional pilots constituted a critical need  for the Afghan Air Force.\nOnce a capability gap has been identified, the requiring activity develops  potential courses of action to address it, such as proposals to train the  ANDSF to develop needed capabilities. Through CSTC-A\u2019s procedures  these proposals are validated, along with associated resources. The  validation process is intended to ensure that a transparent and  accountable process is followed when allocating ASFF resources to  emerging requirements.\nFor example, as part of the fiscal year 2018 budget process, TAAC-Air  identified a capability gap within the Afghan Air Force and then worked  with various subject matter experts to develop courses of action to  address the gap. Specifically, TAAC-Air worked with personnel from the  Program Executive Office for Simulation, Training, and Instrumentation  (PEO-STRI), which provides simulation, training, and testing solutions for  the Army and joint community. Subject matter experts from PEO-STRI  provided details regarding various options for addressing the capability  gap. PEO-STRI officials noted that they also provided cost estimates for  delivering the solution based on historical data. According to PEO-STRI  officials, this was a highly interactive process entailing frequent formal  and informal discussions among multiple organizations to develop the  most effective solution for pilot training for the Afghan Air Force. Once  details and cost estimates were solidified, the requirement owner  presented them to a Council of Colonels, an officer group responsible for  requirement validation for training needs, among other capability needs.  The requirement was then taken to the General Officer Steering  Committee, which votes to validate the requirement and approve the  proposed solution.\n\n\t\tCSTC-A Process Incorporates Validated Training Needs into ASFF Budget Request\n\nCSTC-A\u2019s process incorporates validated training needs and their  associated funding requirements as part of DOD\u2019s annual budget  process. DOD\u2019s planning, programming, budgeting, and execution  (PPBE) process, which is governed in part by DOD Directive 7045.14,  along with other DOD guidance, is conducted under four phases (see  figure 1). Specifically, DOD uses the PPBE process to determine and  prioritize requirements and allocate resources to provide capabilities  necessary to accomplish the department\u2019s missions. According to  officials, as part of this process, CSTC-A provides inputs, including  training requirements and associated funding needs, and later works with  various contracting commands to execute appropriated funds.\nIn the case of ASFF, CSTC-A\u2019s guidance indicates that a proposed  activity (for example, fixed-wing pilot training classes) should generally be  included in the ASFF budget justification book in order to later use ASFF  funds for that activity. To do so, CSTC-A\u2019s Program and Analysis  Division develops and incorporates the requests from requirement owners  for funding for the operations, sustainment, and development of the  ANDSF into the ASFF budget request and associated budget justification  materials. The Program and Analysis Division works with the  requirement owners to write a narrative describing their proposed activity  and associated cost estimate for delivering the activity. The division then  works with the OUSD-Comptroller to consolidate requirements for all  budget activities and sub-activity groups into a single draft budget  justification book.\nOne significant aspect of this process is that many of the key decisions,  and associated cost assumptions, on how CSTC-A and TAAC-Air (in the  case of Afghan pilot training) intend to carry out ASFF training efforts are  proposed 18-24 months before the training will occur. For example, as  shown in figure 2, preparation of the ASFF budget justification book for  fiscal year 2019 began in the summer of 2017. In turn, the budget  justification book was subsequently submitted to the OUSD-Comptroller  in December 2017, and funds were not available for use until the start of  the new fiscal year, in October 2018.\nThese time frames can present a challenge in developing accurate cost  estimates for CSTC-A, given that situations in Afghanistan can change  significantly in the time between CSTC-A\u2019s developing a proposed  capability requirement and associated cost estimate for inclusion in the  ASFF budget justification book and the execution of that requirement,  according to officials. If conditions change, officials noted, the proposed  actions and associated cost estimates for a given requirement may no  longer be appropriate or accurate. For example, the Special Inspector  General for Afghanistan Reconstruction reported in January 2019 that  CTSC-A may have overestimated the cost for UH-60 Blackhawk rotary- wing pilot training by as much as $1 billion over a 7-year period\u2014 attributing the overestimation mainly to unrealistic assumptions regarding  student or pilot attrition and the English language program.\nIn the case of initial entry fixed-wing pilot training classes, CSTC-A\u2019s  original proposal, as reflected in its budget justification book was to have  classes of 25 students. However, during the implementation of this  training, the class size fell to 12 students because not all 25 students  achieved the required English language proficiency, and one student had  dropped out of the program. Consequently, the resulting class was half  the projected size underlying the estimated funding requirement, which  resulted in funds being excess to CSTC-A\u2019s actual need. CSTC-A officials  acknowledged the challenges they faced in filling classes with the  expected number of students, adding that they had purposely built in  significant flexibility in the training approach to be able to adjust to the  realities of the ANDSF\u2019s ability to generate qualified students. According  to CSTC-A officials, the number of English-proficient Afghan student  candidates varies from year to year.\nFor cases like these, where CSTC-A requested more funding than it  ultimately obligated, in some circumstances DOD may reprogram the  unobligated amounts within the same appropriation account, or may  transfer it to other appropriation accounts, if there is authority to do so.  Otherwise, time-limited appropriations, such as the ASFF, expire after  their period of availability and are unavailable for new obligations.  According to CSTC-A officials, in cases where they have unobligated  funding due to changing conditions such as smaller-than-expected class  sizes, they try to reprogram that money for related needs within the same  sub-activity group in the ASFF budget prior to expiration. For example, if  certain Afghan Air Force training costs are lower than expected, the  money could be reprogrammed for other efforts within the Afghan Air  Force training and operations sub-activity group.\n\n\tCSTC-A\u2019s Process for Developing and Overseeing ASFF Training Contracts\n\nASFF-funded training contracts for the ANDSF are developed and  executed through a process that is modeled on the U.S. government\u2019s  foreign military sales process. Until April 2019, ASFF-funded orders to  train the Afghan National Army were generally filled under a contract with  a single provider. At that point, DOD began to transition to an approach  using several contracts, including one with multiple providers.\n\n\t\tASFF-Funded Training Contracts Are Developed and Executed Under a Process Modeled on the Foreign Military Sales Program\n\nASFF-funded training contracts are developed and executed under a  process modeled on the U.S. government\u2019s foreign military sales (FMS)  program, referred to as \u201cpseudo-FMS.\u201d As indicated by CSTC-A  guidance, these pseudo-FMS procurements are FMS-like cases and use  U.S. funds to purchase items, services, and training for ANDSF capability  requirements. The process is outlined in the Security Assistance  Management Manual, which provides DOD-wide guidance to DOD  components engaged in the management or implementation of DOD  security assistance and security cooperation programs over which the  Defense Security Cooperation Agency has responsibility. We have  previously reported that while the many steps of the process used for  FMS and pseudo-FMS cases can be grouped in different ways, they fall  into five general phases: assistance request, agreement development,  acquisition, delivery, and case closure.\nFirst, CSTC-A works with the resource coordinator, requirement owner,  and other elements to develop a Memorandum of Request, and it submits  that memorandum to the implementing agency and the Defense Security  Cooperation Agency, requesting assistance to contract for ANDSF needs  using ASFF funds. For example, when developing the Memorandum of  Request for initial entry fixed-wing pilot training, CSTC-A worked with  TAAC-Air, the requirement owner, to identify details regarding the agreed- upon training solution. Officials noted that CSTC-A also worked with the  subject matter experts from PEO-STRI to develop the independent  government cost estimate.\nSecond, as described by officials, the agreement development phase  begins with the Defense Security Cooperation Agency\u2019s receiving the  Memorandum of Request. The Defense Security Cooperation Agency  opens a case and assigns it to an implementing agency\u2014that is, the  military department or defense agency responsible for overall  management of the actions that will result in the delivery of materials or  services. According to contracting officials, the implementing agency for  training foreign military ground and air forces outside of the United  States\u2014such as the Afghan National Army\u2014is the U.S. Army Security  Assistance Command. The implementing agency then works with the  appropriate Program Executive Office to develop the Letter of Offer and  Acceptance\u2014which serves to document the transfer of articles and  services to the U.S. government requesting authority. For example, for  the out-of-country fixed-wing pilot training requirement, contractors  delivered the training, and the appropriate implementing agency was  PEO-STRI, according to officials. Once the Letter of Offer and  Acceptance is completed and signed by the implementing and requesting  agencies, it is reviewed and approved by the Defense Security  Cooperation Agency and Department of State, as appropriate.\nThird, the Program Executive Office works with the appropriate  contracting command to acquire the requested defense goods or services  as part of the acquisition phase. According to contracting officials, the  contracting command solicits and receives bids from contractors and  selects the best value option (including price plus deliverables). Fourth,  the contractor delivers the required good or service. According to officials,  the relevant Program Executive Office is responsible for monitoring the  contractor\u2019s performance by ensuring compliance with applicable contract  clauses. Fifth, following contract completion and payment of outstanding  obligations, the implementing agency initiates case closure with the  Defense Security Cooperation Agency.\n\n\t\tTraining Requirements for the Afghan National Army Were Generally Provided by a Single Vendor Prior to April 2019, but Are Now Provided by Multiple Vendors\n\nPrior to April 2019, ASFF-funded training requirements for the Afghan  National Army, including out-of-country fixed- wing pilot training, were  generally executed under a single award indefinite delivery, indefinite  quantity contract known as the Warfighter Field Operations Customer  Support (WFF) contract. The WFF contract provided integrated training  system sustainment and training services world-wide for the U.S. Army,  Marine Corps, Navy, Air Force, and Special Operations Command.  According to Army contracting officials, WFF was the most expedient way  to contract for various types of training for the Afghan National Army due  to the contract\u2019s broad scope and $11.2 billion ceiling. These officials said  it provided the capacity and flexibility needed to fulfill the Afghan National  Army\u2019s requirements and time frames in a streamlined way because the  competition and award process had already occurred, enabling officials to  move directly to awarding task orders for support.\nHowever, while the single award indefinite delivery, indefinite quantity  contract streamlined the process for contracting ANDSF training, it limited  DOD\u2019s ability to negotiate some costs. According to contracting officials,  only certain types of costs could be negotiated, such as those associated  with housing, travel, and the number of advisors supporting the training.  The officials stated that other costs were established as a per-unit cost at  the time of the contract award. In addition, various administrative fees  were established when the WFF contract was awarded in 2007 and could  not be renegotiated, according to contracting officials. As a result, any  task orders under this contract, including those to train the Afghan  National Army, had to include these administrative fees and established  labor wages.\nTo illustrate the various costs associated with the Afghan Air Force  training program, we reviewed documentation associated with training  provided under the WFF contract. One training program cost $12.1 million  for the delivery of an 86-week fixed-wing pilot training course (from  February 2018 through September 2019) for 13 Afghan Air Force  students at the Fujairah Aviation Academy in the United Arab Emirates.  The pilot training was conducted by contractors and comprised aviation  English language training, theory of flight, basic and advanced instrument  ground school, advanced flight instrumentation, and simulation training for  the Afghan Air Force Cessna C-208 Caravan aircraft. The $12.1 million  total included amounts paid to the contractor and administrative charges  to cover the costs of entities within the U.S. government. The costs  associated with the training are shown in figure 3 below.\nThe largest cost factor in this task order was the cost of the flight school  itself, which accounted for 68.4 percent (or $8.2 million) of the total cost,  according to contracting officials. The flight school included ground  school, simulation, advanced instruments, and flying hours training, and it  represented a cost per each of the 13 students who actually attended the  training. The flight school also included the cost of housing, electronic  books \/ manuals, and campus security, some of which costs were  negotiable, according to officials. Other costs, such as the Defense  Security Cooperation Agency 3.5 percent surcharge and contract  administration services 1.2 percent surcharge, were established based  upon rates current at the time of the letter of offer and acceptance.  According to officials, the contractor\u2019s profit was established at the time of  award of the contract in 2007. Officials stated that the costs that could be  negotiated were limited and included costs associated with travel,  lodging, and adding more advisors to augment the training. According to  contracting officials, these limitations were not unique to this ASFF  training but applied broadly to all ASFF training task orders they executed  under WFF.\nIn 2018 DOD decided to replace WFF, which was nearing expiration, with  a series of new contracts. DOD has begun to transition work previously  performed under WFF to these new contracts, the first of which was  awarded in 2018. According to contracting officials, ASFF-funded training  efforts are expected to be executed primarily under two of the new  contracts \u2013 the Enterprise Training Services Contract and the Training,  Instructor Operator Support Services Contract. The Enterprise Training  Services Contract is a multiple award indefinite delivery, indefinite  quantity contract with a total contract ceiling of $2.4 billion that was  awarded to multiple contractors in June 2018. According to officials, the  Training, Instructor Operator Support Services Contract is a single award  indefinite delivery, indefinite quantity contract with a ceiling of $197.6  million that was awarded in July 2018.\nAccording to Army contracting officials, the contracting process for ASFF  training services will include competition among multiple contractors for  each task order under the Enterprise Training Services Contract. Army  contracting officials stated that under a multiple-award contract, each  contract holder is to be provided a fair opportunity to compete for each  task order, in part to use competition to ensure that the proposed prices  are fair and reasonable. According to Army contracting officials, the  Enterprise Training Services Contract also affords the opportunity to  negotiate more elements than previously under the WFF contract, such  as labor rates or travel costs associated with training. The first training  task order under the Enterprise Training Services Contract in support of  Afghan forces was issued in April 2019. As this task order has only  recently been issued, it is too early for us to comment on the efficacy of  these contracts.\n\n\tDOD Processes to Provide Visibility over ASFF-Funded Training Contracts\n\nDOD has varying degrees of visibility over ASFF-funded training  contracts. At the broadest level, OUSD-Comptroller and contracting  officials stated that they have visibility of the overall execution of the  ASFF budget, including funding associated with Afghan National Army  training. For example, OUSD-Comptroller tracks and reports ASFF  obligations and disbursements in monthly status-of-funds reports, known  as Defense Financial and Accounting Services 1002 Reports. In addition,  the Special Inspector General for Afghanistan Reconstruction tracks and  reports ASFF obligations and disbursements via its Overseas  Contingency Operations quarterly reports to Congress.\nAt the individual contract level, the military services\u2019 contracting  commands, such as PEO-STRI and Army Contracting Command,  develop and maintain contract files for individual ASFF-funded contracts  and task orders. However, according to officials, DOD does not have a  centralized system or reporting mechanism for tracking all ASFF training  contracts, because the systems used by the services for managing  funding and those used for contract management do not interface with  each other. According to OUSD-Comptroller officials, the systems used  for financial management were not designed or intended to identify ASFF  funds specifically obligated for training contracts because there is no  requirement for them to do so.\nOfficials said that consequently, in the single instance in which they have  had to develop a comprehensive list of all ASFF-funded training  contracts, they had to work with the contracting commands at the  respective military services to gather this information. For example, to  respond to congressional direction related to contracts funded with ASFF,  OUSD-Policy contacted all of the military services to request a list of all  training contracts funded through the ASFF under the respective services\u2019  responsibilities, according to OUSD officials. In turn, Army contracting  officials stated that they identified the requested information by using the  lines of accounting fields in their contract management systems to identify  those training contracts funded with ASFF. OUSD-Policy officials  provided us with the resulting list of 40 contracts and task orders, totaling  over $483 million in estimated contract value, but they acknowledged that  the list was likely incomplete.\nOUSD-Policy officials who compiled the list of training contracts told us  that the precision of the list was affected by inconsistent interpretations  among the services of what constitutes a training contract. According to  these officials, training for the Afghan National Army can also occur under  procurement or maintenance contracts that have embedded training  components. For example, according to officials, the Army\u2019s National  Maintenance Strategy contract provides logistic support to the Afghan  National Army and includes a training component. Similarly, the Navy\u2019s  ASFF-funded ScanEagle unmanned aerial vehicle reconnaissance  procurement contract includes a training component. Because these  contracts are not primarily training-oriented, according to contracting  officials, they were not identified under the training and operations  subactivity group in the ASFF budget, and therefore would not be easily  identifiable as ASFF training contracts. Despite these limitations, DOD  officials stated that, given their existing systems and processes and their  ability to reach out to contracting officials to obtain additional data when  needed, they believe they have sufficient tools to identify most ASFF- funded training contracts. Additionally, DOD officials stated that the  congressional direction associated with ASFF-funded training was a one- time request, not a recurring task.\n\n\tAgency Comments\n\nWe provided a draft of this report to DOD, and DOD responded that it  would not be providing formal comments. DOD also provided technical  comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees and to the Secretary of Defense. In addition, the report is  available at no charge on our website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  Cary Russell 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  the appendix.\n\nAppendix I: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, James A. Reynolds, Assistant  Director, and Jerome Brown, William Chatlos, Alfonso Garcia, Steve  Pruitt, Michael Shaughnessy, McKenna Stahl, and Cheryl Weissman  made key contributions to this report.","output":null}
{"id":"gao_GAO-19-573","pid":"gao_GAO-19-573_0","input":"\tBackground\n\nEEOC provides leadership and guidance to federal agencies on all  aspects of the federal government\u2019s EEO program. EEOC assures  federal agency and department compliance with EEOC regulations,  provides technical assistance to federal agencies concerning EEO  complaint adjudication, monitors and evaluates federal agencies\u2019  affirmative employment programs, develops and distributes federal sector  educational materials, conducts training for stakeholders, provides  guidance and assistance to Administrative Judges who conduct hearings  on EEO complaints, and adjudicates appeals from administrative  decisions made by federal agencies on EEO complaints.\n\n\t\tEEOC\u2019s MD-715 Reporting Requirements\n\nEEOC\u2019s MD-715 requires agencies to take appropriate steps to establish  a model EEO program and to ensure that all employment decisions are  free from discrimination. It also sets forth the standards by which EEOC  will review the sufficiency of agency Title VII and Rehabilitation Act  programs, which include periodic agency self-assessments and the  removal of barriers to free and open workplace competition.\nUnder MD-715, federal agencies, and any subordinate component that  enjoys autonomy from its parent agency, are required to submit annual  MD-715 EEO program status reports to EEOC. Completed MD-715 reports include:\nPart F: Requires designated agency officials to certify that the agency has completed an annual self-assessment (Part G) and established plans to correct any program deficiencies (Part H), as well as conducted comprehensive barrier analyses and established plans to eliminate identified barriers (Part I).\nPart G: Contains a self-assessment checklist for an agency to assess its compliance with essential EEO program elements to operate a model EEO program and identify any deficiencies.\nPart H: Describes the agency\u2019s plans to address identified deficiencies.\nPart I: Shows identified EEO triggers and barriers for race, gender, and national origin; how the agency plans to address them; and who the responsible officials are.\nPart J: Contains the agency\u2019s affirmative action plan for individuals  with disabilities and individuals with targeted disabilities.\nAdditionally, federal agencies are required to identify and eliminate  barriers that impede free and open competition in their respective  workplaces. EEOC reporting requirements state that a barrier is an  agency policy, procedure, practice, or condition that limits or tends to limit  employment opportunities for members of a particular gender, race, or  ethnic background, or for individuals based on disability status. According  to EEOC\u2019s instructions, many employment barriers are built into the  organizational and operational structures of an agency, and are  embedded in the day-to-day procedures and practices of the agency.\nAgencies are also required to identify EEO program deficiencies and  develop plans to address them. According to EEOC\u2019s instructions,  deficiencies are weaknesses in an agency\u2019s EEO program where agency  officials need to provide more attention. For example, a deficiency might  be that the EEO director is not under the direct supervision of the agency  head, or that an EEO Director or Officer lacks a regular, effective means  of informing the agency head and other top management of the  effectiveness, efficiency, and legal compliance of the agency\u2019s EEO  program.\nEEOC\u2019s Office of Federal Operations instructs agencies on how to  complete their MD-715 reports, provides training and technical  assistance, and offers additional informal assistance, such as sharing  best workplace practices. Based on agency MD-715 reports, EEOC  includes assessments of agency progress in its Annual Report on the  Federal Workforce, and in notice and feedback letters addressed to  individual agencies. In addition, according to EEOC officials, EEOC  meets with each agency every 3 years to review the status of its  compliance with federal EEO laws, regulations, and management  directives.\nIf EEOC determines that areas of noncompliance exist in an agency\u2019s  program, it may take compliance actions. Compliance actions include  requiring the agency to provide an update on the status of its plans to  correct deficiencies in its MD-715 submission, or to submit a Compliance  Report to EEOC explaining the agency\u2019s progress in correcting  deficiencies within 6 months of the date of a feedback letter. If agencies  do not comply, EEOC may choose to initiate its noncompliance process,  which could include conducting a program evaluation, issuing a notice to  the Secretary of Homeland Security, or publicly identifying DHS as a  noncompliant agency.\nAs part of its noncompliance process, EEOC has conducted program  evaluations of DHS components. In 2013, EEOC initiated a program  evaluation at TSA to determine the adequacy and appropriateness of the  EEO complaint framework in all offices and directorates within TSA.  EEOC reported in 2014 that TSA\u2019s EEO complaint process was adequate  and complied with its regulations. However, EEOC made eight  recommendations to TSA, including one that called for TSA to modify the  EEO information in its training materials and presentations. In response to  EEOC\u2019s report, TSA submitted a letter to EEOC stating that it planned to  address all of the EEOC recommendations and had already taken steps  to implement several of them. In addition, in 2018, EEOC conducted a  multiagency program evaluation that included U.S. Customs and Border  Protection (CBP). It found that CBP had no women serving in positions  that involve intercepting prohibited commodities or persons, and that  women comprised only 5 percent of its border patrol agents. EEOC  stated that the report\u2019s recommendations may help CBP with its hiring  efforts.\n\n\t\tDHS\u2019s EEO Program\n\nCRCL, through the Deputy Officer for EEO and Diversity, is responsible  for processing complaints of discrimination; establishing and maintaining  EEO programs; fulfilling reporting requirements as required by law,  regulation, or executive order; evaluating the effectiveness of EEO  programs; leading the department\u2019s diversity management program; and  preparing and submitting DHS\u2019s annual MD-715 report to EEOC.\nAccording to EEOC policy, a second-level reporting component is one  that enjoys autonomy from its parent agency, and has 1,000 or more  employees. EEOC instructions require second-level reporting  components submit MD-715 reports to their agency headquarters for  inclusion in the agency-wide report in addition to submitting them directly  to the EEOC. DHS\u2019s Headquarters EEO Office, a part of CRCL,  implements the EEO program for all headquarters employees and  applicants. DHS has nine second-level reporting components, including  DHS Headquarters, that are required to submit individual MD-715 reports  to EEOC. Each component has an office headed by a director charged  with implementing its EEO program.\nFigure 1 shows the officials who are primarily responsible for EEO at  DHS.\n\n\t\tDHS\u2019s MD-715 Reporting Process\n\nCRCL develops DHS\u2019s annual MD-715 EEO program status report and  submits it to EEOC. CRCL works with components to gather and analyze  necessary data and information, and to perform the required MD-715  exercises that are ultimately used to complete the overall DHS MD-715  report. CRCL includes components\u2019 identified deficiencies in the DHS- wide MD-715 report. The Secretary of Homeland Security (or its  designee) and CRCL\u2019s Deputy Officer for EEO and Diversity are to certify  DHS\u2019s MD-715 report before CRCL sends the report to EEOC.\nFigure 2 illustrates DHS\u2019s MD-715 report development process. This  process includes conducting a self-assessment checklist of DHS\u2019s and its  components\u2019 efforts to achieve a model EEO program and barrier  analysis to eliminate identified EEO barriers.\n\n\tDHS Has Plans to Address the EEO Barriers It Identified, but Could Better Measure Its Progress toward Eliminating the Barriers\n\n\t\tDHS Has Taken Steps to Follow EEOC Guidance to Identify and Address EEO Barriers\n\nDHS has taken steps to follow EEOC\u2019s guidance by using and analyzing  various information sources, investigating possible causes of potential  barriers or triggers, and planning activities to address and eliminate  barriers. EEOC MD-715 guidance calls for federal agencies to continually  work towards preventing all forms of discrimination and eliminating  barriers that may impede free and open competition in the workplace.  Figure 3 shows the barrier identification and elimination steps under MD- 715.\nDHS generally uses the information sources that EEOC guidance  recommends in addition to workforce data to help identify potential  barriers. As directed by EEOC guidance, DHS analyzes its workforce  data to help identify triggers or indicators of potential EEO barriers by  comparing the racial, national origin, gender, and disability profiles of its  total workforce, and for various occupational categories to relevant civilian  labor workforce data. In fiscal year 2017, DHS analyzed all available  workforce data including:\nTotal Workforce \u2013 Distribution by Race\/Ethnicity, Gender, and\nParticipation Rates by Major Occupations \u2013 Distribution by  Race\/Ethnicity, Gender, and Disability, and\nApplicants and Hires by Major Occupations \u2013 Distribution by  Race\/Ethnicity, Gender, and Disability.\nIn addition to analyzing workforce data, in each of the fiscal years 2014  through 2017, DHS utilized the U.S. Office of Personnel Management\u2019s  Federal Employee Viewpoint Survey (FEVS) and DHS\u2019s employee exit  survey results to help identify and address barriers. For example,  CRCL, in DHS\u2019s fiscal year 2017 MD-715 report, used FEVS and exit  survey results to help investigate the possible causes of higher-than- expected nonretirement separations for white females and several other  ethnic and racial groups. According to the report, possible causes  included the lack of advancement opportunities, insufficient work\/life  programs, and the lack of alternate work schedules.\nDuring our small group discussions, DHS employee groups told us that  through the MD-715 report development process, they helped identify and  address triggers and barriers. For example, Special Emphasis Program  Managers we spoke with told us that DHS components conduct climate  surveys to obtain input from employees on workforce practices every 1 or  2 years. Further, several DHS components\u2019 MD-715 reports referenced  soliciting employee input, such as obtaining Disability Employment  Program Managers\u2019 input via quarterly disability employment advisory  council meetings where they share best practices and discuss issues and  topics including barriers.\n\n\t\t\tDHS Has Identified Workforce Demographics Data Anomalies That Indicate Potential EEO Barriers\n\nOur review of DHS\u2019s MD-715 reports showed that DHS identified three  department-wide triggers in fiscal years 2014 through 2017. The three  triggers were (1) high rate of nonretirement separations for certain  groups, particularly white women; (2) low participation rates of women  and various ethnic and racial groups in the permanent workforce; and (3)  low participation rates of individuals with disabilities and targeted  disabilities.\n\n\t\t\tWhile Investigating Various EEO Anomalies, DHS Identified Three Barriers\n\nSubsequent to its trigger identification and department-wide barrier  analysis, from fiscal years 2014 through 2017, DHS identified three  barriers: (1) problems with supervision\/management, lack of  advancement opportunities, lack of alternate work schedules, insufficient  work\/life programs, and personal\/family related reasons causing higher- than-expected nonretirement separations for white females and several  ethnic and racial groups; (2) the geographic location of jobs which has  contributed to the low hiring rates of racial groups in certain major  occupations; and (3) medical and physical requirements of law  enforcement positons, such as the ability to engage in moderate to  arduous physical exertion, which limit the eligibility of some applicants  with targeted disabilities. DHS identified these barriers by analyzing  component and DHS level workforce data and reviewing DHS FEVS and  exit survey results. DHS identified barriers in its MD-715 reports for fiscal  years 2014 through 2017. However, EEOC noted that for fiscal years  2015 to 2017, DHS had not identified any policies, procedures, practices,  or conditions causing (1) low hiring rates for women in certain major  occupations, and (2) the high separation rate of employees with  disabilities.\n\n\t\t\tDHS\u2019s Planned Activities to Address the Identified EEO Barriers\n\nAs stated in EEOC\u2019s guidance, barrier elimination is a vital step to  addressing identified barriers and working towards the goal of making the  federal government a model employer. To address and eliminate  identified barriers, EEOC\u2019s instructions direct agencies to include in their  MD-715 reports measurable objectives, an action plan that includes  planned activities and completion dates, as well as officials responsible  for overseeing the plan, and a summary of accomplishments.\nSince our 2009 recommendations, DHS has included interim milestones  in its MD-715 reports. Our 2009 report showed that DHS had modified  nearly all of its target completion dates. We recommended that DHS  identify essential activities and establish interim milestones necessary for  the completion of all planned activities to address identified barriers to  EEO. In its fiscal year 2011 MD-715 report to EEOC, DHS identified  essential activities and established interim milestones. Based on its MD- 715 reporting for fiscal years 2014 through 2017, DHS has continued to  identify planned activities and establish interim milestones.\nOur review of DHS\u2019s MD-715 reports from fiscal years 2014 through 2017  also shows that DHS has planned activities and targeted completion  dates to address each identified barrier, and each trigger for a potential  barrier. For example, to address the low participation rates of women  and several ethnic and racial groups in DHS\u2019s overall workforce, DHS\u2019s  planned activities included researching where to conduct outreach for the  identified groups, and producing a plan to integrate data from the multiple  applicant data-tracking systems used across DHS. DHS\u2019s outreach  activities included identifying colleges and universities with large  populations of underrepresented groups, identifying relevant job fairs in  selected service areas, and conducting focus group meetings with  employees from underrepresented groups to determine how to improve  recruitment and retention, among other events. These events were  initiated in 2011, but are to be reviewed and updated annually. For  example, DHS reported that it develops a \u201cTop 25\u201d list of annual outreach  and recruitment activities that include law enforcement focused events.  DHS also reported developing a framework in 2016 for applicant flow data  analysis\u2014important for identifying and addressing potential recruitment  and outreach barriers. In 2017, activities included conducting more robust  department-wide analysis of applicant data. Many of the activities were  initiated in prior years and target dates for completion were met. To  address the high nonretirement separation rate of certain groups, notably  white women, DHS\u2019s planned activities included updating and  augmenting previously instituted exit survey methods, and identifying and  implementing retention interventions.\nFurther, in its fiscal year 2014-2017 reports, DHS has identified essential  activities, established interim milestones, and met recurring interim  milestones for its planned activities. For example, DHS reported that it  planned to research where to conduct outreach for groups in occupations  with underrepresentation. DHS components completed this outreach  activity in 2012, and components and facilities are to annually identify (1)  colleges with substantial populations of underrepresented groups, (2)  relevant job fairs in the service area, and (3) relevant local affinity groups  and community groups, among other outreach activities. Additionally,  DHS\u2019s Office of the Chief Human Capital Officer (OCHCO) has lead  responsibility for implementing a multiyear plan for targeted recruitment of  applicants from identified underrepresented groups. OCHCO completed  its initial multiyear plan in 2012 and is to annually update its established  goals for intern programs, job fairs, and local advertising.\n\n\t\tSelected DHS Components Took Steps to Conduct Barrier Analyses\n\nAll four selected DHS components have taken steps to follow EEOC  guidance to conduct barrier analyses. Of the components, Federal Law  Enforcement Training Centers (FLETC), the U.S. Secret Service (Secret  Service), the Transportation Security Administration (TSA), and U.S.  Citizenship and Immigration Services (USCIS), only one, TSA, identified  any EEO barriers. However, each of the components identified triggers  and analyzed potential barriers by  reviewing workforce data (i.e., data on total workforce, new hires, and  mission critical occupations) and comparing the data to relevant  benchmarks,  reviewing various information sources to help identify possible barriers  that may be resulting in the current condition highlighted by the  analysis of workforce data, and  reporting action plans and time frames for addressing potential or  actual barriers.\nThe Secret Service\u2019s fiscal year 2017 MD-715 report showed that after  analyzing demographic data to identify triggers, the Secret Service used  FEVS data to identify potential barriers to the employment of individuals  with disabilities in occupations where the triggers were identified. In  addition, USCIS stated in its fiscal year 2017 MD-715 report that its  review of exit survey data provided reasons that men, Hispanics, and  whites left the agency, but data were inconclusive regarding the  continuing underrepresentation of those groups. USCIS also reported that  it would continue analyzing exit data in fiscal year 2018.\nIn fiscal year 2017, TSA identified two barriers in its MD-715 report\u2014(1)  medical and physical restrictions limit opportunities for individuals with  disabilities and individuals with targeted disabilities in Transportation  Security Officer and Federal Air Marshal occupations, and (2) women are  not applying to Transportation Security Officer or Federal Air Marshal  positions at the same rate as men. TSA reported that it analyzed  workforce data and policies, procedures, and practices related to  recruiting, hiring, and promotions to try to determine what may be  contributing to low participation rates for women and individuals with  disabilities. TSA also interviewed employees involved in those processes,  and conducted focus groups with supervisors and leadership at airports  and field offices. TSA\u2019s plans to address barriers include developing a  communication plan to promote TSA programs that support persons with  disabilities and with targeted disabilities; making sure training modules  are accessible; conducting training to increase awareness of unconscious  bias towards working with individuals with disabilities; and working with its  human capital office and others to assist with recruiting and hiring to more  effectively target women.\nAlthough FLETC, Secret Service, and USCIS did not identify EEO  barriers in fiscal year 2017, they each developed action plans that  identified activities designed to help address and correct undesired  conditions, identified responsible officials, and set time frames for  addressing the conditions. Examples of selected components\u2019 plans and  activities include:\nFLETC. To address low participation rates of persons with targeted  disabilities in the permanent workforce, FLETC-planned activities  include working with human resource specialists to identify data and  timelines needed to create reports in its applicant data flow system  that would help identify any barriers in the selection process, and  working to resolve issues concerning applicant flow data in the  applicant pool.\nSecret Service. To address low participation rates of certain groups  in the general workforce and new hires, planned activities include  quarterly tracking and reporting ethnicity, race, and gender data net  changes, hires, resignations, and retirements. Other activities would  involve working closely with the Office of Human Resources Talent  and Employee Acquisition Management Division in recruitment  activities.\nUSCIS. To address the lower-than-expected participation rate of  certain groups in the permanent workforce\u2014for example, white males  and females and Hispanic males\u2014planned activities include  conducting comprehensive applicant flow data analysis of the top five  major occupational categorizes, and administering and analyzing a bi- annual EEO and Diversity Climate Survey.\nDHS has provided training for its components on how to conduct EEO  barrier analysis. In 2016 and 2018, DHS trained DHS component EEO  officials on methods for identifying the root of specific triggers in the  workplace, as well as steps for eliminating identified barriers. According to  DHS\u2019s analysis of participant training evaluations, the majority of  participants believed they would be able to apply what they learned from  the training. In 2017, DHS provided a 2-day barrier analysis training to  agency and component affirmative employment practitioners that  introduced various barrier analysis methods. It included an exercise  involving a hypothetical federal agency. Based on our review of  participant evaluations, participants were satisfied with the training.\n\n\t\tDHS Reports Some Improvements in Employee Engagement and Representation of Minorities and Women, but Lacks Performance Metrics for Tracking Progress\n\nDHS reported improvements in EEO indicators in its MD-715 reports from  fiscal years 2014 through 2017. DHS cited its higher FEVS scores under  employee engagement. For example, although DHS\u2019s employee  engagement remained 7 percent below the government-wide average, it  increased from 54 percent in 2014 to 60 percent in 2017. According to  DHS, this score was largely driven by TSA and U.S. Customs and Border  Protection employees, who accounted for 46.8 percent of DHS\u2019s  completed surveys.\nOur review of DHS\u2019s workforce data from fiscal years 2014 through 2017  showed that every minority group as well as individuals with disabilities  and individuals with targeted disabilities had been trending in a positive  direction since fiscal year 2014. Further, DHS officials told us that  minority representation was up 3 percent and female representation was  up 2 percent since 2015.\nIn addition, DHS has produced barrier analysis reports that address  underrepresentation of women and various ethnic and racial groups. In  2018, DHS completed a barrier analysis report on Hispanic employment  in General Schedule pay scale grades 12 and higher, as required by  EEOC and the U.S. Office of Personnel Management. The report  identified several potential triggers, such as Hispanic women separating  from DHS, and related barriers, such as possible harassment of Hispanic  employees and women, and glass walls. DHS also developed action  plans focused on enhancing elder and family care programs, offering  training on preventing harassment in the workforce, increasing  recruitment into job series with substantial promotion opportunities, and  ensuring interview panels were diverse and interviewers properly trained.\nAlthough DHS has reported positive trending in various underrepresented  groups, DHS officials said they were unable to fully identify the barriers  contributing to the underrepresentation of women in its workforce despite  conducting the required barrier analysis. In 2014, DHS conducted a  barrier analysis of women in law enforcement to help identify any barriers.  While specific barriers were not identified, DHS\u2019s report, Women in Law  Enforcement Study, provided insight into why DHS employed lower rates  of female law enforcement officers than federal government-wide. For  example, study participants shared anecdotal instances of where they or  their colleagues did not pursue promotional opportunities because they  perceived their work environment made them choose between the job  and family. The study also highlighted steps DHS could take to help  address its underrepresentation of women, such as being more creative  in its approach to attracting qualified women through use of social media,  and by creating more family-friendly environments.\nAccording to EEOC, one important tool in examining the fairness and  inclusiveness of the federal government\u2019s recruitment efforts is applicant  flow data. By reviewing the yield of an agency\u2019s recruitment effort, the  organization can reassess and improve its effort to reach all segments of  the population. EEOC guidance states that having department-wide  applicant flow data could aid in analyzing differences in selection rates  among different groups for a particular job. In July 2017, EEOC informed  DHS that the agency\u2019s applicant flow data were incomplete. DHS has  reported challenges in collecting department-wide data that could help  identify potential barriers. EEOC found that DHS\u2019s workforce data tables  do not always contain all of the agency\u2019s applicant flow data. According to  EEOC, without such data, it becomes much more difficult to pinpoint the  specific policies, procedures, or practices in which barriers might be  embedded.\nDHS does not have a consolidated applicant flow data system. According  to DHS, four of its components use one system (USA Staffing), while five  other components use a different system (Monster Government  Solutions). Office for Civil Rights and Civil Liberties (CRCL) officials told  us DHS is developing a new system to integrate applicant flow data  department-wide. However, the officials could not give us a time frame for  when the system is expected to be completed. As a work-around, DHS  explained that it obtains these data directly from each component that  uses Monster Government Solutions. CRCL officials said they will report  complete applicant flow data in fiscal year 2019.\nIn addition to creating a model EEO environment, progress in eliminating  EEO barriers can help DHS avoid costs related to workplace disputes.  According to EEOC guidance, the elimination of barriers may help an  agency avoid expensive costs, such as back pay awards, compensatory  damages, and attorney\u2019s fees, from findings of discrimination. EEOC  found 81 instances of discrimination from fiscal years 2014 through 2017  resulting in DHS paying nearly $30 million to cover judgments, awards,  and settlements for these EEO cases, or an average of $7.4 million per  year. These expenses were nearly equal to the average annual cost of  DHS\u2019s EEO program, which DHS estimated at about $7.63 million in  fiscal year 2019.\n\n\t\t\tDHS Lacks Metrics for Tracking Progress towards Eliminating Identified EEO Barriers\n\nDHS does not have complete performance metrics or mechanisms for  tracking progress towards eliminating its identified EEO barriers. For  example, CRCL does not maintain numerical objectives or goals for  eliminating barriers involving certain EEO groups, such as workplace  satisfaction of white females or the retention rate of women in law  enforcement positions. According to CRCL officials, they are not required  to establish performance metrics or mechanisms for tracking progress  towards eliminating barriers beyond what is included in the department- wide MD-715 report. DHS reported one performance measure for its EEO  program\u2014the percent of timely merit Final Agency Decisions (FADs).\nStandards for Internal Control in the Federal Government states that  management should establish specific and measureable objectives, and  ways to assess progress including performance metrics and milestones. It  also states that management should design control activities to achieve  objectives and respond to risks. Such control activities may include the  establishment and review of performance metrics. Further, EEOC  guidance states that agencies are not prevented from establishing  additional practices that exceed its requirements. DHS officials  acknowledged that their EEO program performance measurement does  not reflect all the work that they do.\nAccording to CRCL officials, CRCL has proposed additional performance  measures for its MD-715 activities, but they were rejected by DHS\u2019s  Office for Policy because they were not directly related to national  security or public safety. DHS\u2019s Office for Policy is responsible for  approving new performance measures. CRCL officials told us that  adopting hiring goals for individuals with disabilities and individuals with  targeted disabilities\u2014which had previously been identified as potential  barriers\u2014has been beneficial in garnering support and commitment  towards meeting them. They said that DHS incorporated these goals into  its efforts and initiatives to increase the recruitment, hiring, advancement,  and retention of individuals with disabilities. Implementing performance  metrics could help DHS better assess its progress in eliminating EEO  program barriers.\n\n\tDHS and Its Components Have Taken Steps to Identify EEO Program Deficiencies, but Lack Action to Fully Address Them\n\n\t\tDHS and Its Components Have Identified Various Deficiencies in Their EEO Programs\n\nAs shown in table 1, our analysis of DHS\u2019s MD-715 reports found that  DHS did not meet about a quarter of the compliance measures for a  model EEO program for each fiscal year from 2014 through 2017.  Specifically, over this 4-year period, DHS did not meet 26 percent of its  compliance measures (128 out of 487). The largest percentage of unmet  measures occurred under the model EEO essential element D\u2014which  focuses on proactive steps taken by an agency to prevent unlawful  discrimination\u2014where about 53 percent or 21 of 40 measures were  unmet. According to DHS officials, in Part G of its MD-715 report, DHS  includes deficiencies identified and reported at the component level as  well as deficiencies directly attributable to the department. For example,  in each of the fiscal years 2015 through 2017, DHS reported that it did not  meet a compliance measure under element D that senior managers  successfully implement EEO action plans and incorporate EEO action  plan objectives into agency strategic plans. Specifically, in fiscal years  2015 through 2017, DHS noted that USCIS had not met this measure,  and in fiscal year 2017, the Federal Emergency Management Agency  (FEMA) and DHS Headquarters did not meet this measure.\nOur analysis of components\u2019 MD-715 reports showed that components  did not meet 9 percent of the compliance measures for a model EEO  program from fiscal years 2014 through 2017. Specifically, over this 4- year time frame, components had a combined total of 369 program  deficiencies out of a total of 4,229 compliance measures. DHS  Headquarters, one of the nine second-level reporting components,  accounted for 36 percent of deficient measures (134 of 369), while the  other eight components accounted for 64 percent (235 of 369) of deficient  measures. Examples of DHS\u2019s deficient measures included EEO  directors not under the direct supervision of the agency head, and the  lack of established timetables or schedules for the agency to review its  employee development and training programs for systemic barriers that  may be impeding full participation in training opportunities by all groups.\n\n\t\tDHS and Its Components Lack Action Plans to Address Some EEO Program Deficiencies\n\nDHS and its components did not have action plans to address some of  their self-identified deficiencies from fiscal years 2014 through 2017.  Specifically, DHS did not have action plans to address 56 percent, or 72  of the 128 reported deficiencies, and components did not have action  plans to address nearly half, or about 179 of the 369 deficiencies reported  by all of the components during the four year period. For example, in  fiscal year 2017, four out of nine DHS components\u2014U.S. Customs and  Border Protection (CBP), DHS Headquarters, FEMA, and Federal Law  Enforcement Training Centers (FLETC)\u2014did not have action plans to  ensure that their EEO directors report directly to their agency heads.\nEEOC guidance requires agencies to demonstrate meaningful progress  toward the removal of deficiencies, and to develop action plans for how  agencies will attain the essential elements of a model EEO program.  Specifically, for each deficient measure, agencies are to develop an  action plan for correcting the deficiency. The plan should  identify and briefly describe the deficiency; provide a measurable objective, including the reason for the  deficiency, and target date for completion;  identify officials responsible for overseeing implementation of planned  activities to accomplish the objective; and provide for a yearly update on status of activities until objective is  completed (i.e., the deficiency is removed).\nIn addition, Standards for Internal Control in the Federal Government  states that management should design control activities to achieve  objectives. Control activities, such as policies or procedures to enforce  directives, can help identify if a required activity is not being achieved  (e.g., action plan completion) or implemented.\nThe four selected DHS components told us that they do not have  standard operating procedures for completing their MD-715 reports,  including review and assessment of deficiencies and action plans, but  have various processes in place to review their reports for accuracy and  completeness. For example, according to USCIS, its process for the  preparation and review of its MD-715 report includes providing a self- assessment checklist to each of its subcomponents; a review of their  responses for accuracy; and follow-up with subcomponents to address  any questions. In addition, USCIS stated that its MD-715 report  undergoes multiple levels of reviews by subject matter experts and  managers that include collaboration with human capital and chief counsel,  and obtaining review and approval from the Director and other agency  officials. The other three components\u2014FLETC, TSA, and Secret  Service\u2014also reported having MD-715 review processes in place,  including report review and approval by senior management; however,  none specifically cited a review and approval of action plans to address  reported deficiencies.\nCRCL officials told us that DHS and its components\u2019 MD-715 reports met  EEOC requirements for action plans for fiscal years 2014 through 2017  by providing explanations for, or briefly stating plans to address, the  majority of their deficiencies rather than developing action plans  identifying how each deficiency would be addressed. During our review of  the MD-715, we noted that the Part G self-assessment checklist form  gave respondents the option of providing a brief explanation in a  comment box on the form or completing an action plan for each  deficiency in Part H of the MD-715 report. For fiscal year 2018, EEOC  revised its MD-715 report form and instructions to clarify that a plan is  required for each identified program deficiency.\nFor example, one component responded to a measure that asks whether  an agency implemented an adequate data collection and analysis system  that permits tracking of the information required by MD-715 and these  instructions by stating \u201cselected offices were currently working on the  initiative.\u201d The same component responded to a measure that asks  whether an agency tracked recruitment efforts and analyzed efforts to  identify potential barriers in accordance with MD-715 standards by  stating, \u201cThe inconsistencies with the reporting of applicant flow data will  need to be addressed to help identify potential barriers.\u201d Another  component responded to this measure by stating that, while its  participation in various events are tracked, a clear, concise, and efficient  system to track and analyze recruitment efforts according to MD-715  standards is currently not in place. Neither component provided a plan for  how these deficient measures would be addressed.\nEEOC continues to identify areas of noncompliance in DHS component  EEO programs. For example, in fiscal year 2017, EEOC noted that three  of four selected components had areas of noncompliance. The areas of  noncompliance included (1) failure to timely issue FADs, and (2) not  establishing timetables or schedules to review its merit program policies  and procedures, employee recognition awards programs, and employee  developmental training programs for potential barriers. Developing  policies or procedures, in consultation with the Deputy Officer for EEO  and Diversity, to help ensure component EEO programs have action  plans with measurable objectives for addressing deficiencies could help  DHS components better comply with EEOC requirements.\n\n\t\tDHS and Its Components Lack Adequate Staffing to Address EEO Program Deficiencies\n\nDHS continues to report insufficient staffing to support its EEO program.  In 2009, we reported that, according to CRCL, DHS modified the target  dates for planned activities to address identified barriers primarily  because of staffing shortages in both CRCL and the Office of the Chief  Human Capital Officer. We also reported that DHS had not conducted  barrier analyses of policies, procedures, and practices that were  established or used after fiscal year 2004 because of resource limitations,  such as staffing and limited funding to contract for this activity.  According to CRCL\u2019s MD-715 and Notification and Federal Employee  Antidiscrimination and Retaliation (No FEAR) Act reports from fiscal years  2014 through 2017, certain aspects of DHS\u2019s EEO program did not have  sufficient staffing. In addition, in fiscal years 2014 through 2017, DHS  reported that staffing shortages contributed to it not meeting its target for  the percent of timely decisions on discrimination complaints. In fiscal year  2017, DHS reported deficiencies for five out of seven staffing measures in  its MD-715 report. In February 2019, CRCL officials told us they lacked  staffing to issue timely decisions on discrimination complaints, to increase  the number of mediators in the alternative dispute resolution program,  and to provide them with training.\nFrom fiscal years 2014 through 2017, DHS and its components reported  funding and staffing challenges in components\u2019 EEO programs. As shown  in table 2, DHS and its components reported that certain aspects of  components\u2019 EEO programs do not have sufficient funding or staffing  from fiscal years 2014 through 2017.\nEEOC guidance states that an agency must provide its EEO program with  sufficient budget and staffing to be able to successfully implement various  activities, including (1) conducting a self-assessment of the agency for  possible program deficiencies; (2) conducting a thorough barrier analysis  of its workforce; and (3) ensuring timely, thorough, and fair processing of  EEO complaints.\nCRCL and component EEO officials told us that they do not have formal  staffing models to assess appropriate staffing of their EEO program  sections. CRCL officials explained that each component EEO program  section is unique with its own assessments and measures by the leaders  in charge of their funding and staffing resources. Using these informal  processes to identify staffing needs, CRCL and component EEO officials  told us that they have requested additional staffing and funding to  address some of their EEO program deficiencies from their top  leadership. However, they said that additional staffing has not been  granted. Our analysis of DHS\u2019s congressional budget justifications show  that DHS\u2019s EEO program funding requests have decreased each year  from nearly $8 million in fiscal year 2016 to nearly $7 million in fiscal year  2019. CRCL officials told us that DHS\u2019s overall resources for the EEO  program have not significantly increased.\nA staffing model could be a computer-based formula that estimates the  number of staff needed to conduct varying numbers of EEO activities,  such as processing a certain number of complaints or providing a certain  number of training courses on an annual or ad hoc basis. As we have  reported, a staffing model is a helpful tool that could better justify requests  for resources to top leadership. Staffing models can identify resources  required to enable program delivery to a sufficient degree and in a timely  manner, or to adapt to changes in program delivery. According to DHS,  the department has contracted support to help components develop  models for Mission Support areas as part of a larger effort to ensure that  all positions are eventually covered by a staffing model. Developing and  utilizing a formal staffing model for its EEO program could help CRCL  better identify, request, and obtain the staff it needs. Further, developing  staffing models, in collaboration with the Deputy Officer for EEO and  Diversity, would help components to better assess the staff they need.\n\n\tDHS Has Plans to Address the Nine Areas of EEOC Identified Noncompliance\n\nDHS did not respond timely to EEOC\u2019s findings of noncompliance and  EEOC did not follow up with DHS concerning the untimely response. In  July 2017, in its most recent review of DHS compliance with EEOC  requirements, EEOC reported nine areas of noncompliance in DHS\u2019s  EEO program. For example, EEOC found that DHS lacked resources to  process EEO complaints and to conduct trend analyses of workforce  data. EEOC stated in its feedback letter to DHS that it would initiate its  noncompliance process if DHS did not submit a report explaining the  agency\u2019s progress in correcting its EEO program deficiencies by January  2018. However, according to DHS officials, due to an administrative  oversight, DHS was unaware of EEOC\u2019s July 2017 feedback letter until  October 2018, when we asked about it. In February 2019, DHS submitted  a report to EEOC that responded to each area of noncompliance. EEOC  officials told us that it had not initiated its noncompliance process against  DHS, but that it had placed DHS in its queue for agencies to be held in  noncompliance.\nAs discussed earlier, DHS Headquarters, a second-level reporting  component, is required by EEOC to submit a separate MD-715 report to  EEOC. However, DHS\u2019s Headquarters EEO Office did not submit a  separate MD-715 report to EEOC during fiscal years 2014 through 2017.  DHS Headquarters EEO Office staff told us that the office had not  submitted the required reports due to staff vacancies, including its EEO  director position. They explained that the component\u2019s EEO data and  information were subsumed in DHS\u2019s department-level MD-715  submission. In October 2018, CRCL filled its Headquarters EEO director  position, which had been vacant for 8 months. DHS officials told us they  plan to submit Headquarters\u2019 fiscal year 2018 MD-715 report to EEOC by  the due date. In February 2019, EEOC officials told us that DHS could  be subject to EEOC\u2019s noncompliance process if the report is not received.\n\n\tDHS\u2019s EEO and Human Capital Offices Have Taken Steps to Oversee and Support Components, but Need to Strengthen Oversight over Components\n\n\t\tDHS\u2019s EEO and Human Capital Offices Use a Variety of Means to Oversee and Support Components in Identifying and Addressing EEO Barriers\n\nAs shown in figure 4, CRCL and the Strategic, Recruitment, Diversity, and  Inclusion (SRDI) Office support and oversee components in their efforts  to identify and address EEO barriers.\nFor example, CRCL convenes an EEO council consisting of EEO  directors from each component that meets monthly and, among other  things, shares best practices for identifying and addressing barriers. In  addition, CRCL hosts EEO and Diversity Training Conferences for EEO  staff that includes barrier analysis training.\nFurther, CRCL provides midyear feedback to component EEO officials on  components\u2019 planned action items and plans for inclusion in their  respective MD-715 reports. For example, based on our review of the  CRCL statistician\u2019s notes, during feedback meetings with components in  2017, he suggested that components consider opportunities for improving  their draft MD-715 reports. The notes show that at least two out of nine  components\u2014CBP and DHS Headquarters\u2014were given feedback to  conduct more robust barrier analyses.\nSRDI supports component EEO program efforts to address EEO barriers  related to recruitment, hiring, veterans, and individuals with disabilities.  For example, to increase the participation of women in law enforcement  across the department, SRDI held a joint hiring event in Dallas based on  its analysis that a large number of female veterans live in Texas.  According to SRDI officials, SRDI also assists DHS components with their  evaluations of their human capital policies, procedures, or practices that  may represent EEO barriers, such as awards, promotions, and career  development.\nFor example, in fiscal year 2016, SRDI analyzed the representation of the  DHS Senior Executive Service Candidate Development Program  applicant pool by various ethnic and racial groups, and by actual selectee  participation. When it found that the representation rate of women  decreased from 32.5 percent in the application stage to 23.4 percent in  the selection stage, SRDI stated that the results, among other things,  triggered the need for further analysis. Two cohorts later in 2018, the  representation rate of women increased from 23.3 percent to 41.4 percent  in the selection\/participant stage.\nFurther, CRCL and SRDI officials said they collaborate on a number of  EEO activities to identify and address EEO barriers. For example, SRDI  works together with CRCL to provide input for completing MD-715 report  sections that address human capital-related EEO barriers. In addition,  SRDI and CRCL worked together to conduct a barrier analysis of  Hispanic employee representation.\n\n\t\tDHS Components Are Generally Satisfied with CRCL\u2019s Collaboration Practices to Identify and Address EEO Barriers\n\nDHS components told us that its collaboration practices are generally  working well and provided examples. In our interviews of nine DHS  components, they told us they are generally satisfied that DHS has:  clearly defined its short- and long-term outcomes, bridged the organizational cultures of participating agencies,  clearly defined roles and responsibilities for participating agencies,  included all relevant DHS participants when identifying and  addressing EEO barriers,  funded and staffed its collaborative mechanisms, such as monthly  EEO council meetings, and documented its agreements on how participating agencies will be  collaborating in identifying and addressing barriers.\nAll nine components told us that CRCL regularly meets with them and  provides guidance on identifying and addressing barriers. Four  components specifically stated that CRCL provided assistance for  reviewing and processing EEO data. For example, USCIS officials said  that CRCL\u2019s statistician provided direction on analyzing workforce data  when conducting barrier analysis. Components also said that they find the  training and technical assistance provided by CRCL helpful, and  specifically commented that DHS\u2019s EEO and Diversity Training  Conferences have helped improve their barrier analyses.\nWhile DHS components are generally satisfied with DHS\u2019s collaboration  practices, some components provided examples of collaboration  practices that could be improved. Three components\u2014CBP, the U.S.  Secret Service (Secret Service), and USCIS\u2014told us that collaboration  on funding or staffing efforts could be improved. For example, USCIS  officials said CRCL lacks sufficient staffing to provide needed training,  tools, and assistance to components to meet new MD-715 reporting  requirements. Three components\u2014CBP, the Transportation Security  Administration, and USCIS\u2014cited the lack of written guidance and  agreements regarding collaboration between CRCL and components as  areas that could be improved. For example, USCIS officials said that its  collaborative efforts with CRCL were guided by informal best practices,  feedback, and guidance, but having formal written guidance and  agreements could clarify roles and responsibilities for identifying and  addressing component EEO triggers and barriers.\n\n\t\tCRCL Does Not Review DHS Components\u2019 EEOC Feedback Reports and DHS\u2019s Organizational Structure Does Not Ensure Its Components Comply with EEOC Requirements\n\nCRCL officials and component EEO officials stated that component EEO  directors report directly to their respective component heads and not to  CRCL. While CRCL requires components to meet to discuss midyear  updates on their EEO efforts, CRCL officials explained that DHS  components are responsible for developing, certifying, and submitting  their own MD-715 reports to EEOC. They also said that if EEOC finds  areas of noncompliance in DHS components\u2019 EEO programs, EEOC  requires DHS components to submit their compliance reports directly to  EEOC.\nIn fiscal year 2017, EEOC provided notice to six out of eight DHS  components for having areas of noncompliance in their EEO programs.  For five out of six DHS components, EEOC required components to  establish plans to correct deficiencies, submit compliance reports  explaining the agency\u2019s progress in correcting these deficiencies, and  showing meaningful progress in implementing its plans within 6 months.\nWe found that three out of five DHS components\u2014CBP, FEMA, and  USCIS\u2014did not submit timely compliance reports in response to EEOC\u2019s  feedback letters. Due to an administrative oversight, CBP officials  explained that the component did not submit a compliance report that was  due in February 2018 until we asked about it during our review. Although  CBP submitted the report in March 2019, the report did not include plans  to correct three out of seven areas of noncompliance. As of July 2019,  CBP has taken steps to address the areas of noncompliance but has not  yet responded to EEOC. As a result, CBP remains at risk of EEOC  initiating the noncompliance process against it.\nFEMA also did not submit a compliance report that was due in February  2018 until we asked about it during our review. In June 2019, FEMA  responded to EEOC\u2019s feedback letter and included plans to correct three  areas of noncompliance. FEMA\u2019s response stated that the component  would provide another update on its plans to correct these areas to EEOC  in October 2019. FEMA\u2019s response also stated that it would update its  actions on 12 other areas of noncompliance in its fiscal year 2018 MD- 715 report.\nEEOC guidance states that an agency\u2019s EEO Director ultimately is  responsible for ensuring equal opportunity throughout the entire agency.  In addition, Standards for Internal Controls in the Federal Government  states that management should implement control activities through  policies. According to CRCL officials, CRCL does not have policies and  procedures to ensure that components have addressed EEOC\u2019s feedback  letters completely and timely. CRCL officials said CRCL does not have  the authority to ensure components\u2019 responses completely and timely  address EEOC\u2019s feedback letters. They explained that components  interact directly with EEOC and are not required to discuss EEOC\u2019s  feedback with CRCL. CRCL officials further said that components may  address EEOC\u2019s feedback in their MD-715 reports instead of sending  compliance reports to EEOC. For example, in response to the EEOC\u2019s  2017 feedback letter, in its MD-715 report for fiscal year 2017, the U.S.  Coast Guard discussed ways to assist DHS with improving its issuance of  Final Agency Decisions.\nCRCL reported in its MD-715 reports from fiscal years 2015 through 2017  that it had authority for components\u2019 EEO programs. A DHS delegation of  authority order states that CRCL can recommend EEO program  improvements to the component head before he or she responds to  EEOC\u2019s feedback letters. In addition, CRCL could use its existing  practices to discuss EEOC\u2019s feedback letter with components, such as  midyear update meetings and monthly council meetings. However, CRCL  officials stated they did not meet to discuss EEOC\u2019s feedback letters with  components in 2018. EEOC officials told us they send component  feedback letters to both the component and CRCL, and invite CRCL  officials to participate in component site visits. They also explained that  DHS could be found noncompliant if a component\u2019s EEO program does  not comply with EEOC guidance. Developing policies and procedures for  responding completely and timely to EEOC\u2019s feedback letters may help  the department comply with EEOC guidance.\nWhile DHS officials told us that ensuring DHS components\u2019 compliance  with MD-715 guidance is EEOC\u2019s responsibility, EEOC officials explained  that DHS\u2019s responsibility equaled the responsibility that EEOC has to  ensure DHS components\u2019 compliance with MD-715 guidance. In addition,  MD-715 guidance states that federal agencies, such as DHS, have the  primary responsibility to ensure nondiscrimination in employment.\nOur prior work has found that an agency can benefit from periodically  evaluating its organizational structure. Additionally, 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 these standards, an effective management  practice for attaining this outcome includes periodically evaluating the  organizational structure to ensure that it meets its objectives.\nAs we previously discussed, EEOC found areas of noncompliance in the  EEO programs of six out of eight DHS components, and two of the six  components did not have plans to correct all of the areas of  noncompliance until we asked about them during our review. While CRCL  officials told us that they lack authority to certify that components\u2019 MD-715  reports comply with MD-715 guidance, EEOC guidance states that an  agency\u2019s EEO Director ultimately is responsible for ensuring equal  opportunity throughout the entire agency. EEOC guidance allows DHS  components to report to either the Deputy Officer for EEO and Diversity  or the Secretary of Homeland Security. However, DHS has not taken  steps\u2014in consultation with EEOC and other agencies as relevant\u2014to  analyze options to address EEO program management weaknesses,  such as analyzing alternatives for granting additional authorities to the  Deputy Officer for EEO and Diversity to ensure DHS components comply  with MD-715 guidance, and assessing benefits and trade-offs of each  alternative. In the absence of these steps, DHS may not be positioned to  effectively manage its EEO program.\n\n\tConclusions\n\nAs the third largest U.S. government department, the challenges DHS  has faced to fully implement effective EEO programs may result in  widespread negative consequences, including monetary expenses borne  by the agency in connection with workplace disputes and decreased  morale and productivity resulting from the ineffective and inefficient use of  human capital resources.\nMD-715 requires DHS and its components to report annually on the  status of their EEO activities and include plans that set forth steps they  will take to correct deficiencies or improve EEO efforts. From fiscal years  2014 through 2017, DHS and its components have reported deficiencies  in their EEO programs and identified EEO barriers in their workforces. We  found areas for improvement in DHS and its components\u2019 EEO programs  that could help ensure success and compliance with MD-715.\nSpecifically, DHS does not have complete performance metrics for the  department\u2019s EEO program, including a mechanism for tracking progress  towards eliminating barriers. Developing performance metrics for the  department\u2019s EEO program could help improve progress in eliminating  identified EEO barriers.\nIn addition, DHS and its components reported that they lack action plans  for addressing deficiencies in their MD-715 reports. Developing policies  and procedures could help DHS component EEO Directors correct  deficiencies in their EEO programs.\nDHS and its components also reported that areas of their EEO programs  do not have sufficient staffing to successfully implement EEO activities.  Developing formal staffing models could help DHS and its components  better assess their resource needs to correct their deficiencies and  eliminate their barriers.\nFurther, from fiscal years 2014 through 2017, EEOC found areas of  noncompliance in DHS and its component EEO programs. Without  developing policies and procedures for responding completely and timely  to EEOC\u2019s feedback letters, DHS components may not correct areas of  noncompliance and remain at risk of financial penalties and lost employee  potential.\nFinally, DHS has not taken steps to address the key EEO program  management weaknesses. Analyzing options for granting additional  authorities to the Deputy Officer for EEO and Diversity can help position  DHS to ensure its components are complying with MD-715 guidance.\nThe commitment of DHS\u2019s leadership is essential to successfully  addressing these issues. By focusing leadership attention on developing  performance metrics, policies and procedures, and staffing models, DHS  and its components can help improve their EEO programs by making  progress towards eliminating barriers, obtaining sufficient staffing, and  addressing areas of noncompliance.\n\n\tRecommendations\n\nWe are making the following six recommendations to DHS:  1.  The Secretary of Homeland Security should develop performance  metrics for the department\u2019s EEO program including a mechanism for  tracking progress towards eliminating barriers. (Recommendation 1)  2.  DHS component EEO Directors, in consultation with the Deputy  Officer for EEO and Diversity, should develop policies and procedures  to help ensure that their component EEO programs have action plans  for addressing deficiencies in their MD-715 reports. (Recommendation  2)  3.  The Deputy Officer for EEO and Diversity should develop a formal  staffing model for its EEO program. (Recommendation 3)  4.  DHS component EEO Directors, in collaboration with the Deputy  Officer for EEO and Diversity, should develop component formal  staffing models. (Recommendation 4)  5.  The Deputy Officer for EEO and Diversity should develop policies and  procedures for responding in a complete and timely manner to  EEOC\u2019s feedback letters. (Recommendation 5)  6.  The Secretary of Homeland Security\u2014in consultation with CRCL and  EEOC, and other agencies and components, as relevant\u2014should  analyze options for granting additional authorities to the Deputy  Officer for EEO and Diversity to ensure DHS components comply with  MD-715 guidance, including the authority of the Deputy Officer for  EEO and Diversity to certify components\u2019 MD-715 reports.  (Recommendation 6)\n\n\tAgency Comments\n\nWe provided a draft of this report to DHS and to EEOC for review and  comment. In its official comments, reproduced in appendix I, DHS agreed  with all six of our recommendations, and DHS and EEOC provided  separate technical comments to the draft of our report, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Acting 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.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-6806 or jonesy@gao.gov, or Christopher 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 report. GAO staff who made key contributions to this report are  listed in appendix II.\n\nAppendix I: Comments from the Department of Homeland Security\n\nAppendix II: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\nYvonne D. Jones, (202) 512-6806 or jonesy@gao.gov.  Christopher P. Currie, (404) 679-1875 or curriec@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contacts named above, Clifton G. Douglas, Jr.  (Assistant Director), Luis E. Rodriguez (Analyst-in-Charge), Adam J.  Brooks, Carla D. Brown, Andrew Howard, Haley Klosky, and Steven  Putansu made key contributions to this report.","output":null}
{"id":"gao_GAO-19-517","pid":"gao_GAO-19-517_0","input":"\tBackground\n\nEstablished by the National Housing Act, FHA\u2019s single-family mortgage  insurance program helps home buyers obtain financing by providing  insurance on single-family mortgage loans. The mortgage insurance  allows FHA-approved private lenders to provide qualified borrowers with  mortgages on properties with one to four housing units and generally  compensates lenders for nearly all the losses incurred on such loans. To  support the program, FHA imposes up-front and annual mortgage  insurance premiums on FHA borrowers. The agency has played a  particularly large role among first-time, minority, and low-income home  buyers. For example, in fiscal year 2017, about 82 percent of FHA- insured home purchase loans went to first-time home buyers and more  than 33 percent went to minority home buyers.\n\n\t\tForeclosure Mitigation and Property Disposition Methods\n\nFHA requires servicers to undertake certain home retention and  foreclosure mitigation actions to help delinquent homeowners catch up on  late mortgage payments. Before initiating foreclosure actions, FHA  requires servicers to contact the borrower, collect information on the  borrower\u2019s finances, and attempt informal methods of resolving the  delinquency. If informal steps are not appropriate for a borrower\u2019s  circumstances, the servicer evaluates the borrower for a series of home  retention actions, which include a formal forbearance and repayment plan  and a loan modification. Under certain circumstances, the servicer may  consider a foreclosure mitigation option, such as a preforeclosure (short)  sale or a deed-in-lieu of foreclosure. If the home retention and  foreclosure mitigation actions are unsuccessful, the servicer or mortgage  note holder is generally entitled to pursue foreclosure to obtain title to the  property. The foreclosure process is governed by state laws, but  foreclosed properties are typically auctioned at a foreclosure sale. Most  foreclosed properties are disposed of in one of two ways.\nClaims without Conveyance of Title (CWCOT). Through FHA\u2019s  CWCOT program, the servicer attempts to secure a third-party  purchase of an eligible property for an adjusted fair market value that  is less than the amount of the servicer\u2019s projected claim.\nConveyance. If the foreclosure process is completed and no third  party purchases the home at the foreclosure sale, the home usually  becomes the property of the servicer. Servicers convey these  properties to FHA, which sells them out of its REO inventory.\nDuring the default and foreclosure process, servicers must meet two FHA  time requirements. The first requires servicers to initiate a foreclosure  (first legal action) or utilize a loss mitigation option within 6 months of  borrower default. The second requirement, for the \u201creasonable diligence\u201d  period, requires servicers to obtain good and marketable title and  possession of a property within a specified time frame that varies by  state. The servicer secures the property and obtains possession once the  property is vacant. Servicers are subject to financial penalties for missing  these deadlines. In both cases, servicers must curtail the debenture  interest that they otherwise would be entitled to collect from the date of  the missed time frame.\nServicers are responsible for maintaining vacant foreclosed properties in  accordance with FHA requirements, which specify allowable reimbursable  amounts to preserve and protect the property. A servicer needing  additional funds to complete the required maintenance must submit an  \u201coverallowable\u201d request to FHA.\n\n\t\tProperty Conveyance Process\n\nWhen a servicer forecloses on a property with an FHA-insured mortgage  and the property is not sold to a third party through CWCOT, the property  is held in the servicer\u2019s name until the servicer conveys the title to FHA.  As seen in figure 1, these properties span a range of home types and  ages. FHA requires servicers to preserve and protect the property and  ensure it meets FHA\u2019s conveyance condition standards before conveying  title. FHA\u2019s preservation and protection requirements include a number of  specific steps for securing, maintaining, and repairing properties and  documenting property conditions. FHA reimburses the servicer for up to  $5,000 per property for required work, and the servicer may request  overallowable funds if needed. FHA\u2019s conveyance condition standards  are broader requirements, including that a property be undamaged by  natural disaster and in \u201cbroom swept\u201d condition, have all damage covered  by hazard insurance repaired, and be undamaged by the servicer\u2019s failure  to properly secure or maintain the property.\nHUD regulations state that the servicer must obtain good and marketable  title and convey the property to HUD within 30 days of the date on which  the servicer filed the foreclosure deed for record or certain other key  dates, whichever is later. If a servicer does not believe it will be able to  convey the property by this time, it may request an extension from FHA.  The servicer files an insurance claim with FHA when it conveys the title. If  a servicer does not convey the property within the required time frame  and has not received an approved extension, the servicer must curtail the  debenture interest and property preservation and protection expenses it  claims as of the date of the missed deadline.\nShortly after conveyance, FHA pays the Part A claim to the servicer,  which includes the unpaid principal balance and debenture interest on the  insured mortgage. At this time, FHA becomes responsible for maintaining  the property until it is sold. FHA pays the part of the claim that covers  eligible property preservation and protection expenses incurred by the  servicer once the servicer submits title evidence and documentation of  expenses (in Part B of the claim form). FHA inspects the property and  reviews title evidence before selling the property out of its REO inventory.  In some cases, FHA reconveys the title to the servicer if it finds the  servicer did not comply with requirements related to property condition or  title. When a property is reconveyed, FHA reassigns the title to the  servicer and requests repayment of the claim amount. The servicer then  must correct any title or property condition issues before it may convey  the property and submit a claim to FHA again.\nThroughout this process, FHA and servicers use the P260 Asset  Disposition and Management System (asset disposition system) to  communicate and upload documentation about the properties. FHA  articulates its property preservation and protection requirements and  conveyance condition standards in a mortgagee letter and policy  handbook that we refer to collectively as FHA\u2019s conveyance condition  policies and procedures.\nFrom 2010 through 2017, servicers conveyed about 610,000 properties to  FHA. The number of properties conveyed annually peaked in 2012 at  about 111,000 (see fig. 2). In 2017, servicers conveyed fewer than 32,000  properties to FHA. The decline in recent years is consistent with  improvements in the housing market since the 2007\u20132011 housing  crisis.\n\n\t\tRoles and Responsibilities in the Conveyance Process\n\nIn this report, we define FHA\u2019s property conveyance process as beginning  when the servicer both obtains good and marketable title and takes  possession of a property and ending when FHA assigns a marketing  contractor to sell the property out of its REO inventory (see fig. 3).\nSeveral FHA contractors and offices play key roles in the conveyance  process.\nCompliance contractor. A nationwide compliance contractor called  the mortgagee compliance manager is responsible for protecting  FHA\u2019s interests in properties conveyed to FHA and communicates  directly with servicers about the properties. The compliance contractor  reviews property inspections to ensure properties meet conveyance  condition standards, reviews requests from servicers for extensions of  conveyance times or for overallowable expenses, reviews servicer  claims for compliance with requirements, and responds to servicer  inquiries about pre- and postconveyance responsibilities. The  compliance contractor is located in Oklahoma City, Oklahoma, and is  overseen by FHA\u2019s National Servicing Center.\nMaintenance contractor. Maintenance contractors, called field  service managers, are responsible for inspecting properties recently  conveyed to FHA and preserving properties in FHA\u2019s REO inventory.  FHA has multiple maintenance contractors; they are responsible for  properties in different regions. Upon conveyance, the maintenance  contractor conducts a comprehensive property inspection to  determine if the property meets conveyance condition standards and  completes the HUD Property Inspection Report. The maintenance  contractor also conducts other inspections at a property before  conveyance, as warranted, including a preconveyance inspection at  the request of the servicer and an overallowable inspection if  requested by the compliance contractor. While these contractors  conduct general maintenance on the property, they typically do not  make major repairs, because FHA generally sells conveyed properties  in as-is condition.\nMarketing contractor. Marketing contractors, called asset managers,  are responsible for marketing and selling the homes in FHA\u2019s REO  inventory.\nFHA homeownership centers. FHA carries out its mortgage  insurance and REO disposition programs through four regional offices  called homeownership centers (HOC). The centers are located in  Atlanta, Georgia; Denver, Colorado; Philadelphia, Pennsylvania; and  Santa Ana, California. Officials in each HOC are responsible for  overseeing the maintenance and marketing contractors for their  region and reviewing HUD Property Inspection Reports to determine if  conveyed properties should be reconveyed to the servicer due to  condition issues. This determination is then forwarded to the  compliance contractor for an additional review.\nHUD\u2019s Office of Finance and Budget. Staff from this office are  responsible for reviewing servicer mortgage insurance claims for  compliance with FHA requirements. The office selects a sample of  claims from the past 3 years to review whether the property  preservation and protection expenses were within allowable limits and  whether the servicer curtailed debenture interest and property  preservation and protection expenses accurately, among other things.\n\n\t\tOther Participants in the Mortgage Market\n\nA number of other federal and federally sponsored entities participate in  the mortgage market. Along with FHA, the Department of Veterans Affairs  and the Department of Agriculture operate programs that guarantee  single-family mortgages made by private lenders. Additionally, two  government-sponsored enterprises\u2014Fannie Mae and Freddie Mac  (enterprises)\u2014purchase and securitize single-family mortgages.\nHowever, the property disposition programs for these entities are not  directly analogous to FHA\u2019s. In contrast to FHA, the Department of  Veterans Affairs and the enterprises take custody of and are responsible  for properties closer to the time of the foreclosure sale. The enterprises  require servicers to convey properties to them within 24 hours of  foreclosure sale or deed-in-lieu of foreclosure, while the Department of  Veterans Affairs requires servicers to provide notice of their intent to  convey properties within 15 days of foreclosure sale. Also in contrast to  FHA, the Department of Agriculture does not take possession of  foreclosed properties with guaranteed loans, but rather oversees their  disposition by lenders.\nIn FHA\u2019s case, properties are often held in the lender\u2019s or servicer\u2019s name  for an extended period after the foreclosure sale. Following the  foreclosure sale, FHA requires servicers to oversee properties during  redemption periods, to evict residents if properties not in redemption  periods are occupied, and to continue property preservation and  protection activities. In addition, before conveyance, servicers must  identify and pay any homeowners association (HOA) fees and utility bills  that are due. As described in figure 3, servicers also must make any  required repairs, meet other conveyance requirements, and pass an FHA  property inspection, or face the prospect of having the property  reconveyed. FHA officials said this approach reduces FHA\u2019s holding time  and costs and that the agency does not have the infrastructure to manage  and fund property repairs itself.\n\n\tFHA\u2019s Property Conveyance Process Often Takes a Long Time, and Servicers and Contractors Performance against Time Requirements Varied\n\n\t\tConveyance Times Increased after 2011, Partly Due to Greater Use of Other Disposition Methods and Extended Default and Foreclosure Periods\n\n\t\t\tData on Time Frames for Conveyance and Reconveyance\n\nFrom July 2010 through December 2017, the property conveyance  process took a median of 70 days, but this figure varied widely by year.  Our analysis of FHA data found that, from 2011 through 2015, the median  number of days to complete the conveyance process increased four-fold  (from 41 to 161 days) and varied more widely around the median each  successive year (see fig. 4). Conveyance time frames declined  substantially in 2016 and 2017 (to a median of 137 days and 112 days,  respectively) while continuing to vary considerably around the median. In  comparison, FHA officials said the conveyance process generally should  take about 37 days to complete\u201430 days for servicers to make  necessary repairs and convey title to FHA and 7 days for FHA to inspect  the property, communicate any condition issues identified during the  inspection, and assign a marketing contractor to promote and sell it.\nWe also found that the time it took properties to complete the conveyance  process varied by HOC region. For the entire July 2010\u2013December 2017  period, the Philadelphia HOC had the highest median time frame (91  days) and the Atlanta HOC the lowest (56 days). The Santa Ana and  Denver HOCs had medians of 78 and 67 days, respectively. A number of  factors may have contributed to differences among the HOCs, such as  the number of properties conveyed in each region (which can affect  servicer and HOC capacity) and the age of the housing stock (which can  affect the time needed to make repairs).\nThe time to complete the conveyance process includes, when applicable,  the time needed for FHA to reconvey a property\u2014that is, transfer  ownership to the servicer due to condition or title issues\u2014and for the  servicer to convey it to FHA a second time. FHA officials said they try to  avoid reconveyances because they prolong the conveyance process and  result in FHA incurring additional preservation and protection costs.  Figure 5 shows examples of condition issues at properties we visited in  the Baltimore, Maryland, and Atlanta, Georgia, metropolitan areas that  were in the reconveyance process.\nOur analysis of FHA data found that reconveyances were not common  enough to significantly affect median conveyance time frames, but  substantially lengthened the conveyance process when they did occur. As  shown in table 1, servicers conveyed 406,863 properties to FHA from  2012 through 2017\u2014the period within our scope for which FHA had  reliable reconveyance data. In comparison, FHA reconveyed 8,874  properties to servicers during that time frame. The annual number of  reconveyances rose from 1,019 in 2012 to 1,935 in 2015, before declining  to 1,099 in 2017.\nWe also found that the median time to complete FHA\u2019s conveyance  process in 2012\u20132017 was more than 614 days longer for reconveyed  properties than the median for properties not reconveyed. However, the  difference between the medians declined over time, dropping from 777  days in 2012 to 267 days in 2017 (see fig. 6).\nServicers and FHA must take several steps to complete the conveyance  process for reconveyed properties, which may account for some of the  length of the time frames. Once the compliance contractor has notified  the servicer that a property has condition issues that must be resolved to  avoid reconveyance, the servicer may appeal. FHA officials said appeals  can add up to 120 days to the conveyance process. If the servicer is  unable to resolve the issues and the appeals are denied, FHA reconveys  the property and the servicer must reimburse FHA for the original claim  amount. The servicer then must complete any required repairs, resolve  any title issues, prepare a new evidence package for FHA showing that  condition and title issues were addressed, and submit a request to FHA\u2019s  compliance contractor to convey the property again. FHA\u2019s compliance  contractor then has 10 business days to review the evidence package  and notify the servicer of its decision. Once conveyance is approved, the  servicer may resubmit a new mortgage insurance claim form and  evidence that the property deed has been filed in FHA\u2019s name.\n\n\t\t\tFactors Likely Contributing to Increased Length of Conveyance Process\n\nTwo factors that likely contributed to the increase in the time to complete  FHA\u2019s conveyance process are increased use of other disposition  methods and property damage stemming from extended default and  foreclosure periods.\nIncreased use of third-party sales. FHA data indicate that from 2010  through 2017 servicers increasingly disposed of properties through third- party sales using the CWCOT program. As previously noted, in 2014 FHA  began requiring servicers to offer all eligible properties for sale through  CWCOT before using the conveyance process. According to our analysis  of FHA property disposition data, in fiscal years 2010\u20132017, the share of  properties disposed of through CWCOT rose from about 1.4 percent to  almost 44 percent, while the share of conveyance and REO sales  dropped from about 84 percent to 42 percent (see fig. 7). The remaining  properties were disposed of through notes sales or preforeclosure  sales.\nIncreased use of CWCOT may have extended property conveyance time  frames for two reasons. First, servicers must attempt to sell all eligible  properties through CWCOT while simultaneously preparing them for  conveyance, which may add additional time to the conveyance process  according to FHA officials. Second, properties conveyed to FHA because  they are not eligible for or sold through the CWCOT program are  generally in poorer condition and require more repairs, according to  servicer representatives. This may contribute to extended conveyance  time frames. For example, a representative from one mortgage industry  group told us that properties ineligible for CWCOT and conveyed to FHA  generally require more than the $5,000 in preservation and protection  costs that FHA allows. In these cases, servicers may request additional  funds from the compliance contractor, but processing the requests may  prolong the conveyance process, as discussed later in this report.\nRepresentatives from one servicer and two mortgage industry groups  stated they prefer the CWCOT program because it reduces the need to  convey properties. They said the conveyance process is costly and  comes with the risk of reconveyance. FHA data show that REO sales  generally had higher loss severity rates (the financial loss on a defaulted  loan as a percentage of the unpaid principal balance) than properties  disposed of through alternative methods, including the CWCOT program.  For example, for the last quarter of fiscal year 2017, FHA reported that  the loss severity rate for properties sold through REO was 54.8 percent,  while the combined loss severity rate for properties disposed of through  alternative methods was 43.8 percent. However, some of this difference  may be attributable to the poorer condition of conveyed properties, as  discussed previously.\nNational Mortgage Settlement  In February 2012, the Department of Justice  and 49 states settled with the five largest  mortgage servicers\u2014 Ally Financial, Inc.  (formerly GMAC), Bank of America  Corporation, Citigroup Inc., J.P. Morgan  Chase & Co., and Wells Fargo & Company \u2014 to address mortgage servicing, foreclosure,  and bankruptcy abuses. The agreement  settled state and federal investigations finding  that these servicers routinely signed  foreclosure-related documents without  verifying their validity and without the  presence of a notary public\u2014a practice known  as \u201crobosigning.\u201d\nExtended default and foreclosure periods. According to FHA officials,  properties with long default and foreclosure periods may be in poor  condition because they deteriorate if servicers delay property  maintenance and repairs. FHA officials said this was common for  properties conveyed to FHA after the 2012 National Mortgage Settlement  because some servicers delayed foreclosure proceedings to limit their  exposure to litigation in 2010 and 2011 (see sidebar).\nFHA officials said that after the Department of Justice issued the National  Mortgage Settlement in February 2012, servicers who had been delaying  default and foreclosure started conveying large numbers of properties.  According to FHA and servicer representatives, damaged properties can  take longer to convey because they require extensive repairs to meet  FHA\u2019s conveyance condition standards.\nThe results of our analysis of FHA data are broadly consistent with these  observations. The number of properties conveyed to FHA increased by  31 percent (from 84,363 to 110,567) between 2011 and 2012, the year of  the settlement. Additionally, the default and foreclosure period for  conveyed properties (the time between the borrower defaulting on the  mortgage and the servicer obtaining title to and possession of the  property) increased over most of the July 2010\u2013December 2017 time  frame. As shown in figure 8, the median default and foreclosure period  was 416 days for properties conveyed in July\u2013December 2010, peaked at  664 days (about 60 percent higher) for properties conveyed in 2015, and  fell to 612 days for 2017 conveyances. The overall upward trend was  even more pronounced for properties with default and foreclosure periods  at the 75th percentile. The 75th percentile was 555 days for properties  conveyed from July through December 2010, peaked at 1,152 days  (about 108 percent higher) for properties conveyed in 2016, and declined  to 1,068 days for 2017 conveyances.\nCertain regulatory and policy changes also may have increased the  default and foreclosure periods since 2013. HUD issued a mortgagee  letter in 2013 that increased the reasonable diligence time frames and  allowed servicers additional time to complete foreclosures in certain  states. For example, the reasonable diligence time frame for properties  in New York increased from 13 to19 months. Also, in 2014 mortgage  servicing rules issued by the Consumer Financial Protection Bureau went  into effect that restricted servicers\u2019 ability to initiate a foreclosure and  gave borrowers additional time to pursue loss mitigation options.  Specifically, servicers may not initiate foreclosure proceedings if a  borrowers\u2019 application is pending for a loan modification or other  alternatives to foreclosure.\nIn addition, we found that properties with longer default and foreclosure  periods generally took longer to complete the conveyance process than  properties with shorter default and foreclosure periods (see fig. 9).  Specifically, from July 2010 through December 2017 properties with the  longest default and foreclosure periods\u2014those in the highest quartile\u2014 took 93 days at the median to complete the conveyance process and 238  days at the 75th percentile. In comparison, properties with the shortest  default and foreclosure periods\u2014those in the lowest quartile\u2014took 57  days at the median to complete the conveyance process and 136 days at  the 75th percentile for that same period. As previously stated, FHA  officials told us that properties with long default and foreclosure periods  may have deteriorated if servicers were not maintaining them. These  properties may have required additional repairs to bring them into  conveyance condition.\nAs previously noted, overall conveyance time frames declined in 2016  and 2017 from their peak in 2015. FHA officials attributed this  improvement largely to the decreasing number of conveyances affected  by the National Mortgage Settlement. As discussed earlier, the settlement  contributed to a wave of properties that took a long time to convey,  potentially due to damage sustained during extended default and  foreclosure periods. FHA officials also indicated that the improved  housing market in recent years has resulted in fewer foreclosures and,  therefore, fewer property conveyances to FHA. Consequently, servicers  and contractors may be better able to manage the workload associated  with property conveyances and complete the process more quickly.\n\n\t\tServicers Often Did Not Convey Properties within the Required Time Frame, but Usually Provided Title Evidence on Time\n\nFrom July 2010 through December 2017, servicers generally did not  convey properties to FHA within the regulatory 30-day time frame  (preconveyance period). During the preconveyance period, servicers  must ensure the property has good and marketable title, conduct routine  inspections and maintenance on the property, and ensure the property  meets conveyance condition standards. If servicers do not believe they  will be able to convey a property within 30 days, they may request an  extension. The median number of days servicers took to complete the  preconveyance period increased from 31 in July\u2013December 2010 to 140  in 2015 (see fig. 10). This figure declined after 2015, dropping to 101  days in 2017. Variation around the median was considerable, especially  in more recent years. For example, in 2017 the time to complete the  preconveyance period was 43 days at the 25th percentile, compared with  268 days at the 75th percentile.\nThe percentage of properties for which servicers did not convey in 30  days plus any approved extension grew from about 31 percent in July\u2013 December 2010 to about 72 percent in 2017. For the entire period from  July 2010 through December 2017, the corresponding percentage was 55  percent. Representatives of 13 of the 20 servicers we interviewed said  that meeting the 30-day timeline was one of their top challenges with the  conveyance process.\nRepresentatives of servicers and mortgage industry groups cited several  reasons for servicers needing additional time to convey. For example,  representatives of 11 servicers cited the heavily damaged condition of the  properties they acquired as one of the primary reasons for not conveying  properties within 30 days. Servicer representatives also noted other  reasons, including four who cited waiting for responses on hazard  insurance claims and five who cited difficulty in obtaining HOA bills to  pay. In addition, representatives of two mortgage industry groups and  three servicers told us that meeting all the conveyance and title  requirements simultaneously is a major challenge. For example,  representatives of one mortgage industry group said a servicer may have  completed required property repairs and paid HOA fees and utility bills,  but if the property were subsequently vandalized, the servicer would have  to delay conveyance to complete repairs. By that point, the servicer might  no longer be current on HOA and utility payments. Servicers have the  option to request an extension to the preconveyance time frame if they  think they will be unable to convey a property in 30 days. Servicers  requested a conveyance extension for about 40 percent of the properties  conveyed from July 2010 through December 2017. FHA approved the  extensions in about 40 percent of these cases.\nIn addition, representatives from six of the 20 servicers we interviewed  said FHA\u2019s process for reviewing servicers\u2019 overallowable requests  (additional funds needed to complete work) negatively affected their  ability to convey properties in 30 days. Once a servicer makes an  overallowable request, FHA\u2019s compliance contractor has 5 business days  to review it and either reject the request or approve all or some of the  requested amount. (We discuss the compliance contractor\u2019s ability to  meet this and other time requirements in the following section.) Servicers  may appeal any rejections, in which case the compliance contractor has 3  business days to make a final determination. Six servicer representatives  said that the time it takes the compliance contractor to make  overallowable decisions may cause them to exceed the 30-day time  frame, especially when they submit multiple requests for the same  property. For context, our analysis of FHA data found that in 2017, the  median number of servicer overallowable requests per property was 13,  and the median number of appeals per property was six.\nIn contrast to the preconveyance requirement, servicers usually met the  time requirement for giving title evidence to FHA. Title evidence includes  documentation that FHA is the legal owner of the property, including a  copy of the mortgage documentation, a legal description of the property,  and a copy of the recorded deed in FHA\u2019s name. Servicers may provide  title evidence to FHA at any point during the conveyance process up to 45  days after filing the deed. If servicers believe they will be unable to  provide title evidence within 45 days, they may submit an extension  request to the compliance contractor. According to FHA data, servicers  were able to provide title evidence within 45 days plus any approved  extension for 84 percent of properties conveyed from July 2010 through  December 2017.\n\n\t\tFHA Contractors Involved in Property Conveyances Largely Met Time Requirements\n\nFHA\u2019s compliance and maintenance contractors generally met the  required time frames for key conveyance tasks for properties conveyed  from 2011 through 2017. However, when the contractors did not meet  their required time frames, the delays may have lengthened the time to  complete the conveyance process for some properties.\nCompliance contractor. FHA established a time frame of 5 business  days for the compliance contractor to conduct various reviews in the pre-  and postconveyance periods. In the preconveyance period, the  compliance contractor reviews requests for overallowables, conveyance  extensions, and conveyance of a property with surchargeable damage.  The contractor also reviews title evidence and extension requests for title  evidence, which are generally submitted after conveyance. Table 2 shows  the percentage of properties conveyed from 2011 through 2017 for which  the compliance contractor met the 5 business day requirement, according  to our analysis of FHA data.\nAlthough the contractor mostly met the required time frames, when it did  not, the delay may have lengthened the time to complete the conveyance  process. Our analysis of FHA data indicates that when the compliance  contractor missed the deadlines, it missed them by a median of 4\u201310  days, depending on the requirement. The compliance contractor\u2019s  review of overallowable requests, conveyance extension requests, and  surchargeable damage requests generally occurs during the  preconveyance period when servicers have 30 days to convey the  property to FHA. As noted earlier, some servicer representatives we  interviewed said that waiting for the compliance contractor to approve or  deny overallowable requests hindered their ability to convey the property  in 30 days.\nThe compliance contractor must complete at least 95 percent of the  reviews within the 5-day time frame to meet FHA\u2019s standard for minimum  acceptable performance. FHA uses monthly scorecards when reviewing  the contractor\u2019s performance against this standard. FHA officials told us  they had not issued any deficiency notices to the current compliance  contractor, but that discussions with the contractor can occur when it  does not meet the 95 percent standard in particular months. FHA officials  also noted that some of the contractor\u2019s reviews may take longer than 5  days if resolving them requires obtaining additional documentation or  substantial back-and-forth communications with the servicer.\nMaintenance contractors. After conveyance, FHA\u2019s maintenance  contractors have 2 calendar days from the date they are assigned a  property to conduct the comprehensive property inspection and upload  the results into a HUD Property Inspection Report in FHA\u2019s asset  disposition system. They then have 5 calendar days to complete a  Property Condition Report, which details the functionality of the property\u2019s  systems, the existence of any transferable warranties, and any legal  actions, such as code violations or pending demolition orders. FHA starts  measuring compliance with these time requirements 24 hours after the  properties are assigned to the compliance contractor (to account for  holidays and late afternoon assignments).\nAccording to our analysis of FHA data, the maintenance contractors  completed property inspections and uploaded the results within 3 days  (the 2-day requirement plus 24 hours) for about 90 percent of properties  conveyed from 2011 through 2017. The contractors met the 5-day  requirement to complete the Property Condition Report about 77 percent  of the time. When the maintenance contractors missed these time frames,  they missed them by a median of 1 and 2 days, respectively. The longer a  property remains uninspected after the servicer has conveyed it, the  greater the chance that it will be damaged or vandalized before  inspection. If a property is damaged during this period, disputes may arise  between FHA and the servicer about which entity is responsible for the  damage. FHA is responsible for maintaining the property once the  servicer complies with all HUD regulatory requirements leading to  conveyance, including filing the deed (in FHA\u2019s name) for record and filing  the conveyance claim. However, FHA may hold the servicer responsible  for the damage if the claim was suspended due to the need for review or  correction resulting from certain types of noncompliance with HUD  requirements or if the servicer could not prove the damage occurred after  FHA became responsible for maintaining the property. Disagreement over  this issue can add time to the conveyance process.\nFHA measures each maintenance contractor\u2019s performance monthly  using a formula that considers both the contractor\u2019s timeliness in  completing property inspections and uploading the results (2-day  requirement plus 24 hours) and in completing the Property Condition  Report (7-day requirement plus 24 hours) for each property. If the  contractor misses either deadline, it is not considered timely for that  property. FHA considers timeliness for 95 percent of properties each  month as satisfactory. According to FHA officials, FHA has taken actions  when the performance of maintenance contractors was not satisfactory. A  HOC official said that the actions may include issuing a defective  performance letter, which requires the contractor to provide a remedy  plan, and issuing a cure notice in coordination with HUD\u2019s contracting  office.\n\n\tFHA Changed Aspects of the Conveyance Process, but Policies and a Pilot Program Still Have Limitations\n\n\t\tFHA\u2019s Updates to Property Preservation Allowances and Data Systems Partly Addressed Certain Servicer Challenges\n\nFHA updated aspects of the conveyance process in recent years to help  address some of the challenges experienced by servicers and the  agency. For example, FHA increased property preservation and  protection allowances in 2016 to help address servicer feedback and to  better align allowances with other mortgage industry participants,  according to FHA officials. In February 2016, FHA issued Mortgagee  Letter 2016-02, which increased allowance amounts that servicers may  claim for specific types of property preservation and protection work. It  also increased the total maximum amount servicers may claim for a  property without submitting an overallowable request from $2,500 to  $5,000. However, the mortgagee letter eliminated all exclusions from the  maximum amount, which previously included one-time major repairs,  such as a roof replacement. FHA officials said the agency increased the  allowance amounts to account for the standard increases in property  preservation costs over time, and to align allowances with those of the  enterprises and the Department of Veterans Affairs.\nSeventeen of the 20 servicers we interviewed said that FHA\u2019s current  property preservation and protection allowances are not sufficient to  complete the work needed to convey properties. While representatives of  eight of the 20 servicers told us the changes FHA made to allowances in  2016 helped them complete work within allowance amounts,  representatives of the remaining 12 servicers said the changes did not  help or helped in some ways but presented more challenges in other  ways. Representatives of an association of mortgage lenders and  servicers said that they preferred the previous system, because some  work was excluded from the maximum allowance. For example,  representatives of one servicer said that due to the 2016 changes, they  now must submit an overallowable request for standard maintenance  items, such as grass cuts, once they have exceeded the maximum  allowance amount.\nOur analysis of FHA data found that the percentage of properties with at  least one overallowable request increased steadily from 2011 through  2017\u2014from about 53 percent to about 90 percent\u2014despite the 2016  changes (see fig. 11). For properties with at least one overallowable  request, the median number of requests before the 2016 changes (from  July 1, 2010, through February 4, 2016) was seven, compared with eight  after the changes (from February 5, 2016, through the end of 2017). In  2017 alone, the median number of overallowable requests per conveyed  property was 13. However, it may be too early to tell what effect the 2016  mortgagee letter will have on servicer\u2019s ability to conduct work within the  allowances. FHA officials said that although the change in the allowance  amounts was partly intended to reduce overallowable requests, the poor  condition of many properties with extended default and foreclosure  periods may have increased such requests. The officials stated that some  of these properties were still being conveyed to FHA in 2017.\nFHA enhanced the information system servicers and contractors use to  manage conveyed properties, but officials noted the need to update  another system FHA uses to process and pay claims. In March 2018,  FHA incorporated its preconveyance inspection pilot, discussed in more  detail later in this report, into the asset disposition system, the information  system servicers use to convey properties to FHA. FHA officials and  contractors also use the system to track properties from conveyance  through REO sale. With the update, servicers may request a  preconveyance inspection and see the results of the inspection in the  system, according to FHA officials. Before FHA added the pilot to the  asset disposition system, servicers and FHA used email to communicate  about properties in the pilot.\nIn October 2016, FHA added a feature to the asset disposition system  that enables FHA officials, contractors, and servicers to electronically  monitor the status of reconveyed properties. According to FHA officials,  all communication between FHA and servicers on reconveyed properties  previously was by email, including the servicer\u2019s notification to FHA that it  was ready to convey a property again, and the photographs required to  document property condition. However, according to FHA officials, FHA\u2019s  claims system is not equipped to process more than one claim per  property, so claims for properties FHA reconveys and which the servicer  then conveys to FHA a second time must be processed manually.  Officials from FHA\u2019s Office of Financial Services said that manual  processing delays claim payments to servicers\u2014sometimes by more than  a year. Seven of the 20 servicers we interviewed identified delayed claim  payments for reacquired properties as a challenge. FHA officials said that  they have made an internal business case for funding to modernize the  system, but have not succeeded in securing the funding in prior years.\n\n\t\tFHA Updated Its Policies and Procedures on Conveyance Condition, but Limitations Remain\n\nFHA updated its written direction to servicers on conveyance condition in  2016, but limitations in the contents and methods of communicating these  policies and procedures have contributed to compliance challenges for  some servicers. In its February 2016 mortgagee letter, FHA re- emphasized its existing directions to servicers about property  conveyance, provided additional details on how to calculate claim  amounts and document property preservation and protection work, and  clarified descriptions of some preservation and protection requirements.  Additionally, in December 2016, FHA issued an updated single-family  housing policy handbook that consolidated all policies and procedures for  servicers into one document, including those on maintaining and  conveying foreclosed properties. However, servicers and other industry  stakeholders with whom we spoke and our review of FHA\u2019s policies and  procedures on conveyance condition identified several limitations, as  follows.\nLack of clarity or specificity. Representatives from 15 of the 20  servicers we interviewed said they found FHA\u2019s policies and procedures  on conveyance condition to be unclear or subjective, and 13 cited specific  parts of the conveyance condition standards they found to be unclear or  missing. For example, one servicer was unsure about the extent of  repairs required when a property had water seepage in the basement. We  found that FHA\u2019s policies and procedures include information on how to  treat a basement that is flooded or a property with moisture damage, but  does not address basement leaks, cracks, or seepage. Representatives  of four servicers said that FHA\u2019s policies and procedures do not  sufficiently address how servicers should handle properties with potential  structural or foundation damage. Consistent with this viewpoint, we found  that FHA\u2019s handbook and mortgagee letter do not explain what a servicer  should do if it believes a property has damage affecting its structural  integrity. In addition, representatives of three servicers said FHA\u2019s  expectations of them are unclear when a roof is damaged but does not  currently have a leak. According to FHA\u2019s policies and procedures,  servicers must ensure all roofs \u201care free of active leaks or other sources  of water intrusion.\u201d However, FHA does not specify what servicers should  do if there is roof damage but no active leak. Two of the servicers said  they were uncertain whether they should replace the damaged roof that is  not leaking, or convey the property and risk reconveyance if it rains  before FHA inspects the property and the roof leaks.\nPerceived inconsistency in interpretation. Representatives from 10 of  the 20 servicers we interviewed said FHA is somewhat or not at all  consistent in determining whether properties meet FHA\u2019s conveyance  requirements. Among the remaining 10, one stated that FHA is  completely consistent and nine said that FHA is mostly consistent. In  addition, two of the 20 servicers said the answers they receive from FHA  to the same question differ depending on whom they ask. HOC officials  also noted cases in which their interpretation of policies and procedures  differed from the compliance contractor\u2019s. For example, officials from  three HOCs told us that the compliance contractor sometimes disagrees  with their determination that a property is not in conveyance condition  when the contractor reviews the HOC\u2019s reconveyance decision.\nLimited communication methods. In addition to formal written policies  and procedures on conveyance condition, FHA fields servicer questions,  primarily through its compliance contractor, by phone. The compliance  contractor also issues an annual newsletter on topics such as common  reconveyance triggers and best practices for submitting successful  overallowable and extension requests. However, some servicers we  interviewed suggested other possible ways to communicate policies and  procedures that they said they would find helpful, including the following:\nRepresentatives of five servicers said they would like FHA to publish an authoritative set of frequently asked questions (FAQ) on conveyance condition. FHA has an FAQ web page that includes information on conveyance condition, but, as of April 2019, did not include FAQs about the specific property preservation and protection issues discussed above (water seepage, structural integrity, and roof damage with no active leaks). In addition, a link in the web page labeled \u201cforeclosure\/conveyance\u201d led to a few FAQs on conveyance condition and property preservation requirements, but the answers consisted solely of language from FHA\u2019s existing policies and procedures.\nOne servicer\u2019s representatives suggested that FHA could issue policies and procedures in a format similar to Fannie Mae\u2019s Property Preservation Matrix and Reference Guide. This guide has features that FHA\u2019s policies and procedures do not have, as discussed below, including photographic examples, detailed requirements for photographic documentation, and \u201cif-then\u201d statements detailing what servicers should do if they encounter certain challenges at a property.\nRepresentatives of two servicers suggested that FHA host regular industry calls. While the compliance contractor told us that it takes ad hoc calls and holds regular teleconference calls with a number of individual servicers, an FHA official told us the contractor is only authorized to respond to servicer questions by providing relevant parts of FHA\u2019s written policies and procedures and is not supposed to respond with interpretations (clarifications, or explanations) of existing policies and procedures. Representatives from one servicer said industrywide calls with FHA staff would give servicers a way to obtain fuller explanations of FHA\u2019s expectations.\nOne servicer suggested that FHA provide training to servicers about the conveyance process. The servicer noted that while FHA provides training on other aspects of its program, including loss mitigation, it does not do so for the conveyance process or submitting claims.\nLimited direction on photographic evidence. FHA\u2019s policies and  procedures provide instructions for servicers and contractors on how to  document property conditions, but contain limited direction on  photographic evidence. Servicers must thoroughly document the  condition of the property when they first obtain possession so that FHA  does not hold them responsible for damage caused by the borrower.  Servicers also must take before and after pictures of any work they do on  the property. FHA\u2019s policies and procedures on photographic  documentation say only that the servicer must use digital photography,  ensure a date-stamp is printed within each photograph, and ensure that  each photograph is labeled to describe the contents of the photograph.  FHA has not communicated in writing any requirements for photograph  dimensions, color, distance, framing, or content or suggestions for  documenting conditions that may be difficult to see.\nServicers and FHA officials stated that they face challenges in  documenting property conditions in a way that most accurately informs  the compliance contractor about the property. The compliance contractor  reviews documentation, including photographs, uploaded into the asset  disposition system by servicers to make decisions on overallowable and  extension requests. The compliance contractor also reviews  documentation from maintenance contractors on inspection results and  reconveyance recommendations by HOC officials. An FHA maintenance  contractor told us that the compliance contractor sometimes responds  that the condition described is not apparent from the photographs in the  asset disposition system. According to members of an industry group  representing servicers, in some cases this may result in FHA requiring  servicers to repair damage caused by the borrower, because the  servicers\u2019 photographs did not prove the damage was present when they  first gained possession of the property.\nTo illustrate how photographs can effectively or ineffectively capture  property condition problems, figure 12 provides two examples of flooring  issues at properties conveyed to FHA. In one photograph, the buckling of  the floor is apparent, but in the other, the waterlogged and warped  condition of floor is harder to discern. An experienced FHA maintenance  contractor told us there are creative ways to document some conditions  that are difficult to photograph. For example, to document a damp floor,  one can photograph a piece of paper (which darkens when wet) before  and after placing it on the floor. This method is not included in FHA\u2019s  handbook or mortgagee letter.\nLimitations in the content and delivery of FHA\u2019s policies and procedures  on conveyance condition suggest room for improvement and are  inconsistent with the federal internal control standard for communicating  externally. This standard calls for management to externally communicate  the necessary quality information to achieve an entity\u2019s objectives.  Federal agencies can help ensure compliance by communicating with  and obtaining information from external parties and by periodically  evaluating and selecting appropriate methods of communication, taking  into account factors such as the audience, the purpose and type of  information being given, and legal or regulatory requirements.\nHowever, FHA has not identified where the conveyance condition policies  and procedures could be improved because it has not assessed  information from servicers\u2014for example, the frequency or content of their  questions to the compliance contractor. FHA also has not thoroughly  evaluated its methods for communicating its policies and procedures. As  a result, FHA has limited assurance that servicers understand FHA\u2019s  expectations for conveyed properties and that contractor decisions are  made consistently. Weaknesses in these areas can contribute to  inefficiencies such as delays in executing conveyances and  reconveyance of properties to servicers.\n\n\t\tFHA Has Not Provided Direction on Alternatives to Reconveyance for Properties That Do Not Meet Conveyance Condition Standards\n\nFHA has not provided written direction to HOC officials on choosing  among alternatives to address conveyed properties that do not meet  FHA\u2019s condition standards. According to officials from FHA  headquarters and the National Servicing Center, HOC officials can (1)  reconvey the property\u2019s title to the servicer, (2) issue a demand letter  establishing a debt to FHA for the cost of the work needed, or (3) enter  into a reconveyance bypass agreement with the servicer that requires the  servicer to complete repairs within a certain number of days. The latter  two options avoid reconveyance and therefore may expedite resale of the  property. These three options are mentioned in different parts of FHA\u2019s  policies and procedures, but the agency has not outlined the  circumstances that would warrant use of each method.\nFHA has not provided direction to the HOCs, partly because HOC officials  have the authority to choose a method based on the expected financial  return on the property. However, HOC officials with whom we spoke  differed in the factors that they considered when deciding how to address  properties that do not meet FHA\u2019s conveyance condition standards.  Officials from three HOCs cited criteria that any property with more than  $5,000 in damage due to servicer neglect should be considered for  reconveyance, while a bypass agreement or demand letter may be issued  if the amount of servicer neglect is less than $5,000. However, FHA  officials were not able to tell us where this criterion is written. An official  from the fourth HOC said the decision to reconvey partly depends on the  strength of the housing market. If the HOC believes it can sell the  property in its current condition\u2014even if the condition does not meet  FHA\u2019s conveyance standards\u2014the HOC will be more likely to issue the  servicer a demand letter than reconvey the property. In contrast, an  official from one of the other HOCs told us the state of the housing market  did not factor into decisions on reconveyance. Furthermore, according to  FHA officials, HOCs may also reconvey a property with only small  amounts of damage if the servicer frequently conveys properties not in  conveyance condition, in order to impress on the servicer the importance  of complying with FHA requirements.\nThe HOC officials generally agreed that bypass agreements offer a way  for small repairs to be fixed quickly. However, an official from one HOC  said the HOC did not issue bypass agreements often because servicers\u2019  property preservation and protection vendors may take longer than the  time specified in the agreement to complete repairs and, since the title is  in FHA\u2019s name, FHA has no recourse with the servicer. An official from  another HOC also said that he did not like issuing bypass agreements  because servicers do not always complete repairs quickly.\nFHA does not produce reports on the HOCs\u2019 use of reconveyance,  demand letters, and bypass agreements, so the frequency with which the  HOCs employ these methods is unknown. Some servicer representatives  with whom we spoke noted apparent inconsistency among the HOCs. For  example, representatives of three servicers said that some HOCs do not  issue bypass agreements at all. Similarly, representatives of one servicer  told us they have infrequently, if ever, received a demand letter for small  condition issues at properties; rather, FHA reconveys the properties for  minor condition issues.\nFHA\u2019s lack of written direction on alternatives to reconveyance is  inconsistent with federal internal control standards, which call for  designing control activities, including policies, to achieve objectives.  Granting HOC officials discretion in dealing with properties that do not  meet condition standards gives them flexibility to respond to specific  circumstances. However, without written direction on factors to consider  when determining whether they should reconvey a property, issue a  demand letter, or enter into a bypass agreement with the servicer, FHA  lacks reasonable assurance that HOCs make determinations consistently  and in line with the agency\u2019s regulatory goals for the REO program\u2014to  dispose of properties in a manner that expands home ownership,  strengthens neighborhoods and communities, and ensures a maximum  return to the mortgage insurance fund. Balancing these goals may  require using different methods to address properties that do not meet  conveyance standards. For example, in some cases issuing a demand  letter or a bypass agreement for certain properties may result in FHA  marketing and selling the property more quickly than it would by  reconveying the property. A quicker sale, in turn, may help avoid the  negative effects of a vacant property on the surrounding neighborhood.  However, if FHA accepts a property in poor condition, it may receive less  in proceeds when selling the property, which negatively affects FHA\u2019s  mortgage insurance fund.\n\n\t\tFHA Does Not Have a Plan to Evaluate Its Preconveyance Inspection Pilot\n\nFHA began a pilot program in 2017 to inspect properties that meet certain  criteria before conveyance, but has not developed a plan to assess the  results of the pilot program. FHA selected three large servicers to  participate in this preconveyance inspection pilot. These servicers may  request preconveyance inspections for properties with characteristics that  increase their chances of being reconveyed, according to FHA officials.  For example, eligible properties include those that experienced recurring  vandalism, received overallowable repairs of greater than $5,000, or have  potential structural defects, foundation issues, or damp or wet  basements. Based on the inspection results, the properties are  approved to convey, approved to convey subject to repair with no  additional inspection, or denied conveyance through the pilot (see table  3). After conveyance, FHA inspectors conduct a thorough inspection to  confirm that the property meets conveyance condition standards.  Properties that do not meet the standards may be reconveyed.\nAs of November 2018, FHA had not developed plans for evaluating the  effectiveness of the pilot in achieving the goals of reducing the number of  properties reconveyed due to property condition and minimizing the time  it takes to convey properties. FHA officials told us that they will develop a  plan to assess pilot outcomes when sufficient data are available.  However, without an evaluation plan, FHA may not collect the right  information during the pilot to rigorously assess results. GAO\u2019s guide for  designing evaluations states that key components of an evaluation design  include the evaluation questions or objectives; information sources and  measures; data collection methods; an analysis plan, including evaluative  criteria or comparisons; and an assessment of study limitations.\nCertain characteristics of FHA\u2019s pilot underscore the importance of  incorporating these components into evaluation design. For example,  because the pilot is intended to expedite the conveyance process through  preconveyance inspections, it will be important to isolate the impact of the  inspections, potentially by making comparisons to a control group. A  properly selected control group can rule out competing explanations for  observed outcomes. Additionally, because the pilot may affect  participating servicers in ways that extend beyond the speed of the  conveyance process or the probability of reconveyance, it will be  important for FHA to thoroughly consider the information sources and  measures it uses, including participant feedback. For example,  representatives of the three participating servicers told us they had  concerns about FHA holding properties in the pilot to higher conveyance  condition standards than nonpilot properties and the time it takes to  complete the preconveyance inspection process. According to the  representatives, this process, which includes 7 calendar days for the  inspection and 5 business days for the HOCs to review the inspection  report, has resulted in longer holding times and increased vandalism  risks.\nWithout a well-designed evaluation, FHA risks making decisions about  preconveyance inspections based on incorrect or incomplete information  on the pilot\u2019s benefits and drawbacks.\n\n\tConclusions\n\nWhile FHA increased the use of other property disposition methods in  recent years, servicers still convey thousands of foreclosed properties to  FHA annually. If the process of transferring ownership from the servicer to  FHA is not efficient, these properties may sit vacant for prolonged  periods, deteriorate, and contribute to neighborhood decline. As a result,  it is critical for FHA to have effective and efficient policies and procedures  for the conveyance process. While FHA has made recent updates to its  handbook, mortgagee letters, and information systems, additional  improvements would better align its processes and procedures with  federal internal control standards and GAO guidance on designing  evaluations:\nBy addressing limitations in the content (including its detail) and communication of its policies and procedures on conveyance condition, FHA could help reduce uncertainty and inconsistency in the conveyance process that may contribute to inefficiencies, such as reconveyance of properties to servicers.\nSecond, by providing direction to HOC officials on factors to consider when deciding whether to use alternatives to reconveyance for properties that do not meet conveyance condition standards, FHA could increase the likelihood that alternatives will be used consistently and in line with FHA\u2019s goals for the REO program.\nThird, by developing a plan for how it will evaluate the outcomes of the pilot to inspect certain properties prior to conveyance, FHA could help ensure the pilot generates the performance information needed to make effective management decisions about future policies.\nBy addressing these issues, FHA could make the conveyance process  more efficient and therefore help reduce negative impacts on  neighborhoods.\n\n\tRecommendations\n\nWe are making the following three recommendations to FHA:  The Commissioner of FHA should enhance the content and  communication of FHA\u2019s policies and procedures on conveyance  condition, including by considering the program stakeholder views  discussed in this report and other stakeholder input. (Recommendation 1)\nThe Commissioner of FHA should provide written direction to HOC REO  directors on factors to consider when determining whether to reconvey a  property with condition issues, issue a demand letter, or enter into a  bypass agreement with the servicer. (Recommendation 2)\nThe Commissioner of FHA should develop a formal plan for evaluating  the outcomes of the preconveyance inspection pilot that includes key  elements of evaluation design\u2014such as evaluation objectives and  measures\u2014and utilizes participant feedback and control groups, as  appropriate. (Recommendation 3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to FHA, the Department of Veterans  Affairs, and the Federal Housing Finance Agency (the conservator and  regulator of Fannie Mae and Freddie Mac) for their review and comment.  The Department of Veterans Affairs and the Federal Housing Finance  Agency did not provide comments. FHA provided written comments  reproduced in appendix II. FHA neither agreed nor disagreed with our first  recommendation to enhance the content and communication of its  policies and procedures on conveyance condition. FHA cited the 2016  updates to its policy handbook and mortgagee letter and said it  recognized the importance of external communication, training, and in- person meetings to ensure servicers have the information they need to  operate in compliance with FHA programs. Our report discusses these  updates, but also identifies areas for additional improvements to address  limitations in the clarity and comprehensiveness of FHA\u2019s policies and  procedures and methods for communicating them. FHA agreed with our  second and third recommendations to provide written direction on  considering alternatives to reconveyance and to develop a plan for  evaluating the preconveyance inspection pilot.\nWe are sending 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 is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives were to examine (1) timelines for Federal Housing  Administration (FHA) foreclosed property conveyances in June 2010\u2013 December 2017 and the extent to which servicers and FHA met time  requirements and (2) changes FHA has made to the conveyance process  in recent years and any ongoing process challenges.\n\n\tTime Lines for Property Conveyances\n\nTo address the first objective, we obtained data from FHA\u2019s Single Family  Insurance System\u2013Claims Subsystem and from the P260 Asset  Disposition and Management System (asset disposition system) on the  610,802 foreclosed properties mortgage servicers conveyed to FHA from  January 1, 2010, through December 31, 2017. For purposes of our  analysis, we generally excluded properties conveyed to FHA from  January 2010, through June 2010 because they were managed using  different data systems and contractors than FHA currently uses.\nAfter excluding these properties, we analyzed data for 544,421 properties  conveyed to FHA from July 2010 through December 2017. (We use  calendar years in this report unless otherwise noted.) We calculated the  number of days it took each property to complete the conveyance  process. We defined the start of the conveyance process as the date the  servicer obtained possession and acquired marketable title for a property  and the end of the process as the date on which FHA assigned a  marketing contractor to sell the property. For each annual cohort of  conveyed properties, we calculated the 25th, 50th (median), and 75th  percentile time frames and compared these statistics across years.\nTo analyze the effect that reconveyances had on the length of the  conveyance process, we compared length of time for conveyance in  2012\u20132017 for properties that were reconveyed to those that were not.  According to FHA staff, data on reconveyances were unreliable prior to  2012, so we excluded those properties from this comparative analysis.\nWe interviewed FHA officials about factors that may have affected  conveyance time frames from 2010 through 2017, including increased  use of other disposition methods and servicers delaying foreclosure  actions and the resulting impact on property conditions, since the asset  disposition system does not disclose the reasons for any delays. To  analyze changes in the use of different property disposition methods and  to examine the loss severity rates for these methods, we reviewed FHA  data for fiscal years 2010\u20132017. To understand the relationship between  properties with long default and foreclosure periods and conveyance time  frames, we measured the time between the borrower defaulting on the  mortgage and the servicer obtaining title to and possession of the  property (effectively, the end of the foreclosure process) for properties  conveyed to FHA from July 2010 through December 2017. We divided  the range of default and foreclosure periods into four quartiles. For each  quartile, we calculated the length of the conveyance process at the  median and at the 25th and 75th percentiles. We then compared these  statistics across quartiles.\nTo determine the extent to which mortgage servicers and FHA  contractors met their respective time requirements for the conveyance  process, we identified relevant time requirements in Department of  Housing and Urban Development (HUD) regulations and policies. We  also reviewed the performance work statements for FHA\u2019s mortgagee  compliance manager (compliance contractor) and field service managers  (maintenance contractors) to identify the contractors\u2019 time requirements  for the conveyance process. For servicers and contractors, we selected  key time requirements for which electronic data were available, including  the following:  Thirty calendar days from acquiring title and possession of a property, plus the length of any approved time extension, to convey property to FHA.\nForty-five days from conveying a property to FHA, plus the length of any approved time extension, to provide FHA with title evidence.\nFive business days to review each overallowable request submitted by a servicer.\nFive business days to review the sufficiency of title documentation submitted by the servicer.\nFive business days to determine whether a servicer can convey a property with surchargeable damage.\nFive business days to approve or deny a servicer\u2019s conveyance or title extension request.\nTwo calendar days, plus an additional 24 hours, to complete and upload the HUD Property Inspection Report from the date the property was assigned.\nFive calendar days to complete a Property Condition Report from the date the Property Inspection Report was completed.\nFor each property, we calculated the number of days it took servicers and  contractors to complete these required steps in the conveyance process  and compared that number to the maximum number of days FHA allows  for each step. For each annual cohort of properties conveyed in 2010\u2013 2017, we calculated the 25th, 50th (median), and 75th percentile time  frames for completing the steps. We also calculated the percentage of  properties for which servicers or FHA contractors met their time  requirements for each step. We reviewed FHA\u2019s procedures for  monitoring the performance of compliance and maintenance contractors  for conveyed properties. We also reviewed examples of contractor quality  control plans and FHA quality control reports and scorecards used to  assess the contractors\u2019 compliance with minimum time frames and other  requirements. Additionally, we interviewed FHA officials about the  contractors\u2019 compliance with their respective time requirements and what  steps FHA took, if any, to address any noncompliance.\nWe assessed the reliability of data from the Single Family Insurance  System\u2013Claims Subsystem and the asset disposition system by  reviewing FHA documentation about the data systems and data  elements. We interviewed FHA staff and contractors knowledgeable  about the data to discuss interpretations of data fields and trends we  observed in our analysis. We also conducted electronic testing, including  checks for outliers, missing data fields, and erroneous values. We  excluded from each analysis properties with missing or erroneous  information in the applicable data fields. We also excluded from each  analysis properties for which the applicable data fields were five absolute  deviations from the median (which we consider to be outliers). In addition,  we excluded certain properties conveyed in calendar years 2010\u20132017  that had conveyance dates that were out of sequence. For example, we  excluded properties for which the date a servicer obtained possession  and good and marketable title occurred after the date the servicer  conveyed the property to FHA. The number of properties we excluded in  any analysis using these methods represents no more than 3.2 percent of  properties conveyed from July 2010 through December 2017, which we  consider to be insignificant when compared to the remaining properties  included in the analysis. After taking these steps, we believe that the data  were sufficiently reliable for purposes of characterizing the overall length  of FHA property conveyances and compliance with key time  requirements.\n\n\tChanges to Conveyance Process and Ongoing Challenges\n\nTo determine what changes FHA made to the conveyance process in  recent years, we reviewed relevant FHA regulations, policies, and  procedures issued in 2010 or later, including FHA\u2019s February 2016  mortgagee letter (a written instruction to FHA-approved lenders) on  conveyances. We compared the requirements and property preservation  and protection allowance amounts in the mortgagee letter to those in the  prior mortgagee letter. We also reviewed FHA documentation on changes  to the asset disposition system, FHA\u2019s data system for conveyed  properties, and on FHA\u2019s preconveyance inspection pilot program that  began in 2017. We interviewed FHA officials on the reasons for the recent  changes and on the extent to which they reviewed any analogous  requirements and property preservation and protection allowances of  other mortgage entities (including Fannie Mae, Freddie Mac, and the  Department of Veterans Affairs) when making the updates. To  supplement our review of FHA\u2019s recent changes to property preservation  and protection allowances, we used the asset disposition system data to  analyze changes in the frequency and number of servicer overallowable  requests since the 2016 mortgagee letter went into effect.\nTo examine what, if any, challenges exist with the conveyance process,  we randomly selected a nongeneralizable sample of 20 large- and  medium-sized, bank and nonbank servicers of FHA-insured mortgages.  We defined large-sized servicers as those with 100,000 or more active  FHA-insured mortgages as of December 31, 2017, and medium-sized  servicers as those with 10,000\u201399,999 active FHA-insured mortgages as  of that date. These servicers accounted for more than one-third of active  FHA-insured mortgages as of December 31, 2017. We conducted  semistructured interviews with the servicers about their experience with  FHA property conveyances, including the sufficiency of FHA\u2019s policies  and procedures, time lines, and allowance amounts and any challenges  they experienced with the process. We also discussed the extent to which  the 2016 mortgagee letter assisted or hindered their conveyance efforts.\nIn addition, we spoke with two national industry groups representing  mortgage servicers about recent changes and any challenges their  members experienced with the conveyance process.\nWe reviewed FHA\u2019s requirements for servicers and contractors on  conveyed properties. In cases in which servicers stated that FHA\u2019s  policies and procedures on particular conveyance requirements was  insufficient or unclear, we examined the 2016 mortgagee letter, HUD\u2019s  single-family housing policy handbook, and frequently asked questions on  HUD\u2019s website\u2014to determine whether it addressed the topics and was  sufficiently thorough to be applied to properties with different  circumstances. We assessed whether the policies and procedures were  consistent with federal internal control standards for external  communication. In particular, we examined whether the policies and  procedures communicated necessary quality information to achieve  program objectives and whether FHA had evaluated appropriate methods  to communicate them. Where applicable, we also compared FHA\u2019s  policies and procedures to features of Fannie Mae\u2019s guide for servicers  on how to preserve and protect vacant properties. We also assessed  FHA\u2019s policies and procedures on reconveyances and alternatives to  reconveyance against federal internal control standards for designing  control activities.\nTo review the preconveyance inspection pilot that FHA began in 2017  and any challenges with the pilot, we interviewed the three participating  servicers about FHA\u2019s implementation of the pilot and the extent to which  preconveyance inspections reduced the likelihood of reconveyance or  addressed other challenges. We spoke with FHA National Servicing  Center officials about their monitoring of pilot outcomes and their plans for  assessing results. We assessed FHA\u2019s planning and evaluation efforts  against key components of evaluation design from GAO\u2019s guide for  designing evaluations.\nFurthermore, we interviewed a number of individuals and entities about  challenges they experienced in implementing their property conveyance  responsibilities, the sufficiency of FHA\u2019s policies and procedures, and  methods for assessing contractor performance. These included FHA  headquarters and National Servicing Center officials with responsibilities  for aspects of the conveyance process; FHA\u2019s compliance contractor; and  Real Estate-Owned Division officials, the largest maintenance contractor,  and staff responsible for overseeing the maintenance contractors at each  of FHA\u2019s four homeownership centers.\nFinally, we visited eight recently conveyed or reconveyed properties in the  Baltimore, Maryland, and Atlanta, Georgia, areas to observe property  conditions, learn about the maintenance contractors\u2019 property inspection  processes, and understand challenges in documenting and addressing  condition issues. We chose these locations to provide some geographic  dispersion and coverage of different FHA homeownership centers. The  properties were selected by Philadelphia and Atlanta homeownership  center staff based on our request to visit a mix of recently conveyed and  reconveyed properties in metropolitan areas and time periods that we  chose. As a result, the conditions we observed are illustrative rather than  representative of all conveyed properties.\nWe conducted this performance audit from September 2017 to June 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.\n\nAppendix II: Comments from the Department of Housing and Urban Development\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Steve Westley (Assistant  Director); Melissa Kornblau (Analyst in Charge); Rachel Batkins; William  Chatlos; Emily Flores; John McGrail; Samuel Portnow; Barbara  Roesmann; Tovah Rom; and Jena Sinkfield made key contributions to  this report.","output":null}
{"id":"gao_GAO-19-437","pid":"gao_GAO-19-437_0","input":"\tBackground\n\n\t\tThe Commercial Space Transportation Industry\n\nSpace transportation is the movement of objects, such as satellites and  vehicles carrying cargo, scientific payloads, or passengers, to or from  space. In the United States, commercial space transportation is carried  out using orbital and suborbital launch vehicles owned and operated by  private companies. Key parties involved in commercial space  transportation activities include:\nThe commercial launch provider\u2014the entity that conducts the  launch of a vehicle and the payload it carries.\nThe launch customer\u2014the entity that pays the launch provider to  carry a payload into space. Customers include the U.S. government\u2014 which has not operated its own launch vehicles since the retirement of  the Space Shuttle in 2011 and primarily relies on commercial launch  providers to, among other things, resupply the International Space  Station, launch satellites, and carry out national security and defense  missions. Customers also include private companies, such as  satellite owners, and researchers.\nThe launch site operator\u2014the entity that hosts the launch (or  reentry, or both) of the launch vehicle from its launch site. Almost all  launch site operators are either commercial launch providers or state  or municipal government entities.\nThe U.S. share of the global commercial space transportation market has  grown in recent years. For example, according to FAA, 64 percent of the  33 worldwide commercial orbital launches in 2017 occurred at U.S.  launch sites, up from about 48 percent in 2014.\nCommercial launch providers currently use, and are developing for future  use, a variety of vehicles to launch payloads. Historically, launch  providers have carried payloads into orbit using vertically launched  expendable launch vehicles\u2014those vehicles that launch only once. In  more recent years, a launch provider, SpaceX, has introduced launch  vehicles that can be reused for multiple launches, such as Falcon 9 and  Falcon Heavy, where one part or all of the launch vehicle returns to a  landing pad, either on land or on a converted barge offshore, after the  payload is launched into orbit. Commercial launch providers are also  moving toward reusable suborbital launch vehicles, some intended for  human space tourism. These vehicles include horizontal hybrid suborbital  launch vehicles, such as Virgin Galactic\u2019s SpaceShipTwo, and vertical  reusable suborbital launch vehicles, such as Blue Origin\u2019s New Shepard.  Figure 1 depicts examples of expendable and reusable vertical launch  vehicles.\nLaunch site infrastructure, and those who own and operate it, also varies  across individual launch sites. The type of infrastructure and its design  depends on the type of operations that the launch site supports. For  example, some launch sites may have a launch pad for vertical launches  but not a runway for horizontal launches; others may have infrastructure  specifically to support launch vehicle reentry operations. While many  different types and designs exist, figure 2 below shows a few examples of  major pieces of launch site infrastructure.\n\n\t\tAST\u2019s Roles and Organizational Structure\n\nWithin FAA, AST is responsible for regulatory oversight of the commercial  space transportation industry. AST\u2019s primary means of oversight is  licensing or permitting commercial launch and reentry vehicle operations  and non-federal launch sites, as well as conducting safety inspections of  licensed launch providers and site operators. AST is organized into three  management and support offices, including the Office of the Associate  Administrator, and five operational divisions\u2014responsible for the majority  of AST\u2019s primary mission areas, such as licensing and overseeing  launches. In addition, the FAA Reauthorization Act of 2018, signed into  law in October 2018, requires that AST develop an Office of  Spaceports. According to FAA officials, as of May 2019, the size and  design of this office have not yet been finalized.\nAST\u2019s workforce size is expected to increase to help accommodate  anticipated growth in the industry and AST\u2019s workload (see table 1). As  of February 2019, AST had 104 full-time equivalent positions and an  operations budget of about $25 million\u2014an increase of 25 full-time  equivalent positions and about $8 million since fiscal year 2015.\n\n\t\tLaunch Licensing Regulations\n\nFAA requires launch providers conducting a launch or reentry within U.S.  borders to obtain a license or permit, as well as those conducting a  launch or reentry abroad, if the launch provider is a U.S. entity. FAA  considers a commercial launch to be one in which the contract for the  main payload\u2019s launch was open to international competition or the  launch was privately financed without government support.\nFAA also requires, with some exceptions, a site operator\u2019s license,  which authorizes an entity, such as a state or local government, to host  commercial space launch operations from a specific launch site. FAA is  to conduct safety inspections of licensed commercial space transportation  launch operations, which involves monitoring of pre-operational,  operational, and post operational activities.\nIn February 2018, the National Space Council recommended that DOT  update the regulations on launch and re-entry licensing to better  accommodate changes that have occurred in the industry. The White  House subsequently directed DOT to publish a proposed rule by February  1, 2019, with a revised framework that allows more flexibility in how  companies can meet the regulatory requirements. DOT published a  notice of proposed rulemaking for the revisions to its licensing regulations  in April 2019.\n\n\tFunding for Infrastructure at Active U.S. Commercial Launch Sites Has Shifted from Federal to State, Local, and Private Sources\n\n\t\tFederally Funded Construction\n\nAround the mid-20th century, the federal government began constructing  the infrastructure that supports the majority of commercial orbital space  launches today. The Department of Defense (DOD) constructed launch  sites to support ballistic missile testing and satellite launches, including  sites that are now home to Cape Canaveral Air Force Station in Florida  and Vandenberg Air Force Base in California. Those sites conducted their  first test launches in 1950 and 1958, respectively. The National  Aeronautics and Space Administration (NASA) was created in 1958, and  began acquiring land adjacent to Cape Canaveral Air Force Station in  1962 to support its human spaceflight lunar program; this land is now  home to the Kennedy Space Center.\nIn recent years, nearly all FAA-licensed launches in the United States  occurred at three federal ranges, which were originally built by the federal  government (see fig. 3). All 61 of the FAA-licensed commercial orbital  launches from 2015 through 2018 occurred at launch sites that are on or  co-located with federal ranges, with 44 of the 61 launches taking place at  Cape Canaveral Air Force Station and Kennedy Space Center  (collectively referred to as \u201cCape Canaveral\u201d). In addition, one of the 11  licensed commercial suborbital launches occurred at a launch site co- located with a federal range.\nWhile the federal government made the initial infrastructure investment at  federal ranges, the launch complexes used for commercial launch  operations at these sites are now operated under use agreements by  non-federal entities, such as state governments or commercial launch  providers. For example, four of the launch complexes at Cape  Canaveral are operated by commercial launch providers, while two others  are operated by the State of Florida. Two other federal ranges have  launch pads that are also operated by non-federal entities\u2014Vandenberg  Air Force Base in California and the Mid-Atlantic Regional Spaceport,  which is co-located with NASA\u2019s Wallops Flight Facility in Virginia.\nThe Air Force and NASA generally still have responsibility for maintaining  common-use infrastructure\u2014that is, infrastructure that may be shared by  multiple users, such as access roads and fuel pipelines. As part of the  operators\u2019 use agreements (the details of which vary depending on the  launch site and launch site operator), however, funding for improvements  to infrastructure used solely by that site operator is generally left to the  site operator. This arrangement is in part because the infrastructure  improvements are necessary to support the unique needs of specific  commercial launch vehicles using those sites.\nAt another launch site, the federal government followed a different  infrastructure investment model. In the 1990s, the Air Force partnered  with the state of Alaska to help fund the construction of a state-owned site  to support federal government launches and missile testing rather than  constructing a new federal range. This site, known as the Pacific  Spaceport Complex \u2013 Alaska, conducted its first government launch in  1998. Major infrastructure includes two launch pads with shared vehicle  integration and transfer facilities. According to spaceport officials at this  site, in addition to government launches, Alaska Aerospace, a state entity  that operates the site, has contracts with three commercial launch  providers, which anticipate conducting commercial orbital launches there  in the future. Appendix II provides additional information on launch sites  co-located with federal ranges, as well as funding sources and  characteristics for other U.S. commercial launch sites.\n\n\t\tState and Local Government Funding\n\nWhile the federal government has not directly funded the construction of  infrastructure at launch sites in recent years, state and local  governments have done so. According to interviews we conducted and  our review of publicly available documents of state-government entities  that were formed to promote space-related development, state and local  governments are investing in infrastructure to obtain the economic  benefits of attracting space-related businesses to their areas. In two  cases, state governments became operators of launch sites co-located  with federal ranges and invested in infrastructure improvements at those  sites to support commercial orbital launch vehicles.\nThe Commonwealth of Virginia\u2014through Virginia Commercial Space  Flight Authority, an independent state entity created in part to develop  and promote Virginia\u2019s commercial space transportation industry\u2014 invested $90 million in improvements to a launch pad at the Mid- Atlantic Regional Spaceport. This represented a share of the total  costs, which were shared by Northrop Grumman Innovation  Systems, a commercial launch provider that has an agreement to  use the pad for commercial launches, including cargo resupply  missions to the International Space Station.\nThe State of Florida\u2014through Space Florida, an independent special  district that serves the state\u2019s space-related needs\u2014has provided  over $140 million in infrastructure investments. Those investments  upgraded launch pads and the supporting infrastructure at Cape  Canaveral, as well as provided grants matched by commercial launch  providers for improvements to infrastructure used by those providers.\nIn other cases, state and local governments have invested in wholly new  commercial launch sites or are adapting existing airport infrastructure to  use as launch sites. According to these launch site operators, these sites  are currently used for suborbital launches but could support orbital  launches in the future.\nThe state of New Mexico funded the construction of the commercial  launch site known as Spaceport America through $225 million in state  appropriations and local taxes in two counties. The state also has a  20-year lease agreement with Virgin Galactic, which plans to conduct  commercial suborbital space tourism launches from the site. This  launch site, with its 12,000-foot-by-200-foot runway, hosted one FAA- licensed suborbital test launch in 2018.\nIn California, the Mojave Air and Space Port (Mojave) is a general  aviation airport that obtained an FAA license to conduct commercial  suborbital launches in 2004. In addition to continuing its general  aviation operations, Mojave currently provides a runway and mission  preparation area to commercial launch providers testing vehicles  designed for orbital and suborbital launches. This site hosted three  FAA-licensed suborbital test flights in 2018. According to a  representative from Mojave, the site generally funds infrastructure  maintenance with rents and user fees, while launch providers build  their own facilities. In July 2018, Mojave also received a $1.4 million  grant through FAA\u2019s Airport Improvement Program for the purpose of  extending an airport taxiway. According to a Mojave representative,  the location of the taxiway extension will be available for hangar  development by both aviation and commercial space users on a first- come, first-serve basis. The project was completed in April 2019.\n\n\t\tPrivate Funds\n\nCommercial launch providers fund infrastructure improvements at existing  launch sites\u2014both co-located with federal ranges and elsewhere\u2014to  ensure the sites are tailored to their unique launch vehicles. For example,  under its agreements to use launch pads at the federal ranges at Cape  Canaveral and Vandenberg Air Force Base, SpaceX representatives told  us they invested \u201chundreds of millions\u201d of dollars in new infrastructure  and infrastructure improvements, such as constructing new liquid fuel  lines and improving launch pad cooling systems. According to SpaceX  representatives, the company made these investments to support the  specific needs of its launch vehicles and the rapid pace at which it is  currently launching. Virgin Galactic and Stratolaunch\u2014two other  commercial launch providers developing suborbital and orbital launch  vehicles, respectively\u2014funded the construction of hangars and testing  facilities for their launch vehicles at Mojave Air and Space Port.\nThree of the seven commercial launch providers that we spoke with  constructed or are currently constructing new launch sites for their  exclusive use. Representatives from two of them said doing so allows  them to schedule launches without having to compete with other launch  providers at existing launch sites. Two of these commercial launch  providers also told us they had not received any government funding for  these sites, while the third told us it had received some support from the  state government where the site is located.\nAs the commercial space transportation industry continues to evolve, it  may lead to more investments in launch sites that are not currently  supporting commercial orbital launches. For example, some commercial  launch providers are developing launch vehicles consisting of a rocket  launched from an airplane in flight, enabling launches from runways  rather than launch pads. This could change how and which entities fund  launch site infrastructure.\n\n\tLaunch Customers in Our Review Consider the Launch Provider\u2019s Capabilities and Price, among Other Factors, When Deciding Where to Launch\n\nCommercial space transportation is a global industry. We identified seven  countries, including the United States, that have launch providers with the  capability to support an orbital launch of a commercial payload (see fig.  4). In 2017, 7 of the 22 FAA-licensed launches conducted in the United  States contained a payload from a non-U.S. launch customer, including  several communications satellite operators and one civilian space  agency, according to FAA. Similarly, some U.S. launch customers we  interviewed said they have used non-U.S. launch providers.\nAccording to representatives of the seven domestic and non-U.S.  companies we interviewed that use launch services for placing their  products into Earth orbit or other trajectories, several factors influence  their selection of a launch provider. Many of these representatives  acknowledged that as part of their business decision, a prerequisite is  that the launch provider\u2019s vehicle and launch site must have the  capabilities to meet the customer\u2019s mission requirements, such as having  the capability to bring the payload to the desired orbit at the desired time.  That capability, in turn, depends on factors such as the lift capacity of a  provider\u2019s launch vehicle\u2014which dictates the maximum weight the  vehicle can carry\u2014and the geographic locations of its launch sites. For  example, launch vehicles operating from sites closer to the equator can  place payloads into certain orbits using less fuel due to Earth\u2019s rotational  velocity. The direction a launch vehicle can travel from a launch site also  affects the orbits into which the vehicle can most efficiently place a  payload. For example, Vandenberg Air Force Base in California\u2014which  allows launch vehicles to travel west over the Pacific Ocean\u2014is more  efficient for certain orbits, while Cape Canaveral\u2014which allows vehicles  to travel east over the Atlantic Ocean\u2014is more efficient for others.\nBeyond selecting a launch provider that has capabilities to meet a launch  customer\u2019s mission requirements, six of the seven launch customers we  spoke with said the price of a launch is a key deciding factor. For  example, a representative from an international satellite operations  company told us that the company achieved significant savings by  procuring a series of launches from its selected provider. According to the  representative, using a different launch provider would have cost almost  twice as much\u2014a price that would have forced the company to delay its  launch plans. According to data published in FAA\u2019s Annual Compendium  of Commercial Space Transportation: 2018, there is wide variation in the  commercial price of launches worldwide, ranging from an estimated $62  million to $178 million per launch. The exact price paid for many  launches is considered proprietary by both launch customers and  commercial launch companies, and is therefore not reported publicly.  Moreover, price can be affected by the size and weight of the payload,  the intended orbit being reached, and other mission-related factors. As a  result, direct comparison of launch prices is difficult.\nIn addition to price, a launch provider\u2019s availability and reliability are also  key factors, according to launch customers we spoke with. Six of the  launch customers we spoke with mentioned availability as a key factor,  which is the launch customer\u2019s ability to reserve a place on the launch  provider\u2019s launch schedule. For example, a representative from a  domestic small satellite operations company said it can be difficult to find  available launches in the United States because the company relies on  sharing launches with larger payloads, and few U.S. launches travel to  the company\u2019s desired orbit. As a result, the company has procured  launch services from Indian and Russian launch providers. Five launch  customers mentioned reliability\u2014generally a launch vehicle\u2019s history of  successful launches\u2014as a key factor, in part due to the financial impact  of a failed launch. For example, a representative from a non-U.S.-based  satellite operations company said that in the event of a failed launch,  insurance would generally cover the cost of the lost payload, but not lost  revenue that would have been generated by the payload in orbit.\nSome launch customers noted that choosing a launch provider is a  complex decision, and that the key factors they consider can be  interdependent. For example, the representative from the non-U.S.-based  satellite operations company said that while a launch provider may offer a  lower price on a less reliable vehicle, the lack of reliability could increase  the customer\u2019s payload insurance costs, effectively increasing the launch  price. A representative from a company seeking to launch into deep  space told us they would only consider a provider that is not only reliable  but also has years of successful operations and a proven business plan.\n\n\tDOT Published a Proposed Rule in April 2019 but Related Rulemaking Activities Affect When Regulatory Changes Will Be in Full Effect\n\n\t\tFAA Accelerated Plans to Streamline Regulations to Respond to a Presidential Directive\n\nAccording to FAA officials, FAA has been considering changes in its  licensing regulations since 2015 and recently has accelerated these  efforts. Dating back to 2015, according to FAA officials, FAA had been  taking an iterative approach by first making \u201cquick wins\u201d\u2014that is, making  administrative changes or straightforward regulatory revisions\u2014with a  long-term goal of fully consolidating and streamlining the regulations over  a period of several years. FAA\u2019s approach changed, however, when in  May 2018, a Presidential Directive was issued that addressed both the  timing and content of FAA\u2019s regulatory updates. The directive contained a  deadline to publish a proposed regulation for public comment by February  1, 2019. It also directed the Secretary of Transportation to replace the  current prescriptive regulations for commercial space launch licensing\u2014in  which a certain technology or action is required\u2014with a regulatory  framework that is performance-based\u2014in which applicants have flexibility  in how they achieve required outcomes, such as a specific level of safety.\nIn response to this directive, DOT published a notice of proposed  rulemaking (NPRM) in April 2019 to solicit comments on a proposed rule  that will incorporate performance-based requirements. According to  FAA officials, they had planned for the NPRM to be published by  February 1st, 2019, consistent with the deadline in the directive, but the  publication was delayed due to the lapse in DOT\u2019s appropriations that  took place in early 2019. A timeline of key actions related to launch  licensing regulation is shown in figure 5 below.\nThe preamble of the NPRM states that the proposed rule intends to  satisfy the requirements of the Presidential Directive, including  consolidating and revising multiple regulatory parts to apply a single set of  licensing and safety regulations across several types of operations and  vehicles, and replacing prescriptive regulations with performance-based  rules. The preamble further states that these changes will give industry  greater flexibility to develop means of compliance that maximize their  business objectives while maintaining public safety.\nThe proposed rule also seeks to address recommendations made by an  Aviation Rulemaking Committee (ARC) that was created in March 2018  as a forum for industry to discuss procedures and requirements for launch  and reentry licensing. For example:\nThe ARC recommended that FAA propose rules to eliminate  potentially duplicative requirements for launches at federal ranges.  Currently, launch providers at federal ranges are subject to FAA\u2019s  requirements in addition to those of the range operator (NASA or the  Air Force), which may be duplicative of each other. The preamble to  the NPRM states that, while FAA has not included language to  eliminate duplicative approvals, FAA would continue to work with the  appropriate agencies to streamline launch and reentry requirements  at ranges and federal facilities.\nThe ARC also recommended more flexibility in licensing such that a  single license structure could accommodate a variety of vehicle types  and launch or re-entry sites. The preamble states that the proposed  rule would, among other actions, eliminate the current limitation  specifying a launch license covers only one launch site.\n\n\t\tCompleting Other Related Rulemaking Activities and Finalizing Guidance Will Affect When Applicants Operate under the Revised Regulation\n\nAs part of the rulemaking process, FAA must comply with a number of  requirements before the final rule can be issued. FAA is statutorily  required to provide a period of time to solicit public comments on the  proposed regulation. FAA must then reasonably respond to public  comments submitted on the NPRM and determine whether any changes  to the proposed rule may be required as a result of the comments. Some  changes made in response to comments would allow AST to proceed  with publication of the final regulation. However, major changes not  contemplated in the NPRM could necessitate a supplemental NPRM,  which could affect the timing of the final regulation\u2019s publication.\nFAA provided 60 days after publication in the Federal Register for the  public comment period. And, while officials told us that they plan to work  toward publishing the final rule by the end of 2019, the schedule was  affected by DOT\u2019s lapse in appropriations. They also noted that the  quantity and content of the public comments and the time and resources  required to respond to them will influence that date. Officials estimate that  the public comments could number in the thousands. Further, there is a  lack of industry consensus in some areas. For example, according to the  cover letter accompanying the final ARC report, the report did not include  specific recommendations that were agreed upon by all participants.  Almost half of the industry stakeholders that participated in the ARC and  provided comments on the ARC final report (8 of 19) did not fully concur  with the report. Industry stakeholders disagreed on issues such as the  requirements for testing flight safety systems, which would be considered  as part of the licensing process. The lack of consensus among ARC  participants suggests that the NPRM may also generate significantly  different perspectives.\nFurthermore, FAA officials emphasized that the NPRM addresses a  highly complex and technical issue, using a wholly revised performance- based regulatory framework, an approach that could affect  implementation timelines. We found in the past that the complexity of the  issues addressed by rulemakings is a major factor influencing the time  needed to issue a regulation.\nFAA officials told us they intend to complete other related activities that  support the rule, such as finalizing guidance documents to provide  transparency and help ensure that licensing applicants understand the  new requirements. Such guidance may, for example, provide examples of  how to comply with the new performance-based requirements. FAA also  intends to implement new administrative tools to help AST review  licensing applications more quickly. Specifically:\nGuidance: FAA released a number of draft guidance documents in  the form of Advisory Circulars with the NPRM. These Advisory  Circulars cover a range of topics, such as providing ways for  applicants to comply with requirements for flight safety analysis and  lightning hazard mitigation, and provide at least one way an applicant  could demonstrate compliance with each performance-based  requirement in the proposed rule. FAA officials told us that they plan  to publish these Advisory Circulars in final form simultaneous with  publishing the final regulation. Through the ARC process, FAA sought  input from industry on the standards that should be used to  demonstrate compliance with the performance-based regulations. In  the long term, however, FAA told us that they are encouraging the  industry to develop voluntary consensus standards that the FAA could  then accept as an acceptable way of demonstrating compliance.\nAdministrative Tools: FAA officials said they are in the early stages  of looking at ways to reduce the administrative burden on FAA and  licensing applicants during the licensing process. For example, FAA  officials told us that in 2019 they will be examining ways to automate  and streamline the licensing process. FAA officials told us that they  would like to implement a system whereby applicants, for the first  time, would submit applications electronically to an FAA-sponsored  system rather than by hard copy or attachments to an email.  According to the preamble of the NPRM, FAA\u2019s proposal would allow  an applicant to submit its application by email as a link to a secure  server, and would remove the requirement that an application be in a  format that cannot be altered. In addition to easing the burden of  developing paper applications, FAA officials told us they envision that  an electronic system would enable both FAA and industry to view the  application during the application process and more easily  communicate about its progress.\n\n\tAST Has Taken Steps to Better Understand Current Workforce Needs, but Understanding of Future Needs Is Limited by a Lack of Information\n\nIn recent years, AST has improved some aspects of how it determines its  workforce needs. Our work on strategic workforce planning underscores  the importance of determining both current and future workforce needs  and identifying potential gaps in employee skills. The improvements made  to date provide AST with greater insight into the optimal number of people  currently needed in certain positions. However, these improvements do  not improve AST\u2019s ability to systematically assess the workforce needs of  its management and support offices, nor does AST project its future  workforce needs. Moreover, AST has yet to collect information on staff  skills and competencies that would enable it to identify potential gaps in  those skills, gaps that further limit AST\u2019s ability to effectively and  efficiently align its available staff resources with current and future  workloads.\n\n\t\tAST Has Improved Measurement and Analysis of Workforce Needs, but Only for Part of Its Office and within Its 2- Year Budget Cycle\n\nTo assist FAA decision makers in understanding and meeting AST\u2019s  staffing needs, AST developed and annually updates a 5-year workforce  plan for its office. The current plan\u2014covering the period from 2018  through 2022\u2014indicates that AST\u2019s approach for workforce planning has  a 5-year time frame. However, the plan discusses immediate workforce  and resource needs in general terms. One of the key principles we  identified in our prior work on effective strategic workforce planning is the  importance of determining the workforce needs that are critical to  achieving an organization\u2019s current and future programmatic goals.  Such a determination of workforce needs should include both the optimal  number of staff needed in specific positions and the required skillsets and  levels of expertise for staff.\nSince 2016, AST has taken several steps to better understand how it  uses its staff resources in carrying out its mission to license and oversee  space launch operations. The majority of AST\u2019s operations budget\u2014 about 75 percent in fiscal year 2018\u2014was used to fund salaries and  related expenses. AST now comprehensively monitors and measures  staff time spent on specific activities and measures and tracks the volume of its work\u2014information it can use to better understand workforce  needs. AST officials told us that these steps facilitate more informed  decision-making about the number of staff needed in specific positions for  the next budget cycle. However, these steps do not provide the  information AST needs to determine the optimal size and composition of  its entire workforce or enable it to project workforce needs sufficiently into  the future.\n\n\t\t\tRevised Timecard System\n\nAST launched a revised timecard system in June 2016 to more  comprehensively account for staff time spent on specific activities.  According to AST officials and our review of relevant documentation,  including a list of revised time codes, the revised system allows staff to  record hours worked on individual tasks, such as launch observations or  consultations with launch companies prior to application submission (i.e.,  pre-application consultation), training, and leave. Time codes were  revised for all AST staff\u2014that is, staff in its five operational divisions,  management office, and two support offices (see fig. 6)\u2014to account for all  major tasks they perform. AST officials told us that the new timecard data,  in combination with workload metrics, can help inform its current  workforce needs.\nFor its five operational divisions, AST officials have developed and  continue to refine a set of workload metrics, which, along with other data,  enable AST to identify the resources that are used to carry out key AST  activities, such as licensing and overseeing launches. These metrics track  the number of work activities (e.g., regulatory waivers issued or safety  inspections conducted) that are ongoing or were completed over a certain  time period. For example, in fiscal year 2018, AST was engaged in pre- application consultations with about 23 commercial launch providers and  was evaluating more than 16 license applications on average per month.  Officials analyze these metrics in combination with timecard data to  determine the number of staff hours and average number of days spent  completing specific activities. For example, between March and August  2017, FAA officials reported that for each ongoing project, staff spent an  average of about 60 hours per month on pre-application consultations.  Officials plan to use the results of this analysis in the fiscal years 2021\u2013 2022 budget cycle to help estimate the number of staff currently needed  in specific positions within its five operational divisions.\nHowever, with regard to its management and two support offices\u2014 which  represent about one-third of AST\u2019s total staff\u2014AST has not yet developed  workload metrics. Staff in AST\u2019s management and support offices are  responsible for overseeing research and development; advising and  assisting other offices on technical matters; coordinating and liaising with  international entities and other federal agencies; as well as performing  other support operations, such as budget and financial planning.\nOfficials told us that although they would like to develop these metrics,  they put the effort on hold because of competing priorities within AST,  such as updating its licensing regulations. Officials said that they had first  focused on better understanding the workforce needs of the operational  divisions, which have responsibility for the majority of AST\u2019s primary  mission areas, such as licensing and overseeing launches. In discussing  this approach AST officials stated that recent budget constraints have  limited their ability to address all of their current identified workforce  needs, which, according to their most recent workforce plan, are in nearly  all areas of their office. As a result, officials said that they use their limited  number of authorized positions to fill their most immediate workforce  needs, typically in the operational divisions.\nHowever, without workload metrics that would allow AST to determine the  number of staff needed for its workload regardless of what office or  division, it is difficult for AST to determine the appropriate number and  composition of staff to most effectively carry out its statutory priorities and  help ensure that it uses its limited resources in the most efficient way. In  addition, AST officials told us that they recognize that past hiring  decisions and balance of workload among staff may not have been fully  aligned with AST\u2019s statutory priorities and that the composition and ratio  of staff may no longer be appropriate given the evolution of the industry  and the revised regulatory structure under way. As a result, officials  stated that in the coming months they intend to take a fresh look at the  organization of the Office of Commercial Space Transportation as a  whole to better balance the needs of the industry with the organizational  requirements. In addition to developing an Office of Spaceports, as  required by the FAA Reauthorization Act of 2018, officials told us that  they will consider re-organizing the offices and divisions, as well as the  workload and staff currently within them.\n\n\t\t\tWorkload Projections\n\nAST also has taken steps to improve its ability to estimate its workload for  a 2-year budget cycle, which, according to AST officials, will help them  determine and justify near-term workforce needs. Specifically, from the  new workload metrics discussed above, AST officials told us they had  identified five key activities that best reflect historical workload trends  and that officials then plan to combine with their assumptions about how  the industry will evolve over the next 2 years. Officials told us that they  plan to use this approach for the first time in the fiscal years 2021\u20132022  budget cycle. In past budget cycles, AST relied primarily on the projected  number of launches to estimate its workload; this number, officials noted,  is the most important factor but resulted in an incomplete reflection of the  five operational divisions\u2019 workload. For example, officials told us that the  workload of its operational divisions encompasses a range of activities  leading up to a launch that would not be captured in its workload  estimates if AST only looked at the number of launches. Now, under their  planned approach, AST officials said that they will better account for the  full range of regulatory activities and the timeline of its licensing process.\nWhile planned improvements to AST\u2019s workload estimates better account  for the full range of AST\u2019s regulatory activities, limiting these estimates to  the 2-year budget cycle reduces AST\u2019s ability to anticipate and respond to  emerging workforce needs. AST recognizes the importance of longer- term workforce planning by developing and annually updating a 5-year  workforce plan. Also, as noted above, key principles for effective strategic  workforce planning emphasize the importance of forward-thinking  planning to help organizations align their workforce to meet future  programmatic goals. According to AST officials, they estimate the  workload for 2 years in part because it is intended to help them identify  and justify workforce needs during the 2-year budget process, as well as  prioritize addressing immediate workforce needs. Officials also said that  substantial uncertainty surrounds longer-term industry forecasts, and  consequently, any assessment of longer-term workforce needs. For  example, they pointed to a number of factors that lead to the  unpredictability of how the industry will evolve, including the variable pace  at which new launch companies progress and the future of the  commercial suborbital launch sector, particularly the nascent space  launch tourism industry. They also noted that a launch vehicle accident or  other risks could affect the industry\u2019s rate of growth.\nIn our prior work, we have discussed some approaches used by other  agencies to help assess future workforce needs when faced with  uncertainties. One approach involves scenario planning, in which a  federal agency operating in a changing environment used a range of  scenarios, each of which represented different future environments that  the agency may face, to help predict how the scope and volume of its  activities might change in each scenario. For AST, such an approach  could entail developing a range of workload projections based on different  industry and regulatory environments that it thinks it may face, along with  associated workforce management strategies to address those  environments.\nAST officials said that they were considering projecting their workload  estimates further into the future and intend to work with FAA\u2019s Office of  Aviation Policy and Plans\u2014the office that helps develop FAA\u2019s 20-year  aerospace industry forecasts\u2014to leverage that office\u2019s forecasting  expertise. However, AST has not established a timeline with milestones  or formally committed to conducting longer-term workload projections.  Longer-term workload projections may be particularly beneficial to AST to  help make well-timed decisions about hiring and training staff and to help  ensure AST has qualified staff available when they are needed. For  example, according to officials, it can take a few years for systems safety  engineers to be trained and have the sufficient experience to lead  projects. Further, AST officials told us that hiring technically qualified  personnel, including positions that require considerable training and  experience to be a fully functioning employee, is challenging. Without an  understanding of its projected workload beyond a budget cycle, AST will  be limited in its ability to effectively and strategically plan for its longer- term workforce needs and take action when the opportunity arises. As  such, AST remains at risk of not having the right number of staff in the  right positions to keep pace with and respond to changes in the  commercial space transportation industry.\n\n\t\tAST Lacks Information to Identify Gaps in Staff Skills and Competencies\n\nOur prior work on strategic workforce planning underscores the  importance for organizations to determine the skills and competencies  that are critical to successfully achieving their current and future missions  and goals. Once the necessary skills and competencies have been  identified, key principles for effective strategic workforce planning call for  an organization to identify\u2014and subsequently develop strategies to  address\u2014gaps between the skills and competencies needed and those  that its workforce has. Those gaps should include both current skills gaps  (i.e., skills that its workforce currently needs but does not possess) and  emerging skills gaps (i.e., skills that its workforce may need in the future  but does not possess). Further, according to federal Standards for  Internal Control, an organization\u2019s management should ensure that the  workforce skills necessary to achieve programmatic goals are continually  assessed. This step is especially important as changes in national  security, technology, budget constraints, long-term fiscal challenges, and  other factors may occur in the environment within which federal agencies  operate.\nAST, however, does not currently collect the information needed for it to  conduct a skills gap analysis. Rather, AST has a basic understanding of  the skills and competencies of its workforce. For example, its current  workforce plan includes the following information on AST\u2019s workforce:\nLevel of education\u2014the percentage and number of employees having  attained bachelor\u2019s, master\u2019s, and doctorate degrees.\nOccupation\u2014the percentage and number of employees in mission- critical occupations (e.g., aerospace engineers).\nAge\u2014the percentage and number of employees by age range.\nTenure\u2014the average number of years employees have been in their  current position and employed by FAA.\nRetirement eligibility\u2014the number of employees who will be eligible to  retire each year during the 5-year period of the staffing plan.\nAST officials acknowledged that the workforce information it currently  collects is insufficient to allow them to systematically identify gaps in  specific staff skills or competencies\u2014such as expertise in flight safety  analysis or launch vehicle propulsion\u2014needed for evaluating certain  launch license applications. Officials told us that they do prioritize filling  positions, through hiring or contracting, that address the organization\u2019s  most immediate needs. However, this strategy focuses on positions, as  opposed to identifying specific skills or competencies within those  positions.\nAST officials told us that they are planning to develop and annually  administer to staff and managers a skills assessment survey that would  collect information about the specific skills and competencies that  individual staff currently possess. Officials told us that the results of the  survey would allow them to assess the current skills of AST\u2019s workforce  and in combination with other information, such as expected attrition and  retirement rates, help identify current and emerging skills gaps. In July  2018, officials told us that they plan to complete the survey and  administer it in time for inclusion in their workforce plan for fiscal years  2019\u20132023, estimated to be issued in April or May 2019. However,  officials subsequently stated that their survey plans have been delayed  for multiple reasons, including DOT\u2019s lapse in appropriations. Accordingly,  as of May 2019, AST had neither developed a draft of the skills  assessment survey, nor established a formal timeline for finalizing it or a  plan for periodically administering the survey. Furthermore, officials told  us that they are currently negotiating with the union\u2019s bargaining unit to  gain approval to administer a survey that does not maintain anonymity to  non-management staff. They said that if they cannot obtain the bargaining  unit\u2019s approval, they will need to develop an alternative plan because they  do not believe that collecting anonymous data on staff skills would allow  them to identify skills gaps for these staff.\nOfficials told us that they also intend to include in the survey skills and  competencies that may be needed in the future. They stated that they did  not know for certain if or how they would identify what those new skills  might be, but that they are considering soliciting feedback from industry  stakeholders, such as through FAA\u2019s Commercial Space Transportation  Advisory Committee, to help identify any future competencies that may be  needed as a result of the evolution in the industry.\nWithout systematic information on specific skills and competencies of its  entire workforce, AST lacks reasonable assurance that its current  workforce possesses the requisite skills and competencies and may not  be able to efficiently identify opportunities to move staff within AST to help  address identified skills gaps. And, ultimately, AST may not be prepared  to make strategic decisions on how to address emerging skills gaps and  align its staff to achieve future programmatic goals, such as identifying  and acquiring potential new skills and competencies needed under a  revised regulatory structure.\n\n\tFAA Is Exploring Technological and Procedural Solutions to More Efficiently Accommodate Commercial Space Operations\n\n\t\tFAA\u2019s Current Approach to Accommodating Launch and Reentry Operations Results in Inefficiencies for Airspace Users and FAA\n\nFAA officials and representatives from the commercial space and aviation  industries we met with agree that FAA\u2019s current approach to  accommodating commercial space launch and reentry operations into the  National Airspace System (NAS) is inefficient. FAA has the  responsibility for ensuring the safe and efficient use of the NAS, a limited  national resource, for and by all users, including commercial and  business airlines and commercial launch providers, among others. To this  end, according to FAA officials and documents describing operational  procedures and risk evaluation, FAA takes measures during a  commercial space operation aimed at preventing fatalities, injuries, and  property damage, and ensuring that nothing interferes with the launch  vehicle\u2019s operations.\nFAA\u2019s current approach, as described in documents that explain how FAA  mitigates risk to people and property during a space launch, is to close  the airspace around a commercial launch operation\u2014in some cases  hundreds of square miles for several hours\u2014to other airspace users,  such as commercial airlines. Prior to launch, FAA establishes the size  and duration of the airspace closure, also known as an aircraft hazard  area, and, days ahead, notifies potentially affected airspace users about  the upcoming closure. FAA calculates the size and boundaries of the  aircraft hazard area generally based on the risk to life and property posed  by a launch vehicle\u2019s expected trajectory, as well as potential trajectories  in the case of a vehicle\u2019s failure and the subsequent paths of falling  debris. The duration of the closure is generally dependent on the period  of time in which the launch or reentry is expected to occur\u2014known as a  launch window\u2014which varies by the type of launch or reentry vehicle,  among other things. The aircraft hazard area extends from sea level up to  unlimited height, and generally does not change in size or shape during  the entirety of the launch window (see fig. 7).\nAccording to FAA officials, the designated aircraft hazard areas are larger  and remain in effect longer than may actually be needed to ensure public  safety. For example, according to FAA officials and launch  documentation, to protect public safety, the duration of an airspace  closure is always longer than the launch window. In fact, in some cases,  the airspace closure may be scheduled for more than 3 hours, which is  substantially longer than the time typically required for space launch and  reentry operations from Cape Canaveral (about 30 minutes). FAA officials  explained that they are not able to monitor or respond to dynamic  circumstances associated with space launch vehicles in the NAS in real- time. As a result, FAA closes the airspace for when and where it is  potentially\u2014rather than actually\u2014hazardous.\nFAA officials told us that the agency\u2019s approach to date for  accommodating space launch operations into the NAS has helped ensure  public safety during launches. For instance, during fiscal years 1989  through 2018, FAA reported that it licensed 357 launches or reentries,  and in this time there were no fatalities, serious injuries, or significant  property damage to the uninvolved public. However, according to FAA  officials and research, FAA\u2019s approach creates inefficiencies in how the  airspace around launch operations is used\u2014such as causing flight delays  for commercial airlines. FAA officials and commercial space industry  representatives said it also makes scheduling these operations more  challenging for launch providers, and affects FAA\u2019s operational efficiency.  The effects on each of these groups are described below.\nCommercial airlines. FAA has estimated that, in fiscal year 2017,  about 1,200 commercial airline flights were directly affected\u2014that is,  rerouted or delayed\u2014around 22 space launch operations, resulting in  an estimated 39,000 additional miles flown. The majority of these  miles were flown in proximity to Cape Canaveral in Florida, which  hosted the majority of domestic launches that year. FAA further  estimated that, of the 15 space launches from January to October  2018 around Florida where airspace tends to be busy due to the high  volume of commercial airline traffic along the East Coast, an average  of 60 aircraft per launch were directly affected. For all commercial  launch sites, FAA estimates that the number of directly affected  aircraft ranged up to 153 for an individual launch with an average of  fewer than 10 aircraft per launch outside of the Florida area.  According to FAA officials, these estimates are based on historical  data on the number of aircraft that typically fly through that area at the  time of the airspace closure. Because launches can be delayed by  hours or days for reasons such as unforeseen weather conditions or  technological issues, airlines and other affected airspace users may  face challenges when attempting to plan around a launch to avoid  flight reroutings and delays. Representatives of a major airline trade  association told us that the spread of launch activity beyond Cape  Canaveral, as well as the development of new launch vehicles, has  heightened their concerns about inefficiencies in how airspace around  launch operations is used.\nLaunch providers. The size and duration of aircraft hazard areas can  make it difficult for FAA to find time slots to accommodate commercial  space launches because of its responsibility to ensure the efficient  use of the national airspace, a limited resource. All the launch  providers we spoke with that had conducted launches at U.S.  commercial launch sites said they have been able to find suitable  launch windows that met with FAA approval. However, one launch  provider told us of an occasion when FAA had denied the originally  requested launch date and time because it fell within a time of  unusually congested airspace. In addition, more than half of the  launch providers told us that they anticipate challenges obtaining  approval for a requested launch date or time in the future.\nFAA. In addition to effects on NAS users, FAA officials told us that  FAA itself also experiences operational inefficiencies in managing air  traffic during launches. This inefficiency is, in part, because FAA\u2019s  current policies and procedures were developed for aircraft operations  and either have not yet been fully adapted for commercial space  operations, or a relevant policy or process is missing altogether. For  example, FAA\u2019s current procedures for launch providers and FAA to  follow when they request, schedule, and conduct launches require  different FAA facilities to negotiate unique agreements for each  separately licensed operation or activity. This process can be time- consuming. For example, one launch provider told us that it took 1\u00bd  years to finalize minor changes to a letter of agreement. As we  discuss later, FAA is taking steps to standardize these letters.\n\n\t\tFAA Aims to Increase Efficiency of Launch Integration through New Technologies, Procedures, and Industry Coordination\n\nAccording to FAA documentation and officials we spoke to, FAA aims in  the long term to increase utilization of the NAS by integrating launch  vehicle operations into the NAS with other users, rather than its current  approach of segregating launch and reentry operations through airspace  closures. Specifically in 2011, FAA began identifying actions it could take  and developing plans to address challenges associated with closing  portions of the airspace during launch operations. It did so in light of the  increasing frequency of commercial space launch and reentry operations  and the spread of operations to new locations. According to FAA officials,  the actions and plans continue to evolve as FAA learns more and reacts  to anticipated changes in the commercial space transportation industry.\nFurther, officials told us that FAA\u2019s vision for full integration of commercial  space launch operations cannot be defined by a single solution or an end  goal because the demands of these operations on the NAS are constantly  changing. Consequently, FAA officials said that full integration of  commercial space operations into the NAS will reflect a collection of  visions or approaches that improve predictability and efficiency while  maintaining safety. For example, according to FAA documents and  officials we spoke to, FAA\u2019s approach for experimental launches will  always be to close the airspace around the launch to other users. In  contrast, FAA may develop standards for some launch vehicles, such as  hybrid launch vehicles with repeated successful operations, which specify  a safe distance and duration of separation in the airspace.\nFAA has two key internal documents to help guide the development and  implementation of its actions as it seeks to better integrate commercial  space launches and reentry operations into the NAS and reduce FAA\u2019s  operational inefficiencies.\nA concept of operations: FAA officials expect to finalize a concept of  operations in 2019, which will provide a long-term, high-level vision for  FAA\u2019s efforts to efficiently integrate commercial space operations.  According to FAA officials, it will describe, among other things, FAA\u2019s  existing approach to and associated shortfalls in accommodating  commercial space operations, as well as proposed tools, policies, and  procedures to address those shortfalls. According to FAA officials, it  also will inform FAA\u2019s current and future efforts to identify needs for  new or modified technologies, tools, procedures, and policies.\nRoadmap for the Integration of Space Operations in the National  Airspace System (Roadmap): This document serves as a planning  and tracking tool for FAA\u2019s operational arm\u2014the Air Traffic  Organization\u2014to use as it seeks to more efficiently manage the  airspace during commercial space launch and reentry operations  while maintaining safety. It identifies, prioritizes, and tracks the  specific changes needed to begin addressing the related shortfalls  that FAA officials told us will be discussed in the concept of  operations. According to the Roadmap, some of the activities are  exploratory, and FAA expects that new activities will be identified and  added to the development schedule as FAA continues to work with  stakeholders to determine how best to manage the airspace, and  conceptualizes and develops key technologies. The first Roadmap  was released in November 2016, and, according to FAA officials, FAA  plans to update it annually. FAA officials told us they expect to release  the third and most recent version in 2019. The activities it identifies  are divided into: short-range (to have been completed in calendar  year 2018); mid-range (through 2022); and long-range (through 2023  and beyond) time frames, during which FAA plans to develop and  incorporate new technologies, policies, processes, and regulations.\nIn completing the actions needed to implement the approaches outlined in  the Roadmap, FAA officials told us that they are actively working with  FAA\u2019s Performance Analysis Directorate to develop a set of metrics to  measure the progress and effectiveness of its actions. Officials also  highlighted that because the demands of commercial space operations on  the NAS are constantly changing, as noted above, there is no defined end  goal. To this end, the purpose of any metrics officials develop will be to  help determine if their actions are helping increase efficiency while  maintaining safety, not measure their progress toward a goal of full  airspace integration. FAA officials told us they plan to have a set of  metrics completed by early 2019. Some of these metrics will likely use  currently available data, such as the number of aircraft rerouted and how  many additional miles rerouted aircraft fly, while others are still being  identified. Further, FAA officials told us that FAA coordinates actions  related to commercial space integration through an interagency working  group established in 2015. The group meets monthly and members  include officials from across FAA lines of business, as well as other  federal agencies, including the Department of Defense.\nThe Roadmap shows that FAA\u2019s actions to better integrate commercial  space launch and reentry operations into the NAS include, but are not  limited to: developing new technologies; updating and assessing needed changes to policies, procedures, and  coordinating with aviation- and space-industry stakeholders.\n\n\t\t\tTechnology\n\nFAA\u2019s technology efforts are related primarily to collecting real-time data  on a launch vehicle\u2019s position and path, automatically generating the  required aircraft hazard area, and integrating those data into the existing  structure of the air traffic control systems. As a result, FAA officials said  that FAA may ultimately be able to dynamically change the size and  duration of the aircraft hazard area in some types of launches, thereby  reducing the amount and duration of airspace closed to other users.\nIn the short term, FAA is assessing how existing air-traffic control  technologies and procedures could be used to help reduce the effects of  launches on other NAS users. According to an FAA official, for example,  four initiatives currently used to manage air traffic during other airspace  constraints could potentially be used during space launch operations.  One initiative would enable air traffic controllers to strategically control the  number of flights approaching the aircraft hazard area so that if these  flights were in the hazard area at the time of a launch vehicle failure,  controllers could still clear the area quickly enough to protect public  safety. This FAA official told us that if they decide to pursue these  initiatives, they hope to complete some of the necessary steps to do so by  summer 2019.\nFor potential use in the longer-term, FAA is piloting prototypes of two key  technologies by running them alongside existing air-traffic control systems  during selected launches, thereby testing their capabilities without their  being fully operational.\nThe Space Data Integrator (SDI) is designed to receive real-time data  on launch vehicle position and movement and display real-time  aircraft hazard areas to enable improved situational awareness. FAA  officials told us that, as FAA is assessing approaches to shift from  static to more dynamic hazard area calculation capability, initial SDI  capabilities will likely be deployed in advance of more integrated and  improved real-time hazard area generation capabilities. In addition,  FAA officials told us that they are exploring alternative acquisition  strategies that could enable partial system implementation for the  technology by 2022. Because FAA has not made a final investment  decision, the date of system-wide implementation of SDI is unknown.\nAccording to FAA officials, the Hazard Risk Assessment and  Management (HRAM) tool, if pursued, is intended to help  automatically communicate SDI data to air traffic control systems and,  in the future, to present air traffic controllers with information that  would allow them to decide how to best manage the airspace.  Officials also said that HRAM involves modifying an existing air traffic  management tool, currently has very limited capabilities, and is still  only under consideration as a possible approach. Over the next year  these officials plan to work on some of the tool\u2019s components, assess  what types of data are valuable to air traffic controllers, and determine  whether to continue developing this technology or consider alternative  technologies.\n\n\t\t\tPolicies, Procedures, and Regulations\n\nAccording to the Roadmap, FAA has identified policies and standard  operating procedures that need to be created or updated to enable it to  better manage the operating environment during space launches. Actions  taken to date include, for example: developing training materials to inform air traffic personnel about  commercial space operations in the NAS; developing a high-level strategy for integrated space vehicle  operations going forward; and  standardizing the terms of reference for commercial space operations  for use by FAA, NASA, and DOD.\nIn addition, according to the Roadmap, FAA plans to standardize some  letters of agreement\u2014the document specifying procedures that a launch  provider and FAA use to request, schedule, and conduct launches.  Officials said they hope to issue documentation of these changes by  September 2019. FAA officials told us that these changes will result in  letter of agreement templates for use by FAA. FAA officials said FAA also  plans to continue reviewing its regulations, policies, and procedures to  identify other areas that need updating or entirely new language.\n\n\t\t\tIndustry Coordination\n\nFAA is taking steps to foster coordination between commercial space and  aviation industries to help develop and increase buy-in for new and  revised approaches to improve the efficiency of the national airspace for  all users. Most notably, in November 2017, FAA chartered an aviation  rulemaking committee to examine the issue of equitable airspace access  among various users. Committee members include a mix of commercial  space transportation and aviation industry representatives. Topics being  addressed include identifying potential criteria that FAA may use when  considering competing user priorities for airspace, as well as potential  tools that could help mitigate the effects on other airspace users during  launch operations. FAA officials told us that the committee anticipates  issuing a report and recommendations to FAA in April 2019, and some  members of the committee highlighted that the meetings benefited their  understanding of other users\u2019 unique needs; economic benefits; and  experiences with regard to integrating space operations.\nAlso, an FAA official said the agency has sponsored four \u201cIndustry Days\u201d  events since 2014 for the commercial space industry. At each event,  multiple FAA offices discussed their roles and responsibilities associated  with space launches and answered questions from industry. For the first  time, at its 2018 event, FAA invited aviation industry representatives to  encourage continued dialogue between the commercial space and  aviation industries. FAA officials also noted that they solicited ideas on  priority actions from participants and are currently reviewing those ideas  to help inform their next steps. Separately, FAA expanded the  membership of its Commercial Space Transportation Advisory Committee  to include representatives of the aviation industry in addition to the  commercial space transportation industry to foster further dialogue  between these groups.\n\n\tConclusions\n\nThe commercial space transportation industry provides a service that has  become essential to many aspects of government, business, and society.  The capability to launch payloads into space enables national security  missions, mobile communications, and scientific research, among many  other applications. AST\u2019s role as a regulator of commercial space launch  providers is fundamental to the continued safe growth of the industry.  With the anticipated growth and potential organizational restructuring of  AST, as well as the evolution of the commercial space transportation  industry, it is vital that AST ensure that the size, composition, and skills of  its workforce are aligned with its projected workload, based on anticipated  future mission and programmatic goals. AST\u2019s workforce plan states that  AST needs additional staff in nearly all areas. However, current budget  and long-term fiscal pressures heighten the need for agencies to  strategically manage their workforce, a process that includes making  strategic decisions about how and where to prioritize limited resources.  AST does not have a complete understanding of its current and projected  workload, nor does it know the number of staff and types of staff skills  and competencies necessary to meet those workload needs. Without this  information, AST risks managing its workforce reactively to a rapidly  changing environment instead of strategically planning for the future.\n\n\tRecommendations for Executive Action\n\nWe are making the following four recommendations to FAA:  1.  The Associate Administrator of AST should develop workload metrics  that encompass the whole office and that would allow AST to  determine an appropriate workforce size and composition.  (Recommendation 1)  2.  The Associate Administrator of AST should establish a timeline for  finalizing workload projections that extend beyond the 2-year budget  cycle and that include an approach for addressing uncertainty.  (Recommendation 2)  3.  The Associate Administrator of AST should ensure that its skills  assessment survey collects information from staff on skills and  competencies in those areas that are both currently needed and may  be needed in the future. (Recommendation 3)  4.  The Associate Administrator of AST should develop and document a  plan for periodically assessing whether staff possess the necessary  skills and competencies to achieve programmatic goals, such as  annually administering a skills assessment survey. (Recommendation  4)\n\n\tAgency Comments\n\nWe provided a draft of this product to DOT and NASA for review and  comment. In its written comments reproduced in appendix III, DOT  concurred with our recommendations. DOT and NASA also provided  technical comments that we incorporated, as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, DOT, NASA, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff members have any questions about this report, please  contact me at 202-512-2834 or KrauseH@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 IV.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives for this report were to: (1) describe how the construction of  infrastructure at selected U.S. commercial launch sites has been funded;  (2) describe key factors that influence where orbital launches occur; (3)  summarize actions the Federal Aviation Administration (FAA) has taken  to streamline its commercial space launch regulations; (4) examine how  well-positioned FAA\u2019s Office of Commercial Space Transportation (AST)  is to determine its current and future workforce needs; and (5) identify  actions FAA is taking to better integrate commercial space launch  operations into the National Airspace System (NAS).\nThe scope of this report focuses on topics related to FAA\u2019s oversight of  the U.S. commercial space transportation industry. Therefore, the report  does not discuss launch indemnification and the safety of human  spaceflight, or examine international outer space treaty obligations.\nFor all objectives, we reviewed relevant statutes, regulations, and  directives governing FAA\u2019s oversight of the U.S. commercial space  transportation industry. In addition, we interviewed AST officials and  conducted semi-structured interviews with all seven commercial space  launch providers that had conducted an FAA-licensed launch operation  as of January 2018.\nTo describe how infrastructure at selected commercial launch sites has  been funded, we first identified, through review of FAA information on  launch site operator licenses and launch licenses, all U.S. commercial  launch sites\u2014those that have an FAA site operator license to conduct  commercial launch operations and those that may not have a site  operator license but have hosted FAA-licensed launch operations. From  these 15 identified U.S. commercial launch sites, we selected 9 for review  because the launch site has hosted FAA-licensed launch operations  between January 1, 2015, and December 31, 2018. We reviewed relevant  publicly-available documents, such as launch sites\u2019 business plans, user  guides, and other planning documents related to U.S. commercial launch  sites. We interviewed the eight launch site operators of the nine selected  launch sites. The perspectives of the selected launch site operators are  not generalizable to those of all launch site operators; however, the  information obtained provides a balanced and informed perspective on  the topics discussed.\nIn addition, we interviewed members of the Commercial Spaceflight  Federation\u2019s working group on commercial launch sites. See table 2 for a  full list of entities interviewed.\nTo describe key factors influencing where orbital launches occur, we  reviewed data from FAA\u2019s 2018 Annual Compendium of Commercial  Space Transportation as well as FAA data on recent launches within the  United States. We interviewed representatives from seven launch  customers, selected based on the following criteria:\nThe company is not a government entity.\nThe company\u2019s payload was commercial, as documented in FAA\u2019s  commercial space launch compendiums.\nThe customer had multiple launches in 2016 and 2017, with at least  one of those launches occurring in 2017.\nThe customer has had at least one launch in the United States that  was licensed by FAA.\nAmong the companies that met these criteria, we chose our final  selections to have a mix of the following characteristics: domestic and non-U.S. companies,  those that had launched exclusively at one launch site versus multiple  launch sites, and  those that are involved in traditional space activities, such as satellite  communications companies and remote-sensing companies and  those that are pursuing non-traditional space activities, such as  asteroid mining and satellite servicing.\nThe perspectives of the selected launch customers are not generalizable  to those of all launch customers; however, the information obtained  provides a balanced and informed perspective on the topics discussed.\nTo summarize actions FAA is taking to streamline its commercial space  launch regulations, we reviewed relevant statutes, regulations, and FAA  guidance. We also reviewed FAA\u2019s documents related to the rulemaking,  including its schedule of rulemaking activities and the Streamlined Launch  and Reentry Licensing Requirements notice of proposed rulemaking  issued in April 2019, and reviewed and analyzed the Streamlined Launch  and Reentry Licensing Requirements Aviation Rulemaking Committee  final report. We interviewed FAA officials and representatives of the  Commercial Spaceflight Federation about FAA\u2019s ongoing and planned  actions related to the rulemaking. Finally, we reviewed the minutes from  the June 2018 meeting and attended the October 2018 meeting of the  Commercial Space Transportation Advisory Committee, in which FAA  officials and industry representatives discussed FAA\u2019s actions on the  rulemaking.\nTo examine how well-positioned AST is to make strategic decisions about  its current and future workforce needs, we reviewed FAA documents,  including its budget justification and workforce plans from the past 3  years. We also reviewed FAA\u2019s year-end reports on its workload metrics  from fiscal years 2017 and 2018, and portions of FAA\u2019s preliminary labor  analyses using its revised timecard data and workload metrics. We  identified key principles on effective strategic workforce planning from our  previous work to use as criteria to assess FAA\u2019s actions. We interviewed  AST officials about their plans and actions to improve its workforce  planning and assessed those actions against the identified key principles  for effective strategic workforce planning. We focused our analysis on  those principles that are related to determining current and future  workforce needs.\nTo identify actions FAA is taking to better integrate commercial space  launch operations into the National Airspace System, we reviewed and  analyzed relevant FAA documents, including a document that discusses  FAA\u2019s vision for integrating commercial space transportation operations  into the NAS and the Roadmap for the Integration of Space Operations in  the National Airspace System. In addition, we interviewed FAA officials  within AST, Air Traffic Organization, and the Office of NextGen regarding  their ongoing and planned actions for improving the integration of  commercial space transportation operations into the NAS. We also  interviewed industry stakeholders to obtain perspectives on this topic.\nThese stakeholders included representatives from Airlines for America, a  trade association for the U.S. airline industry, and from launch providers.  Finally, we attended an FAA-sponsored industry conference in October  2018 on FAA\u2019s airspace integration efforts.\nWe conducted this performance audit from July 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.\n\nAppendix II: Selected Characteristics and Capabilities of U.S. Commercial Launch Sites\n\nTable 3 shows selected characteristics and capabilities of U.S.  commercial launch sites included in our review of infrastructure funding.  Table 4 includes other U.S. commercial launch sites that did not have  FAA-licensed activity from 2015 to 2018 and were not included in our  review of infrastructure funding.\n\nAppendix III: Comments from the Department of Transportation\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, Heather Halliwell (Assistant  Director); Gretchen Snoey (Analyst-in-Charge); Namita Bhatia Sabharwal;  Giny Cheong; Gerald L. Dillingham; Camilo Flores; Joshua Garties;  Richard Hung; Delwen Jones; Elke Kolodinski; Maureen Luna Long;  Malika Rice; Travis Schwartz; and Andrew Stavisky made key  contributions to this report.","output":null}
{"id":"gao_GAO-19-337","pid":"gao_GAO-19-337_0","input":"\tBackground\n\n\t\tEXIM Financing Product Types\n\nAs described in figure 1, to support U.S. exports, EXIM offers four major  types of financing products: direct loans, loan guarantees, export-credit  insurance, and working capital guarantees. Regardless of type, EXIM\u2019s  financing products generally have one of 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.\nAs we reported in July 2018, for all financing types, EXIM currently  conducts a number of preauthorization and postauthorization antifraud  activities. See the examples shown in figure 2.\n\n\t\tFraud Risk Management\n\nFraud and \u201cfraud risk\u201d are distinct concepts. Fraud\u2014obtaining something  of value through willful misrepresentation\u2014can be challenging to detect  and adjudicate 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 (e.g., financial pressures) 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 adjudicated.\nAccording to the Standards for Internal Control in the Federal  Government, executive-branch agency managers are responsible for  managing fraud risks and implementing practices for combating those  risks. Specifically, federal internal control standards call for agency  management officials to assess the internal and external risks (including  fraud 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.\nThe leading practices in the Fraud Risk Framework call for agencies to  identify inherent fraud risks affecting the program, examine the suitability  of existing fraud controls, and then prioritize mitigating \u201cresidual\u201d fraud  risks\u2014that is, risks remaining after antifraud controls are adopted.  Specifically, according to the assess component of the Fraud Risk  Framework, managers who effectively assess fraud risks attempt to fully  consider the specific fraud risks the agency or program faces, analyze the  potential likelihood and impact of fraud schemes, and then ultimately  document prioritized fraud risks. Moreover, managers can use the fraud  risk assessment process to determine the extent to which controls may  no longer be relevant or cost-effective. Leading practices that are  consistent with this component include  conducting quantitative or qualitative fraud risk assessments at  regular intervals, or both, of the likelihood and impact of inherent risks  on the program\u2019s objectives, and determining the agency\u2019s risk  tolerance for the inherent fraud risks;  identifying specific sources for gathering information about fraud risks,  including information on fraud schemes that are reflected in  adjudicated cases of fraud; examining the suitability of existing fraud controls for preventing fraud  and mitigating fraud risks identified; and documenting in the program\u2019s fraud risk profile the analysis of the  types of inherent fraud risks assessed, their perceived likelihood and  impact, managers\u2019 risk tolerance, and the prioritization of the inherent  fraud risks and any residual fraud risks.\nAs we reported in July 2018, the Fraud Reduction and Data Analytics Act  of 2015 requires the Office of Management and Budget (OMB) to  establish guidelines that incorporate the leading practices of GAO\u2019s 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 risk management and internal controls established  under the OMB guidelines. OMB published guidance under OMB  Circular A-123 in 2016 affirming that federal managers should adhere to  the leading practices identified in the Fraud Risk Framework. As we  reported in December 2018, EXIM identifies itself as subject to the act,  and, as such, follows it. The Fraud Risk Framework is also aligned with  federal internal control standards, specifically Principle 8 (\u201cAssess Fraud  Risk\u201d) of the Green Book.\nFederal internal control standards also state that excessive pressures,  such as financial pressures (e.g., delinquent federal debt), can pose a  fraud risk factor to agency programs as these pressures can provide an  incentive or motive to commit fraud. Although the existence of financial  pressure alone does not necessarily indicate that fraud exists or will  occur, financial pressure is often present when fraud does occur.\n\n\t\tDelinquent Federal Debt and EXIM Financing Programs\n\nApplicants for EXIM programs who have delinquent federal debt may not  be able to obtain certain types of financing until they resolve their debts.  Specifically, under 31 U.S.C. \u00a7 3720B, applicants who are delinquent on  federal nontax debts may not receive federal financial assistance,  including such assistance provided by EXIM, until they satisfactorily  resolve the delinquency (e.g., pay in full or negotiate a new repayment  plan). However, 31 U.S.C. \u00a7 3720B also provides that an agency head  may waive this restriction. Additionally, OMB\u2019s Circular No. A-129,  Policies for Federal Credit Programs and Non-Tax Receivables,  prescribes to agencies the policies, procedures, and standards for  screening program participants to determine whether they are delinquent  on any federal debt when applying to federal credit programs.\n\n\tEXIM Reported Antifraud Controls for Mitigating Fraud Risks Identified and a Fraud Risk Assessment That Considered Those Risks Closed Cases of Fraud Generally Involve Four Fraud Risk Factors\n\nWe identified fraud risks\u2014generally involving four overall fraud risk  factors\u2014by examining EXIM-associated court cases of fraud adjudicated  from calendar year 2012 through calendar year 2017. We then  communicated these fraud risks to EXIM, and EXIM officials reported  examples of existing controls it uses to help detect and mitigate these  fraud risks. EXIM also provided documentation reflecting its efforts to  conduct a fraud risk assessment that considered various fraud risks  affecting its major financing product lines, including fraud risks we  identified during this review.\nWe identified fraud risks\u2014generally involving four overall fraud risk  factors\u2014by examining 44 EXIM-associated closed court cases of fraud  adjudicated from calendar year 2012 through calendar year 2017.  Specifically, the various fraud risks we identified overall involved one or  more of the fraud risk factors illustrated in figure 3 below: opportunities to falsify self-reported information on applications or  financial pressures that potentially incentivized participants or  employees to commit fraud; opportunities to circumvent or take advantage of EXIM or lender opportunities to circumvent the intent of EXIM\u2019s programs by diverting  loan proceeds and other EXIM financing for personal use or benefit  instead of for the export of U.S. goods.\nSee appendix I for a summary of these 44 cases we reviewed.\nThese 44 cases illustrate the financial risks associated with fraud against  EXIM. Federal and state courts combined have ordered restitution of  $82.4 million in the 44 adjudicated cases, but much of that restitution has  not yet been paid. For example, as of October 2018, the total remaining  unpaid restitution amount is $71.6 million, or over 80 percent. In one fraud  case we reviewed, which was adjudicated in 2013, a federal court  ordered a convicted U.S. exporter to pay EXIM $8.6 million in restitution  for the fraud that he committed in a loan guarantee program. Since 2013,  the participant has paid back $25.00 of this amount.\n\n\t\tEXIM Reported Antifraud Controls for Mitigating Fraud Risks Identified in Closed Cases\n\nEXIM reported having existing antifraud controls to mitigate the fraud  risks we identified. Specifically, we communicated to EXIM the fraud risks  we identified from our review of the 44 adjudicated cases. In response,  EXIM officials described general antifraud controls the agency currently  uses to help detect and mitigate each of the fraud risks we identified. The  officials stated that EXIM has experience with all the fraud risks we  identified and stated that they were generally confident that EXIM\u2019s  antifraud controls were appropriate for mitigating the risks. EXIM officials  consider many of the fraud risks that we identified as risks that could  impact any of the agency\u2019s financing programs (i.e., credit insurance, loan  guarantees, direct loans, or working capital guarantee programs).\nEXIM officials provided examples of the general antifraud controls that  they said EXIM uses to mitigate the fraud risks we identified across all  agency financing products. According to EXIM officials and as illustrated  in figure 4 below, these controls include: fraud prevention and detection  procedures; due diligence standards; and a list of \u201cred flags\u201d that EXIM  staff should be aware of and is used to identify indicators of potential  fraud and corruption that may appear on EXIM transaction documents.  Officials said that their confidence in the controls stems from seeing a  reduction in fraud cases since the early 2000s after these antifraud  controls were put in place.\nEXIM officials clarified that this confidence does not stem from completing  a comprehensive fraud risk assessment of fraud risks impacting all of its  financing products consistent with the leading practices in the Fraud Risk  Framework.\n\n\t\tEXIM\u2019s Fraud Risk Assessment Considered Fraud Risks Identified\n\nEXIM also provided documentation reflecting its efforts to conduct a fraud  risk assessment that considered various fraud risks affecting its major  financing product lines, including fraud risks we identified during this  review. EXIM officials said that the fraud risks we identified were  generally already known to EXIM as they relate to or are very similar to  those fraud risk factors contained in EXIM\u2019s list of red flags. EXIM officials  acknowledged that assessing its fraud risks and evaluating the agency\u2019s  existing antifraud controls may indicate opportunities for EXIM to further  adapt EXIM\u2019s antifraud controls to mitigate any residual fraud risks within  its tolerance level. Such assessments can further help EXIM mitigate  fraud and the resulting effects across all product lines before they occur,  which includes the length of time it can take for EXIM to fully recover from  restitution losses after fraud has been perpetrated, as illustrated in the 44  cases presented in appendix I.\n\n\tEXIM Has Procedures for Detecting Delinquent Federal Debt Owed by Applicants and Participants but Is Missing Additional Opportunities to Use Readily Available SAM Data to Do So\n\nEXIM has procedures for detecting delinquent federal debt owed by EXIM  applicants and participants. However, EXIM is missing additional  opportunities to use readily available SAM data to identify ineligible  applicants or participants that may have delinquent federal debt, and to  use such data to determine eligibility or assess repayment fraud risk.\n\n\t\tEXIM Has Procedures to Detect Delinquent Federal Debt Owed by Applicants and Participants\n\nEXIM has procedures to detect delinquent federal debt owed by  applicants and participants that include reviewing their credit reports and  requiring applicants to certify that they and other participants do not have  such delinquent debt. Under 31 U.S.C. \u00a7 3720B, applicants who are  delinquent on federal nontax debts may not receive federal financial  assistance, including direct loans, loan guarantees, or loan insurance until  they satisfactorily resolve the delinquency (e.g., pay in full or negotiate a  new repayment plan). 31 U.S.C. \u00a7 3720B does not address delinquent  federal tax debt; however, such delinquent federal debt may also pose a  fraud risk or repayment fraud risk to EXIM\u2019s financing programs.  Additionally, OMB Circular No. A-129 prescribes to agencies the policies,  procedures, and standards for screening program participants to  determine whether they are delinquent on any federal debt when applying  to federal credit programs, including  recommending that agencies ask applicants to self-certify on their  applications that they have no delinquencies;  requiring agencies to obtain and review applicants\u2019 credit reports; and encouraging agencies to use appropriate databases, such as the  Department of the Treasury\u2019s Do Not Pay portal sources to identify  delinquent federal debtors during the application screening process.\nAccording to EXIM officials, the agency employs procedures to ensure its  policies and processes meet these requirements for applicable financing  products. Specifically, and as illustrated in figure 5 below, these  procedures include reviewing the following:\nSelf-certifications: EXIM applications for relevant financing programs  include a self-certification by the applicant that the applicant does not  have delinquent federal debt. However, as we have reported in the  past, relying on applicants to self-report adverse actions on their  applications, instead of verifying such information, could cause an  agency to miss opportunities to develop a more-complete picture of  the applicants.\nCredit reports: EXIM obtains credit reports for applicants and  participants in some financing products. In particular, EXIM\u2019s  internal Loan Guarantee and Credit Insurance Manual of 2015  communicates the 31 U.S.C. \u00a7 3720B restriction to loan officers and  instructs them to review the borrower\u2019s credit report to check whether  the borrower is delinquent on any federal debt. If the loan officer finds  that the credit report reflects such delinquent federal debt, the manual  further instructs the loan officer to advise and request guidance from  EXIM\u2019s Trade Finance Director and the Office of General Counsel.  However, as we have reported in the past, some delinquent federal  tax debt may not appear on the credit reports unless the Internal  Revenue Service has filed a lien on the delinquent federal tax debt.\nWorld Check: EXIM, through the assistance of a third-party vendor,  also makes use of some data sources listed in the Do Not Pay  sources as part of its prescreening application process and possibly  during postauthorization risk-based reviews. Specifically, EXIM  officials told us that EXIM uses Thomson Reuters\u2019s World Check  database to identify federal debts owed by applicants as part of its  Character, Reputational, and Transaction Integrity (CRTI) review  process that is managed by EXIM\u2019s Credit Review and Compliance  Division. The World Check database currently checks over 20  different watch lists and other databases, including lists of entities  excluded from doing business with the federal government maintained  in GSA\u2019s SAM. According to EXIM, other sources in the World  Check database that reveal such federal debts could also lead  indirectly to the discovery of delinquent federal debt. However, as  discussed below, this check of SAM does not involve a check of  delinquent federal debt. This CRTI review process is conducted  during the underwriting (i.e., the preauthorization review) phase and  may occur throughout the life cycle of transactions, such as during  EXIM\u2019s postauthorization risk-based reviews. EXIM officials told us  that, as part of this process, loan officers or other EXIM officials send  the names of applicants to EXIM librarians, who perform a manual  search of the World Check database, review results, and return  relevant results to EXIM officials for their consideration. EXIM officials  noted that this process can be challenging, particularly when librarians  perform searches on applicants with common names, which produce  many results that are not useful.\nEXIM officials told us that EXIM does not track information on instances in  which an applicant\u2019s delinquent federal debt prevents a transaction from  moving forward or prevents a specific applicant\u2019s participation in a  transaction. Consequently, EXIM officials told us that EXIM has no  records of this happening. However as described in greater detail below,  EXIM does not make use of readily available SAM data to identify  delinquent federal debts owed by applicants and participants, which could  limit its ability to detect instances in which applicants and participants owe  these debts.\n\n\t\tEXIM Is Missing Additional Opportunities to Use Readily Available SAM Data to Detect Applicants and Participants That May Have Delinquent Federal Debt\n\nEXIM is missing additional opportunities to use readily available SAM  registration data to identify potentially ineligible applicants and  participants that may have delinquent federal debt or may otherwise  pose a repayment fraud risk. Specifically, while EXIM employs  procedures that may reveal applicants\u2019 delinquent federal debts, as  described above, EXIM\u2019s procedures for identifying applicants and  participants with delinquent federal debt do not include a search of a  specific data element in the SAM database that can be used to detect  delinquent federal debtors. The data element we refer to here is the Debt  Subject to Offset flag, which may reflect both nontax and tax delinquent  federal debts owed. As mentioned previously, SAM is a government-wide  information system that federal agencies can use to obtain information on  businesses that do business with the federal government, including an  entity\u2019s Debt Subject to Offset status. The Debt Subject to Offset data  element in SAM indicates that the entity potentially has a delinquent  federal debt subject to collection under the Treasury Offset Program.\nThe GSA officials who maintain the SAM database told us that all federal  agencies have the legal authority to use the SAM registration database  free of charge. Specifically, all federal agencies can use this database to  manually search by an entity\u2019s name, Data Universal Numbering System  number, or Tax Identification Number for the purpose of detecting  whether the entity potentially has delinquent federal debt, such as by  identifying whether an entity\u2019s SAM record contains the Debt Subject to  Offset flag. Further, GSA officials also told us that all federal agencies  are able to request batches of SAM registration data free of charge, for  the purpose of matching these data to agency data by entities\u2019 names,  Data Universal Numbering System numbers, or Tax Identification Numbers for the purpose of identifying entities that may have the Debt  Subject to Offset flag in SAM, among other available data.\nPerforming data analytics, such as batch matching, on available data is  a leading practice cited in the Fraud Risk Framework that we have  reported can help improve agency efforts to combat fraud. In particular,  we have found in prior work that using available data to verify that EXIM\u2019s  transaction applicants are not delinquent on federal debt can help EXIM  assure applicant eligibility is consistent with federal guidance, provide  reasonable assurance of repayment, and help prevent fraud. We have  also found that using available data to independently verify self-reported  delinquent federal debt information, such as self-reported information on  delinquent federal tax debt owed, is a key detection and monitoring  component of fraud prevention.\nWe identified additional opportunities for EXIM to manually use SAM\u2019s  online database or data-matching approaches to identify applicants or  participants with potential delinquent federal debt. Specifically, we  registered in SAM to conduct several manual searches (by entities\u2019 Data  Universal Numbering System numbers, Tax Identification Numbers, and  names) and confirmed that it can be used to conduct such searches  without incurring any external costs charged by GSA. For example, we  conducted two Data Universal Numbering System number searches and  found two active EXIM participants appearing in SAM\u2019s registration  database with a Debt Subject to Offset flag. We also obtained historical  SAM data from GSA and EXIM transaction data and confirmed that these data sources could be used to identify EXIM applicants and participants  with potentially delinquent federal debt in a batch match (rather than  manual, case-by-case searches). As illustrated in our batch-matching  results below, we found this data-matching process can provide an  opportunity to match these data sets using the Tax Identification Numbers  and Data Universal Numbering System numbers for the entities in both  data sets.\nOur batch-matching analyses indicated that, from calendar year 2014  through calendar year 2016, EXIM authorized transactions that had an  aggregate authorization value of approximately $34.3 billion. Of that  amount, we found the following:\nAn aggregate authorization value of about $1.7 billion was associated  with 32 U.S.-based companies that had a delinquent federal debt  indicator in SAM in the same month that these transactions were  authorized. The transactions mostly involved U.S.-based applicants  and exporters. As mentioned above, associated parties we reviewed  included not only the applicant, but also participants involved,  including the borrower, buyer, and exporter, which may or may not be  the applicant. While the results of this analysis do not mean that EXIM  should have suspended these transactions in accordance with 31  U.S.C. \u00a7 3720B, these results nonetheless indicate that the data in  SAM that indicate delinquent federal debt could provide an  opportunity for EXIM to identify important indicators of applicants or  other transaction participants with potential delinquent federal debt  when determining their program eligibility and assessing any related  fraud risks or repayment risks they present during EXIM\u2019s  preauthorization CRTI reviews. Because the Debt Subject to Offset  flag may indicate either nontax debts or tax debts, it is possible that  some of these entities owed delinquent federal nontax debts that are  applicable under 31 U.S.C. \u00a7 3720B, indicating EXIM should have  considered suspending these transactions. However, it is also  possible that some of these entities owed delinquent federal tax debts  that are not applicable under 31 U.S.C. \u00a7 3720B, but that may pose a  fraud risk or repayment risk nonetheless. By using the Debt Subject to  Offset flag as an indicator of these delinquent federal debts and  gathering additional information on the specific facts and  circumstances of each case, EXIM would be better positioned to  assess the relevant compliance, fraud, and repayment risks an  applicant\u2019s or participant\u2019s delinquent federal debt may pose.\nAn aggregate authorization value of about $4.1 billion was associated  with 97 U.S.-based companies that had a delinquent federal debt  indicator in SAM during the transaction maturity period (i.e., after the  month they were approved, but before the transactions\u2019 maturity  date). These transactions mostly involved U.S.-based applicants  and exporters. As mentioned above, associated parties we reviewed  included not only the applicant, but also participants involved,  including the borrower, buyer, and exporter, which may or may not be  the applicant. 31 U.S.C. \u00a7 3720B may prevent applicants with federal  financial debts from obtaining loans, guarantees, and insurance; thus,  it does not apply to any delinquent federal debt accrued after loan  approval. However, we looked at potential delinquent debt accrued  after approval because delinquent debt accrued after approval and  during the transaction maturity period might affect EXIM\u2019s view of a  financing product\u2019s repayment risk. Further, EXIM already conducts  similar postauthorization monitoring to identify such risks through its  use of World Check as part of its CRTI process described above.  Thus, these results nonetheless illustrate that EXIM can use SAM  data during EXIM\u2019s postauthorization CRTI reviews to identify  transaction participants with potential delinquent federal debt and  determine the extent to which they may pose a repayment fraud risk.\nPrior to sharing our results with EXIM, EXIM officials told us that they  have access to SAM entity registration records, but they believe  searching the SAM registration database is a time-consuming process  that should be reserved for rare circumstances. Further, EXIM officials  also told us that using the SAM registration database to identify  applicants or participants that have the Debt Subject to Offset flag in SAM  would yield few results because the vast majority of their financing  program participants are foreign-based entities, and thus would not also  be contractors for the U.S. government and registered in SAM.  However, we identified many U.S.-based entities that had a delinquent  federal debt indicator either in the month a transaction was approved, or  during the transaction\u2019s maturity period, by searching in the SAM  database and analyzing SAM data for EXIM applicant and participants, as  described above. Further, it is not clear whether performing manual  searches or batch matches with SAM data to identify delinquent federal  debtors would be any more time-consuming than EXIM\u2019s current  procedures for doing so, which include manual searches of World Check  and obtaining and reviewing credit reports, as described above.\nWhen we met with EXIM officials to communicate our batch-matching  results above, they expressed concern that these results could imply that  EXIM is doing business with applicants or participants with delinquent  federal debt. They then indicated that they were interested in obtaining  SAM registration data so that they could determine whether it would be  feasible for them to perform the same type of analysis that we performed.  In a subsequent meeting, EXIM officials informed us that they were also  able to obtain current SAM registration data, analyze the SAM data  against active EXIM participant data, and find dozens of active EXIM  participants with the Debt Subject to Offset flag in SAM.\nThe results of our analyses, as well as EXIM\u2019s own experience with the  SAM data, suggest EXIM also has an additional and practical opportunity  to incorporate searches of SAM entity registration data as part of its  postapproval monitoring of transactions to enhance its monitoring of and  response to risks in ongoing transactions. Standards for Internal Control  in the Federal Government state that management should use quality  data to achieve agency objectives. For example, this could include  agencies obtaining relevant operational, financial, or compliance-related  data from reliable internal and external sources in a timely manner based  on identified information requirements, and then using such data to make  informed decisions and evaluate performance in achieving program  objectives and addressing risks.\nWithout also pursuing available debt data in SAM\u2019s registration database,  as an additional layer of due diligence, to identify applicants with  delinquent federal debt during underwriting and compliance reviews,  EXIM is potentially forgoing practical opportunities to use such data when  determining applicants\u2019 program eligibility and to adopt leading practices  for managing repayment fraud risks across EXIM\u2019s financing programs. In  particular, such available SAM data can provide opportunities to  verify independently the applicants\u2019 self-certification of delinquent  federal debts they owe and assess whether the applicants may have  misrepresented their delinquent federal debt status on their  applications, which is a fraud risk in the application process; detect potential delinquent federal debts that are not apparent in credit make informed eligibility decisions during preauthorization CRTI  reviews and assess repayment fraud risk during postauthorization  CRTI reviews.\n\n\tConclusions\n\nEXIM assumes the credit and country risks that the private sector is  unable or unwilling to accept, including the risk of losses due to fraud.  EXIM\u2019s financing products face various fraud risks, and EXIM has begun  to take steps to consider these fraud risks as part of a full fraud risk  assessment, as we recommended in July 2018. However, because it  remains unclear whether EXIM\u2019s actions fully respond to the  recommendations of our July 2018 report, we will continue to monitor  EXIM\u2019s progress in fully assessing its fraud risks. EXIM also employs  procedures to detect delinquent federal debt owed by EXIM applicants  and participants. However, EXIM is missing opportunities to use readily  available SAM data to identify applicants or participants that may  misrepresent their delinquent federal debt status and pose a repayment  fraud risk to EXIM financing programs. Applicants or participants with  delinquent federal debt could be one of many repayment fraud risks that  could indicate an increased risk of nonrepayment and incentives to  commit fraud against EXIM. EXIM officials believe searching SAM is a  time-consuming process that would yield few results. However, manually  searching SAM\u2019s online registration database for the purpose of  determining whether an applicant or participant may have a Debt Subject  to Offset flag may not be any more time-consuming than what EXIM  currently performs through its preauthorization or postauthorization CRTI  reviews. Nevertheless, we demonstrate in this report the practicality and  illustrate results of using such data through multiple approaches, such as  batch matching, without incurring any external costs charged by GSA. By  assessing the practicality of searching SAM data, EXIM may determine  that this source of data provides an additional tool for combating fraud.  Implementing these antifraud activities could further help EXIM verify  program eligibility, identify repayment fraud risk, and provide EXIM with  reasonable assurance that it is effectively and efficiently carrying out its  mission of supporting U.S. jobs and the export of U.S. goods.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to EXIM:  EXIM\u2019s chief operating officer should direct EXIM\u2019s Credit Review and  Compliance Division to assess and document the practicality of  incorporating into its preauthorization CRTI reviews searches of data  elements in SAM that indicate delinquent federal debts owed by  applicants, and, if practical, implement relevant approaches\u2014such as  manual searches or batch matching. (Recommendation 1)\nEXIM\u2019s chief operating officer should direct EXIM\u2019s Credit Review and  Compliance Division to assess and document the practicality of  incorporating into its postauthorization CRTI reviews searches of data  elements in SAM that indicate delinquent federal debts owed by  applicants and participants, and, if practical, implement relevant  approaches\u2014such as manual searches or batch matching.  (Recommendation 2)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to EXIM for review and comment. In its  written comments, reproduced in appendix II, EXIM concurred with our  recommendations and stated that it will move forward to implement them.  EXIM also provided technical comments, which we incorporated as  appropriate.\nIn its written comments, EXIM noted a number of points it referred to as  \u201ckey concerns.\u201d These points do not disagree with our findings,  conclusions, or recommendations. Specifically, EXIM stated that the 44  cases we reviewed involved transactions that were approved between  2002 and 2012 and that it will continue to work with the Department of  Justice to collect restitution payments. Additionally, EXIM stated that it is  in full compliance with 31 U.S.C. \u00a7 3720B and the related provisions of  OMB Circular A-129 guidance regarding restrictions on doing business  with delinquent federal debtors. However, assessing EXIM\u2019s compliance  with 31 U.S.C. \u00a7 3720B or OMB Circular A-129 was outside the scope of  this report.\nFinally, for the purpose of implementing our recommendations, EXIM  requested the data pertaining to the U.S.-based companies that we found  to have a delinquent federal debt indicator in SAM. To identify those  companies, we used (1) an extract of data that EXIM provided to us, and  (2) GSA SAM data, which EXIM told us it can and has already obtained  directly from GSA. We will provide EXIM with a copy of the EXIM data it  requested. However, we believe EXIM will be better positioned to assess  the practicality of checking the SAM delinquent federal debt flag by  continuing to obtain the SAM data directly from GSA.\nWe are sending copies of this report to the appropriate congressional  committees, the president and board chairman of EXIM, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf 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 III.\n\nAppendix I: Summary of GAO Review of 44 Cases Adjudicated from Calendar Years 2012 through 2017\n\nThe table below summarizes the information we reviewed during our  review of the 44 Export-Import Bank of the United States (EXIM)- associated cases of alleged fraud that we were able to identify and  determine were adjudicated from calendar years 2012 through 2017.  Such information includes financing product types, dates adjudicated,  fraud schemes, fraud risk factors involved, and the amount of EXIM  restitution owed and paid to EXIM. As mentioned earlier, the fraud risks  we identified in these 44 cases related to one or more of the following four  fraud risk factors: (1) opportunities to falsify self-reported information on  applications or transaction documents, (2) financial pressures that  potentially incentivized participants or employees to commit fraud, (3)  opportunities to circumvent or take advantage of EXIM or lender controls,  or (4) opportunities to circumvent the intent of EXIM\u2019s financing programs  by diverting loan proceeds and other EXIM financing for personal use or  benefit instead of for the export of U.S. goods.\n\nAppendix II: Comments from the Export- Import Bank of the United States\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Jonathon Oldmixon (Assistant  Director), Flavio Martinez (Analyst in Charge), Mason Calhoun, Marcus  Corbin, Anthony Costulas, Adam Cowles, David Dornisch, Heather  Dunahoo, Paulissa Earl, Colin Fallon, Dennis Fauber, Jennifer Felder,  Dragan Matic, Maria McMullen, Christopher H. Schmitt, Albert Sim,  Sabrina Streagle, and Steve Westley made key contributions to this  report.","output":null}
{"id":"gao_GAO-19-512","pid":"gao_GAO-19-512_0","input":"\tBackground\n\nIn the early 2000s, the Navy conceived of a new small surface combatant  concept known as LCS. This ship was intended to offer the Navy an  affordable, flexible platform that would be able to swap out surface  warfare, anti-submarine warfare, or mine countermeasure mission  packages to provide for one of those mission needs. As we found in  multiple reports, the Navy\u2019s vision for LCS evolved significantly over time  in response to diminished capability expectations and significant cost and  schedule growth. In 2014, the Secretary of Defense directed the Navy to  evaluate alternatives to LCS, citing survivability and lethality concerns.  This represented the beginning of the Navy\u2019s pursuit of a solution to  address LCS shortcomings and the evolving threat environment  acknowledged by the department.\nThe Navy initially envisioned quickly fielding a frigate\u2014referred to as the  FF program\u2014based on a minor modified LCS design. The ship was  expected to provide a more lethal and survivable multi-mission ship  capable of simultaneous surface and anti-submarine warfare, with a  planned contract award for the lead ship in 2018. In 2016, we found that  the Navy\u2019s planned upgrades for FF did not significantly improve certain  survivability areas and lacked capabilities that were prioritized by fleet  operators, such as the ship\u2019s range of travel without refueling. Then, in  April 2017 we found the Navy\u2019s aggressive FF acquisition schedule  increased risk to the government because it included a commitment to  buy ships in advance of adequate knowledge. In May 2017, the Navy  announced it was revising its frigate plans and began pursuing FFG(X).\n\n\t\tShipbuilding Best Practices\n\nIn 2009, we identified commercial shipbuilding best practices that could  be adapted for use by the Navy. We found that successful shipbuilding  programs have sound business cases built on attaining critical levels of  knowledge at key points in the shipbuilding process before significant  investments are made, as shown in figure 1.\nRegardless of the differences between Navy and commercial  shipbuilding, knowledge attainment is crucial to success. Executable  business cases use realistic cost and schedule targets to meet  performance and quality expectations by balancing inherent uncertainties  in acquisition programs. A solid business case provides for the resources  necessary to mitigate challenges, such as immature technologies and  design requirements. The greater the potential for challenges to occur,  the more time and money should be factored into the business case to  address them. The Navy has previously agreed, in principle, that  knowledge should be attained prior to key milestones to better ensure  ships are built to established cost, schedule, quality, and performance  standards.\n\n\t\tNavy Shipbuilding Acquisition Framework\n\nIn general, the Department of Defense (DOD) acquires new weapon  systems, such as Navy surface combatants, through a management  process known as the Defense Acquisition System. Under this system,  programs typically complete a series of milestone reviews and other key  decision points that authorize entry into a new acquisition phase. To  execute shipbuilding acquisition programs, the Navy uses the acquisition  processes included in the DOD Instruction 5000 series, as well as  acquisition instructions established by the Secretary of the Navy. The  Navy\u2019s guidance supports a seven-gate review process intended to  ensure that requirements align with acquisition plans, and to improve  collaboration among stakeholders. Figure 2 provides an overview of the  notional framework for Navy shipbuilding acquisition programs described  by the DOD and Navy guidance.\nThis acquisition framework includes decision reviews and milestones at  key junctures in the acquisition cycle. The Milestone Decision Authority is  the individual responsible for determining what events and documentation  requirements will apply to an acquisition program, as well as providing  approval for a program to proceed to the next acquisition phase. The  acquisition framework and Milestone Decision Authority\u2019s purpose is to  support careful assessment of a program\u2019s readiness to proceed to the  next stage of acquisition activities.\nThe gates and milestones that will be included in an acquisition program\u2019s  schedule can be customized based on its circumstances and needs. We  have previously found that shipbuilding programs typically have different  decision points than other DOD weapon systems. For example,  Milestone B for ship programs usually occurs after development of ship  specifications and system diagrams is well under way and is typically  aligned with the decision to authorize the start of detail design. While  Milestone C generally represents the decision to start production for  weapon systems, several of the Navy\u2019s more recent shipbuilding  programs either do not include a Milestone C review or changed the  sequencing of the review to occur after delivery of the lead ship.  Programs can receive approval to tailor the requirements for information  that must be developed to support this process and to have the decision- making authority delegated to other individuals for acquisition decisions  and approvals.\n\n\tNavy Expects That FFG(X) Requirements Will Provide a More Capable Small Surface Combatant, but at Increased Cost\n\nThe Navy expects that its current plans for FFG(X) will result in a small  surface combatant with considerable capability improvements compared  to LCS. To achieve this increased capability, the Navy is committing to  construct a larger, more expensive ship than LCS. To help refine FFG(X)  requirements and identify opportunities for cost savings, the Navy used a  conceptual design phase, in which it awarded $75 million in contracts to  industry.\n\n\t\tFFG(X) Requirements Reflect Limitations of LCS and Evolution in Capability Needs\n\nThe Navy\u2019s FFG(X) requirements represent the department\u2019s recognition  of its need for a more capable small surface combatant and the limitations  of LCS. For LCS and its mission packages, the Navy has devoted nearly  $28 billion (constant fiscal year 2018 dollars) to develop and buy a ship  that has fallen far short of demonstrating it can meet the minimum level of  capability defined at the beginning of the program. Specifically, LCS was  designed with reduced survivability requirements as compared to other  surface combatants. Over time the Navy lowered several survivability and  lethality requirements further and removed some design features\u2014 making the ships less survivable in their expected threat environments  and less lethal than initially planned. As shown in figure 3, the Navy  arrived at its FFG(X) plans after spending several years developing and  evaluating a variety of inputs to address problems with LCS and emerging  capability needs.\nThe Small Surface Combatant Task Force study report maintained the  Navy\u2019s need for 52 small surface combatants, which was revalidated in  the Navy\u2019s 2016 Force Structure Assessment. In recognition of LCS\u2019s  shortcomings, the Navy significantly reduced the total number of LCS,  and began planning for the new frigate based on minor modifications to  an LCS design\u2014referred to as FF\u2014to fulfill the 52-ship need.\nWhile the FF program was developing its acquisition plans and moving  toward a contract award for the lead ship scheduled for 2018, the  maritime operating environments continued to rapidly evolve, becoming  increasingly complex and contested. In recognition of this, the Chief of  Naval Operations directed the Navy to conduct another study, increasing  air defense and survivability beyond the FF baseline. In response, the  Navy convened a Frigate Requirements Evaluation Team from January to  June 2017. The purpose of this team was to build upon FF requirements  by analyzing options for air defense and vulnerability upgrades to help  determine top-level mission requirements that would yield a more capable  frigate. The results of this review led the Navy to cancel its FF acquisition  plans and focus on meeting increased requirements through a new  FFG(X) Guided Missile Frigate program.\nBoth the FF and FFG(X) requirements reflect the 2015 Small Surface  Combatant Task Force report findings that identified a need for increased  capabilities for small surface combatants to address evolving threats. As  we reported in June 2016, an FF based on a minor modified LCS only  partially fulfilled the small surface combatant capabilities that the task  force identified as most valued by the fleet. In particular, FF  requirements supported a multi-mission ship with some of the fleet\u2019s  highest priority mission capabilities, such as surface and anti-submarine  warfare, but did not provide air warfare capability. For FFG(X), the Navy  maintained the FF requirements and added local air defense as a  capability. Table 1 outlines the requirements evolution that the Navy  undertook to support a more lethal and capable small surface combatant.\n\n\t\tRequirements Drive Higher FFG(X) Cost than for Previous Small Surface Combatants\n\nTo achieve the increased capability expectations for FFG(X), the Navy  committed to acquiring a larger, more expensive ship than LCS or the  previously planned FF. Figure 4 provides average shipbuilding cost  estimates for the three different ships, with costs shown in same-year  dollars for comparison.\nAlthough the FFG(X) requirements have been finalized, the Navy plans to  make final cost and capability tradeoffs through the process of evaluating  proposed designs before selecting which one will be built.\n\n\t\tThe Navy Used Conceptual Design Phase to Better Understand Ship Requirements and Associated Costs\n\nIn an effort to focus on the relationship between requirements and cost,  the Navy undertook a conceptual design phase for FFG(X), which  enabled industry to inform requirements and identify opportunities for cost  savings. In February 2018, the Navy competitively-awarded FFG(X)  conceptual design contracts valued at nearly $15 million each to five  industry teams. These 16-month contracts were intended to enable  industry to mature parent ship designs\u2014designs for FFG(X) that are  based on ships have been built and demonstrated at sea\u2014and help  refine technical and operational program requirements.\nThe purpose of the conceptual design phase has parallels with the  purpose of pre-contractual negotiations in commercial shipbuilding. As we  previously have reported, these pre-contractual practices minimize ship  buyer risk prior to awarding construction contracts by developing the ship  concept and specifications based on negotiations between the ship buyer  and the shipyard. The practices include specifying the expected  performance and the major equipment on the ship. As part of these  activities, commercial shipbuilders and ship buyers analyze one or more  ship concepts to identify areas of potential risk and either mitigate these  risks or remove the risky elements from the ship before signing a  contract. Figure 5 provides an overview of the industry teams and  shipyards participating in the FFG(X) conceptual design.\nEach industry team performed ship development, ship design, workforce  planning, and shipyard improvement planning, among other activities, in  support of FFG(X) requirements refinement and cost reduction efforts.  Industry teams updated the Navy regularly on their design progress and  technical approach to fulfill requirements through monthly technical  exchange meetings and two design review meetings. Navy officials stated  that these meetings were intended to provide information to support the  program\u2019s Preliminary Design Review in May 2019 and mitigate risk prior  to the Navy\u2019s release of its request for proposal in June 2019 for the  FFG(X) detail design and construction competition.\nOur prior work on shipbuilding best practices emphasizes the importance  of having a full understanding of the effort needed to design and construct  a ship before awarding a contract for ship construction in order to reduce  cost and schedule risk. Navy and industry officials stated that the  conceptual design phase facilitated dialogue and information sharing that  helped ensure FFG(X) requirements were more fully understood by  industry and the government. Specifically, industry officials noted that  communication and activities during conceptual design improved their  understanding of the impetus for specific Navy requirements, allowing  industry the opportunity to get clarification on the intent of some  requirements, propose less costly alternatives, and get government  feedback on the proposed alternatives. It also improved their  understanding of the linkages between FFG(X)\u2019s approved capability  requirements and system specifications. In particular, industry officials  told us that one-on-one opportunities with the Navy aided knowledge  sharing and provided them with a means to ask questions without  concern that disclosing such information could jeopardize their  competitive position. They emphasized that in other cases where the  request for proposals process is their primary means for communicating  with the Navy (as opposed to having a conceptual design phase),  submitting questions about requirements or system specifications can be  challenging because those inquiries are available to the public. As a  consequence, contractors may opt to infer more about the intent of  requirements to avoid compromising their competitive interests.\nThe conceptual design phase included a formal cost savings effort, with  the Navy seeking proposals internally and from industry participants to  reduce cost through requirement and system specification refinement. To  support this effort, Navy officials stated they established a Frigate  Affordability Board to review potential cost reduction measures submitted  by both contractors and government that responded directly to Navy  requirements and specifications. Navy officials said the Board\u2014co- chaired by the Program Executive Office for Unmanned and Small  Combatants and the Naval Sea System Command\u2019s Naval Systems  Engineering Directorate, as well as the Chief of Naval Operations\u2019  Surface Warfare Directorate\u2014assessed the potential cost and capability  trade-offs of these proposed changes to requirements, and accepted or  declined them. Before going to the Board, relevant Navy subject matter  experts reviewed the technical and requirements implications of cost  reduction measures. The program office subsequently worked with Navy  engineering and requirements officials to balance cost with capabilities. If  the program office, Navy engineers, and requirements officials could not  reach agreement on the appropriate cost and capability mix, then their  different positions were presented to the Board.\nFor cost reduction initiatives submitted by industry, the Navy provided  feedback on the Board\u2019s decision, and incorporated fully or partially  accepted cost reduction initiatives into the FFG(X) system specifications.  Navy officials said they informed all industry teams of any changes to the  specifications on a monthly basis. Navy officials also stated that industry  submitted about 350 cost reduction ideas, with roughly 60 percent  partially or fully accepted by the Navy. They estimated $86 million in  savings per ship (constant year 2018 dollars) based on changes made in  response to the cost reduction measures submitted by industry or  government-initiated cost savings measures influenced by engagement  with industry.\n\n\tStreamlined Acquisition Approach Accelerates Planned FFG(X) Schedule, but Reduces Knowledge Available for Key Program Decisions\n\nIn an effort to accelerate the time between FFG(X) acquisition planning  and the fielding of ships, the Navy streamlined the program\u2019s acquisition  approach and leveraged knowledge obtained from industry during the  conceptual design phase. While the program may benefit from the  streamlining efforts, the acquisition approach for FFG(X) required the  Navy to submit its budget request for lead ship construction before the  program had a comprehensive understanding of the potential ship  designs and cost. Recent Navy policy changes have created some  uncertainty for Navy cost estimation activities by altering roles and  responsibilities within the Navy for completing component cost positions  and independent cost assessments.\n\n\t\tNavy Streamlined FFG(X) Program Acquisition Approach in an Effort to Accelerate Fielding of Ships\n\nAs permitted by DOD and Navy policy, the Navy has streamlined the  FFG(X) acquisition approach to move from planning to ship delivery and  fielding quicker than in a more traditional acquisition program. The  accelerated schedule reflects the Navy\u2019s desire to field a minimum of 52  small surface combatants, which the Navy\u2019s long-range shipbuilding plan  states will be achieved by fiscal year 2034. Navy officials stated that the  significant amount of knowledge that already existed to inform the  program\u2019s early activities and the use of parent designs helped enable the  streamlined approach for FFG(X). For example, Navy officials cited previous efforts by the Small Surface Combatant Task Force and the  Frigate Requirements Evaluation Team to determine appropriate ship  requirements, as well as activities performed in support of the FF frigate  acquisition plan that immediately preceded the shift to FFG(X). The Navy  also leveraged industry input received from a request for information in  2017 to understand cost drivers and the potential shipbuilders\u2019 abilities to  meet top level FFG(X) requirements and incorporate Navy-defined  equipment into ship designs. Figure 6 provides a high-level schedule of  key activities for the program.\nTo support its decision to pursue an accelerated acquisition schedule, the  Navy used the previously discussed conceptual design phase as well as  its decisions to limit FFG(X) to parent ship designs and minimize  technology development. Navy officials noted the use of parent designs is  allowing the program to proceed at a much faster pace from early  assessment of capability options to detail design and construction  contract award. They added that the parent designs provided a higher- fidelity design baseline from which the conceptual design industry teams  incorporated Navy systems and other requirements. Use of parent  designs is consistent with our best practices work in shipbuilding, which  has found that commercial shipbuilders use previous ship designs to the  extent possible. Doing so can reduce technical, schedule, and cost risk  in building a ship as compared to a \u201cclean sheet\u201d new ship design.  FFG(X) program officials noted the latter approach can take up to 9 years  to complete an analysis of alternatives and move through the acquisition  process to construction contract award.\nNavy officials said the program also used opportunities available as an  Acquisition Category (ACAT) 1B program to shorten the approval timeline  for specific acquisition requirements. For an ACAT 1B program, the  head of the DOD component is generally the Milestone Decision Authority  but, as appropriate, may delegate approval authorities to lower level  offices under its jurisdiction. In the case of FFG(X), the Assistant  Secretary for the Navy for Research, Development, and Acquisition  serving as the Milestone Decision Authority delegated specific approval  authorities to the Program Executive Office for Unmanned and Small  Combatants. These approval authorities applied to the program\u2019s life  cycle sustainment plan, independent logistics assessment, program  protection plan, and a compliance schedule addressing environmental  considerations.\nThe Navy also took advantage of opportunities to alter or waive some  significant early acquisition activities. For example, the Milestone  Decision Authority waived the formal Analysis of Alternatives and  Affordability Analysis, decided not to conduct a Milestone A review, and  deferred the full \u201cShould-Cost\u201d Analysis to later in the acquisition  process. Table 2 defines the purpose of these DOD acquisition program  elements and provides an overview of the Navy\u2019s actions related to them.\nAs the first major milestone for many major acquisition programs,  Milestone A is a review by the Milestone Decision Authority of key  program documents that support the materiel solution and risk reduction.  We have previously found that DOD officials place a high value on the  information developed for some of these documents, including the  Analysis of Alternatives, Affordability Analysis, and Should-Cost  Analysis. The Navy\u2019s decision to not conduct a Milestone A review also  eliminated a formal opportunity to bring the broad set of FFG(X)  stakeholders within the Navy and the Office of the Secretary of Defense  together at a relatively early stage to assess the program\u2019s acquisition  strategy and affordability and feasibility, as well as technical, cost, and  schedule risks. Further, it reduced the FFG(X) acquisition approach to a  single milestone decision point\u2014Milestone B\u2014for the broader group of  DOD stakeholders to evaluate program progress and readiness to  proceed to the detail design and construction contract award planned in  July 2020.\nIn the absence of Milestone A, the Navy\u2019s Gate 3 review for FFG(X)  provided an opportunity to communicate the program\u2019s progress toward  developing requirements and acquisition expectations, albeit to a more  limited audience than typically would participate in a Milestone A. In  particular, the Navy used Gate 3 to discuss top-level requirements  changes and receive capability development document approval from the  Chief of Naval Operations. It also included cost discussion related to  FFG(X) affordability within the overall Navy shipbuilding portfolio. The  gate\u2019s participants included officials from the Navy and the Office of Cost  Assessment and Program Evaluation (CAPE) within the Office of the  Secretary of Defense.\nThe Navy\u2019s Gate 4 conducted in February 2019 focused on a review of  the FFG(X) system specification before the draft detail design and  construction request for proposal release. Gate 4 documentation for  FFG(X) indicates that participants were limited to stakeholders from the  office of the Deputy Assistant Secretary of the Navy for Ships; Naval Sea  Systems Command Cost and Design Directorates; Program Executive  Office for Unmanned and Small Combatants; the FFG(X) program office;  and the Chief of Naval Operations Surface Warfare Directorate. This  excludes a number of key stakeholders that Navy guidance calls on to  attend and certify gate reviews, such as the Assistant Secretary of the  Navy (Financial Management and Comptroller) and the testing  community. As a result, the Navy would not have received insight from  several key stakeholders during the Gate 4 review for acquisition  activities, such as the program life cycle cost estimate development and  release of the draft request for proposal. These activities are generally relevant to this gate review, as Navy guidance notes program affordability  as a focus and the Navy\u2019s streamlining documentation indicates that the  gate was focused on reviewing the FFG(X) system specification before  releasing the draft request for proposal. Navy officials noted that  stakeholders have regularly received insight into FFG(X) activities  through other prior program reviews and will have additional opportunities  to review program costs and sustainment plans leading up to Milestone B.\nWe also found that some key stakeholders did not provide formal  approval for the initial FFG(X) life cycle sustainment plan that was  approved in March 2019. Specifically, only FFG(X) program officials and  the Program Executive Officer for Unmanned and Small Combatants\u2014 the delegated approval authority\u2014signed the plan. However, as stated in  DOD guidance, representatives from the relevant sustainment command  and the Program Executive Office for Integrated Warfare Systems are key  stakeholders that should provide their signed concurrence when  approving the life cycle sustainment plan. The FFG(X) life cycle  sustainment plan is a key document outlining the Navy\u2019s plans to address  the program\u2019s sustainment needs and costs, as typically around 70  percent of a weapon system program\u2019s total cost is in the sustainment  phase after procurement. Navy officials stated that the plan has been  reviewed by the independent logistics assessment team members that  are evaluating the FFG(X) program\u2019s integrated product support activities,  and noted that the Program Executive Office for Integrated Warfare  Systems has separate life cycle sustainment plans for government  furnished equipment systems included in the FFG(X) design. Navy  officials also said that FFG(X) sustainment plans would be reviewed by  stakeholders as part of Gate 5 and the Milestone B independent logistics  assessment.\n\n\t\tBudget Request for FFG(X) Lead Ship Preceded the Completion of Key Cost Estimation Activities That Should Inform Funding Decisions\n\nThe FFG(X) acquisition approach required the Navy to submit its nearly  $1.3 billion budget request for lead ship construction before the program  had established a comprehensive understanding of the potential ship  designs and estimated cost for the program. Our shipbuilding and  acquisition best practices call for resource decisions to be timed to align  with the availability of requisite cost, schedule, and technical knowledge  in order to inform key program decisions. Navy officials stated that they  had sufficient knowledge to inform key program decisions based on cost  estimation and conceptual design efforts that had previously been  completed. Navy officials said this included development of an FFG(X)  cost estimate by November 2018 to support a realistic budget request for  the lead ship. However, at the time of the Navy\u2019s fiscal year 2020 budget  request to fund detail design and the lead ship, the Navy had not  completed its component cost position, which will formalize the life cycle  cost expectations for FFG(X). Further, CAPE had not completed the  independent cost estimate for the program. The GAO Cost Estimating  and Assessment Guide says that comparing the component cost position  with an independent cost estimate to validate methodologies produce  similar results reinforces the credibility of a cost estimate.\nIn addition to key cost estimating best practices that had not been  completed, the Navy had not received final design review information  from the industry teams participating in the conceptual design phase  before requesting lead ship funds from Congress. Figure 7 reflects the  budget request timeline for the FFG(X) detail design and lead ship  contract award, as well as notable cost and design-related program  activities that were planned to be completed after the request.\nThe considerable cost growth that we have previously reported is  common to many shipbuilding programs, as well as challenges in  deviating from shipbuilding plans once a program has begun procuring  ships, emphasize the importance of having a strong understanding of  program expectations to back the initial procurement decision for  FFG(X). Given the timing of the Navy\u2019s budget request for lead ship  funding, Congress faces a decision on whether to authorize funding for  FFG(X) detail design and lead ship based on a budget request that was  not informed by key cost and design information.\nIf Congress authorizes and appropriates FFG(X) funding as the Navy  requested in March 2019, it will be critical that the Navy demonstrate the  program\u2019s acquisition program baseline reflects the results of the  component cost position and independent cost estimate before awarding  the detail design and construction contract. Doing so before the contract  award will help ensure a more reliable acquisition program baseline upon  which future costs and variances are measured and funding decisions are  made. Further, it will help mitigate remaining risk that stems from the  Navy not being able to account for the actual FFG(X) design and  associated estimated cost for ship construction until after the planned July  2020 contract award. Specifically, as currently planned, the Navy\u2019s  budget requests for fiscal years 2020 and 2021\u2014which are intended to  fund the first 3 ships\u2014will be made before the Navy has agreed to  contract pricing for FFG(X).\nNavy officials stated that they have completed a robust program life cycle  cost estimate. They noted that the estimate was informed by Navy  modeling of a notional ship design that leveraged data received from  industry during conceptual design and reflected ship design elements  needed to meet program requirements Navy officials also said that, as of  May 2019, some additional work remains for the cost estimate to account  for training and military construction considerations, as well as address  any needed changes related to the final industry design reviews for the  conceptual design phase. They also said that the program life cycle cost  estimate informed the Gate 4 review in February 2019, and an updated  version of the estimate will provide a basis for the Navy\u2019s efforts to  establish the component cost position in October 2019. As of the  issuance of this report, we have requested the program life cycle cost  estimate from the Navy, including the estimate\u2019s criteria and underlying  assumptions, but have not yet received this information.\n\n\t\tRecent Navy Changes in Cost Estimation Policy and the FFG(X) Program Schedule Create Uncertainty for Remaining Cost Estimation Activities\n\nRecent policy changes by the Navy related to cost analysis and  estimation have created some uncertainty for Navy cost estimation  activities going forward. Specifically, a March 2019 Secretary of the Navy  instruction for acquisition program cost analysis shifts the Naval Center  for Cost Analysis\u2019s role and responsibilities for Navy cost estimation to the  Navy\u2019s systems commands. Previously, the Naval Center for Cost  Analysis\u2014organizationally residing completely outside of the systems  command structure\u2014would provide an independent cost assessment of  the program life cycle cost estimate. The Naval Center for Cost Analysis  and the acquisition program, in coordination with the relevant systems  command, would discuss and adjudicate any differences between the  program life cycle cost estimate and the independent cost assessment to  produce the Navy\u2019s component cost position. This independent cost  assessment by the Naval Center for Cost Analysis was an important  verification of the program office estimates, which were often found to be  too optimistic, prior to the Navy finalizing its component cost position. The  Navy\u2019s recent changes for cost estimation and analysis may pose a risk  of overly optimistic estimates carrying forward in programs.\nNavy officials stated that they believe Naval Sea Systems Command cost  estimators can provide an independent cost estimate, as they are  intended to provide technical support to acquisition programs  independent of programmatic authority and report to a separate chain of  command. However, as stated by the Naval Sea Systems Command, the  collective mission of its organizations is to build, buy, and maintain the  Navy\u2019s ships. Based on this, we believe, as do CAPE officials with whom  we spoke, that shifting independent cost assessment activities to the  systems commands diminishes the Navy\u2019s ability to independently verify  a program life cycle cost estimate. As a result, the program life cycle cost  estimate essentially will become the component cost position based on  the lack of additional cost estimation input, such as what the Naval Center  for Cost Analysis previously provided.\nFurthermore, CAPE officials stated that having a systems command  execute cost analysis responsibilities for an acquisition program within the  same system command effectively eliminates the Navy\u2019s capacity to  perform independent cost estimates for its programs based on their  shared overarching mission. This position is consistent with the GAO  Cost Estimating and Assessment Guide, which states that an  independent cost estimate should be conducted by an organization  independent of the acquisition chain of command. The Director of CAPE  is required to conduct or approve independent cost estimates and cost  analyses for all major defense acquisition programs. As noted by CAPE  officials, CAPE has previously delegated certain cost estimation  responsibilities to the Naval Center for Cost Analysis. With the recent  Navy policy changes, CAPE may no longer choose to delegate  independent cost estimation activities to Navy cost estimators.\nFor FFG(X), CAPE intends to complete an independent cost estimate to  verify the Navy\u2019s component cost position. These plans include site visits  and data collection from the shipyards participating in the conceptual  design contracts. CAPE confirmed that the final independent cost  estimate will reflect the content of the winning proposal, indicating that  any FFG(X) proposals that the Navy receives from contractors not  involved in the conceptual design phase will be evaluated to ensure the  independent cost estimate accounts for those cost and design plans.\nCAPE officials also stated that their timeline for finalizing the independent  cost estimate for FFG(X) is tied to when the Navy decides on the winning  proposal for detail design and construction and communicates this  information to CAPE. Specifically, CAPE\u2019s final independent cost estimate  will reflect only the winning FFG(X) design, so completion of the estimate  will occur after the Navy informs CAPE about the FFG(X) design for  which it intends to pursue a contract award. CAPE officials said that  because the Navy\u2019s decision may not be made in advance of the planned  February 2020 Milestone B review for FFG(X), CAPE would likely just  provide input to support the milestone and complete the independent cost  estimate after that review.\n\n\tThe Navy Has Taken Steps to Reduce Design and Technical Risk, but Technology Integration and Testing Will be Key to Meeting Program Expectations\n\nThe Navy\u2019s decision to pursue a parent ship design for FFG(X) was  intended to reduce design uncertainty for the program. The Navy\u2019s  planned use of existing technologies for the ship\u2019s mission and combat  systems also supports reduced technical risk, though further maturation  of some key systems and successful integration and testing will be critical  to demonstrate the ship provides required capability within cost and  schedule expectations.\n\n\t\tUse of a Parent Ship Design Was Intended to Increase Design Certainty\n\nAdopting a parent design requirement for FFG(X) provided the conceptual  design industry teams with a proven baseline ship design. This enabled  them to focus on incorporating modifications to meet the Navy\u2019s specific  FFG(X) requirements rather than designing a new ship. The Navy did not  set any limitations on the extent contractors could modify or deviate from  the parent design. However, Navy officials stated they actively reviewed  parent design modifications through contract deliverables, technical  exchange meetings, and design reviews with industry teams. The design  reviews included an interim report in October 2018 and a final report in  May 2019 from each industry team on their design progress.\nFFG(X) program officials noted that the design maturity reviews provided  sufficient information to support the Navy\u2019s decision that the designs were  mature enough to release the request for proposals for the detail design  and construction contract award. In addition, some industry officials told  us that the conceptual design work on parent designs enabled them to  develop more mature and refined designs than typical for this stage of the  shipbuilding acquisition process. They also noted that continuing work in  response to the pending competition should move at least some design  elements closer to a detail design-level of maturity, and may provide the  Navy with greater confidence in the contract proposals it receives from  industry.\n\n\t\tTechnology Re-Use Should Reduce Some Risk, but Integration and Testing Remain to Demonstrate Critical Systems\n\nThe FFG(X) program\u2019s design concept requires the use of many existing,  more mature combat and mission systems to reduce technical risk. As  stated in the approved acquisition strategy for FFG(X), the program has a  requirement for all integrated systems to have achieved maturity of a  technology readiness level (TRL) 6 or higher. TRL 6 is defined by GAO  as the capability to produce a prototype system in a production-relevant  environment. Program officials confirmed that, as of May 2019, many  but not all FFG(X) integrated systems were at TRL 6 or higher. For  selected key systems planned for FFG(X), Navy officials stated they will  have achieved TRL 7 or higher by the planned July 2020 detail design  and construction contract award. Doing so would be consistent with our  acquisition best practices, which include maturing new key ship  technologies into actual system prototypes and demonstrating them in a  realistic environment\u2014achieving a TRL 7\u2014before the award of the  contract for lead ship design and construction. This practice helps reduce  the likelihood of costly design changes later.\n\n\t\t\tTechnology Re-Use\n\nMany of the systems planned for FFG(X) have been demonstrated and  are in use on other Navy ship classes, which helps the program fulfill  capability needs while avoiding developmental risks. Table 3 provides an  overview of some of the key existing systems planned for the ship.\nIn addition to the systems that have been utilized by other Navy ships, the  FFG(X) program plans to incorporate some systems that are still in  development, such as the Enterprise Air Surveillance Radar (EASR) and  a new version of the Aegis Weapon System.\nNavy officials stated that EASR\u2014a complex radar system expected to  provide long-range detection and engagement of advanced threats\u2014 is critical to FFG(X)\u2019s air and surface warfare missions. It is a scaled  down version of the Navy\u2019s Air and Missile Defense Radar that is in  production and scheduled for initial integration with the Aegis combat  system on a DDG 51 Flight III destroyer in fiscal year 2020. In early  2019, the Navy began testing a full-scale, single-face EASR array  engineering developmental model\u2014the full system planned for  FFG(X) will have three array faces\u2014at a land-based test site to  further demonstrate its functionality. The Navy expects to complete  land-based testing of the EASR engineering development model by  February 2020. The Navy also plans to integrate a rotating version of  EASR and a fixed-face version on other ship classes prior to  integrating the radar on the lead FFG(X). The Navy\u2019s results from  planned EASR developmental testing at the land-based site will be  integral to achieving a TRL 7 and reducing risk prior to the start of  FFG(X) detail design.\nThe Navy is developing a new version of the Aegis Weapon System\u2014 FFG(X)\u2019s combat management system\u2014to coordinate radar and  weapons system interactions from threat detection to target strike. For  example, the system will support the ship\u2019s ability to employ the Naval  Strike Missile for over-the-horizon offensive capability as well as a 32- cell vertical launch system to employ missiles for air defense. The  Aegis Weapon System for FFG(X) will leverage the Aegis common  source software that supports the combat systems found on the  Navy\u2019s DDG 51-class destroyers and CG 47-class cruisers. Navy  officials noted that they anticipate at least 70 percent of the Aegis  Weapon System software for FFG(X) will be common to the Aegis  software used for DDG 51 Flight III ships.\nRigorous testing of the Aegis Weapon System with EASR will be critical  for FFG(X), as the radar and combat management system must work in  concert for the ship to detect, track, and assess possible targets. Given  the radar and software commonalities, the risk level for both of these  FFG(X) systems should be reduced once the DDG 51 Flight III radar and  Aegis system baseline, upon which the FFG(X) integrated system is  based, have been demonstrated through testing on a ship beginning in  2022. Specific to the Aegis Weapon System for FFG(X), software  development is expected to run from fiscal year 2022 to late fiscal year  2024. The system\u2019s integration and testing with EASR is scheduled to  occur through fiscal year 2024.\n\n\t\t\tIntegration and Testing\n\nWhile the Navy is planning to use many already mature systems on  FFG(X), integration and testing of those systems will be critical to  demonstrate systems fit and work together as intended on the ship. The  Navy completed a technology readiness assessment in spring 2019 to  identify potential technical risks, and concluded that FFG(X) does not  have any critical technology elements. DOD generally defines a critical  technology element as one that may pose major technological risk during  development. Navy officials who completed the assessment stated that  they reviewed about 150 systems as part of their activities and found  none composed of new or novel technologies for which the Navy has  insufficient knowledge to demonstrate maturity. The assessment noted  one technology\u2014the New Advanced Integrated Line-of-Sight Equipment  System (nAILES) multi-coupler for antennas\u2014as a watch item. The Navy  would like to utilize nAILES for FFG(X), but according to Navy officials, it  is not considered a critical technology because the Navy has identified  alternative, proven technologies that will be used to meet the ship\u2019s needs  if nAILES is not available for use.\nThe findings of the technology readiness assessment are consistent with  the FFG(X) program\u2019s decision to use existing systems that do not require  technological innovation to deliver desired capability. However, the  findings do not necessarily equate to the program having no technology  risk for planned systems. For example, the Aegis Weapon System for  FFG(X) did not qualify under the parameters of the technology readiness  assessment as a critical technology element. Still, as already discussed,  the Aegis Weapon System will carry technical risk for several years until  the Navy completes development and demonstrates the system works as  intended for FFG(X). The Next Generation Surface Search Radar is  another system that is relatively mature\u2014FFG(X) program officials  confirmed in May 2019 it is nearing a TRL 6\u2014but requires further  development to reduce risk.\nThe FFG(X) test and evaluation master plan and independent technical  risk assessment are significant documents yet to be completed that will  help to further define risks and plans to address them. The test and  evaluation master plan serves to outline the program\u2019s integrated test  program and master schedule of major test events or phases. Navy  officials expect the test plan to be approved in December 2019 to support  the Milestone B decision. They noted that the plan may need to be  updated once the FFG(X) design is selected based on the additional  information that will be available to inform test planning. The independent  technical risk assessment is intended to categorize risks that cover a  broad range of factors, including technology maturity, integration needs,  and testing. If these factors are not sufficiently accounted for, a program  is likely to have difficulty meeting cost, schedule, and performance  objectives. An official from the Office of the Under Secretary of Defense  for Research and Engineering who is participating in the technical  assessment for FFG(X) stated they plan to complete their work to identify  any risks in March or April 2020. The official added that at this early stage  of their activities, the potential for integration risks associated with the  FFG(X) combat system is an area of interest because of the extensive  number of existing systems that will need to be integrated into the new  ship design.\nNavy test officials as well as DOD systems engineering and test officials  noted potential advantages and risks related to FFG(X) program\u2019s plans  for using existing technologies. Similar to what we previously discussed  about the use of a parent design, the officials stated that the use of  existing systems can increase understanding of the ship and its systems,  which may help the FFG(X) program achieve its planned accelerated  timeline between development and delivery. However, systems  engineering and test officials also indicated that, regardless of maturity,  challenges typically arise when DOD takes systems from other platforms  and attempts to integrate and use them in new ways on a new platform.  They cautioned that programs like FFG(X) that plan to use a lot of  government-furnished equipment or non-developmental systems often  underestimate the amount of integration challenges they will face. The  officials told us this may occur because of overconfidence that the  maturity of systems demonstrated through use on other platforms  eliminates most technical risk, whereas experience confirms that it is  always challenging to get systems to fit and work together as intended on  a new platform. Officials from the office of the Director, Operational Test  and Evaluation said that the parent design approach for FFG(X) may  enable the Navy to reduce some developmental testing activities;  however, operational testing expectations would largely be unaffected  because there will still be substantial integration to be completed and  tested in order to demonstrate mission capabilities.\n\n\tContracting Plans for FFG(X) May Help Mitigate Some Risk, and Use of Warranties Could Potentially Further Reduce Costs\n\nThe draft FFG(X) request for proposal indicates that the Navy plans to  use a fixed-price incentive contract to help control ship costs and special  performance incentive fees. In addition, the Navy plans to use  guarantees with limited liability for the shipbuilder to correct defects after  ship deliveries. Our prior work has found that using comprehensive ship  warrantees instead of guarantees could reduce the Navy\u2019s financial  responsibility for correcting defects.\n\n\t\tUse of Fixed-Price Incentive Contract Provides Benefits, but Planned Contract Structure Results in the Navy Absorbing More Cost Risk\n\nAfter completion of a full and open competition for FFG(X) detail design  and construction, the Navy plans to use a fixed-price incentive contract in  combination with additional special performance incentive fees to procure  the lead and follow-on ships. As we have previously reported, full and  open competition allows all responsible sources\u2014or prospective  contractors that meet certain criteria\u2014to submit proposals for a contract.  The use of competition in contracting is a critical tool for achieving the  best possible return on investment for taxpayers. Competitively awarded  contracts can save the taxpayer money, improve contractor performance,  and promote accountability for results. The fixed-price incentive  contracting approach for FFG(X) is intended to incentivize the contractor  to control costs and meet performance requirements. This contracting  strategy represents a significant departure from previous surface  combatant programs in which the Navy negotiated cost-reimbursement  contracts for construction of the lead ship. Under cost-reimbursement  contracts, the Navy assumes the cost risk because the shipbuilder is  reimbursed for its allowable incurred costs to the extent prescribed in the  contract, regardless of whether the work is performed to the exact level  desired by the Navy. For example, our prior work found that the Navy\u2019s  decisions to accept the first two LCS in incomplete, deficient conditions  complied with federal acceptance provisions, largely due to the cost- reimbursement type contracts in place to construct these ships.\nFixed-price incentive contracts provide an incentive for the shipbuilder to  control costs in order to maximize profit. Fixed-price incentive contracts  generally include a profit adjustment formula referred to as a shareline, as  well as a price ceiling, target cost, and target profit. The structure of the  shareline establishes how cost overruns or underruns in relation to a  target cost are shared between the government and shipbuilder. For  example, the 70\/30 shareline that the Navy is planning for FFG(X) lead  ship overruns means that the government pays 70 percent of cost and the  shipbuilder pays 30 percent when the cost exceeds the target cost up to  the price ceiling. Generally, the shareline functions to decrease the  shipbuilder\u2019s profit as actual costs exceed the target cost. The price  ceiling is generally the maximum the government will pay under the  contract and is typically negotiated as a percentage of the target cost.  The target cost generally informs the shareline and price ceiling.\nGiven the unknowns associated with design and construction, the Navy  plans to account for these unresolved risks by assuming responsibility for  cost growth above DOD recommended guidance. As we reported in  March 2017, when the Navy assumes a greater share of cost overruns  above the target cost, accepts a higher price ceiling, or both, the fixed- price incentive elements may not provide sufficient motivation for the  shipbuilders to control costs. Figure 8 depicts the how risk changes as  the Navy departs from a 50\/50 shareline for cost overruns and a ceiling  price of 120 percent.\nAs we previously noted, for the FFG(X) lead ship the Navy is planning to  have a shareline of 70\/30 for target cost overruns. The Navy also plans to  have a 60\/40 target cost overrun shareline for the second ship, and a  50\/50 overrun shareline for the remaining seven ships included in the  detail design and construction contract award. Based on this plan, the first  two FFG(X) ships will depart from DOD\u2019s guidance recommending a  50\/50 point of departure for negotiations between the government and  shipbuilder for cost overruns up to the price ceiling. This results in more  cost risk to the government for two ships in the detail design and  construction contract. The Navy\u2019s planned price ceiling for the 10 ships  included in the contract award may deviate from DOD\u2019s guidance  recommending a ceiling price set at 120 percent of target cost as a point  of departure for fixed price incentive contracts. Specifically, Navy  officials stated that the maximum ceiling price could be as high as 125  percent for all of the ships. However, Navy officials stated that the request  for proposal will provide incentive for industry to propose the minimum  price ceiling that sufficiently accounts for the proposal\u2019s level of risk,  meaning that industry may propose price ceilings below 125 percent. The  Navy also plans to include options for a special performance incentive fee  for each of the FFG(X) ships, which will be established for the final  request for proposal. These incentives have the potential to increase  shipbuilder profitability.\n\n\t\tFFG(X) Plan for Guaranty Use Is More Robust than Recent Shipbuilding Programs, but Use of Warranties Could Provide More Value to the Government\n\nAs outlined in the FFG(X) draft detail design and construction request for  proposal and confirmed by program officials, each frigate will have a  guaranty period that commences at ship delivery and is expected to end  18 months after delivery. Navy officials stated the guaranty is intended to  formalize a period of responsibility during which the shipbuilder must  correct defects, with the cost to the government and the contractor based  on the contract terms (cost shareline and price ceiling) associated with  the ship. During the guaranty period, the shipbuilder would be required to  correct all defects for which it is responsible, with proposals required to  include a minimum limitation of liability of $5 million per ship. Once the  total cost to correct identified defects reaches $5 million, the government  would pay the full cost to correct any additional guaranty period defects.\nThe $5 million minimum limitation of liability planned for FFG(X) has a  higher dollar value and covers a longer period of time than other recent  shipbuilding programs. For example, we previously found that for the  Navy\u2019s LPD 25 amphibious transport dock construction, the contract  initially included a $1 million limitation of liability. Navy officials stated  that the final request for proposal also will include a provision allowing  industry to propose a higher liability limit, up to and including no limitation  of liability. Navy officials said that any additional liability amount proposed  beyond the $5 million guaranty will be assessed as part of the technical  evaluation criteria used to select the winning FFG(X) design.\nWe found in March 2016 that the use of a guaranty did not help improve  cost or quality outcomes for the Navy and Coast Guard ships we  reviewed. We also found that commercial ship buyers and Coast Guard  officials stated that warranties foster quality performance because the  shipbuilder\u2019s profit erodes as it spends money to correct deficiencies after  delivery, during the warranty period. We further reported that the Coast  Guard has improved cost and quality by requiring the shipbuilder to pay to  repair defects by following Federal Acquisition Regulation warranty  provisions. For example, the Coast Guard paid up front for the Fast  Response Cutter warranty. The cost of the warranty amounted to 41  percent of the total defect correction costs. Although this ship does not  have the size and advanced systems planned for FFG(X), it serves to  demonstrate the potential value to the government presented by the use  of warranties. The Coast Guard also used a fixed-price incentive contract  with a warranty on its Offshore Patrol Cutter\u2014a ship of comparable size  to FFG(X). The first Offshore Patrol Cutter has a 2-year warranty, and  follow-on ships will have 1-year warranties. The Coast Guard pays a set  amount for these warranties, and in return, the shipbuilder must fix all  applicable defects identified within the agreed-upon time period  regardless of cost.\nRather than using guarantees for the FFG(X) contract to provide for the  correction of defects, the Navy could help control costs to the government  through the use of warranties. Under warranties, the government  generally receives a contractual right for the correction of all defects for  which the shipbuilder is responsible at the shipbuilder\u2019s expense. The  use of warranties is typically not mandatory, but federal and defense  acquisition regulations instruct contracting officers to consider various  factors when deciding whether a warranty is appropriate for an  acquisition. The regulations also instruct contracting officers to use a  warranty when it is practicable and cost-effective to do so. We  previously found that, unlike a warranty, the Navy almost exclusively paid  for defects that were the shipbuilder\u2019s responsibility under a guaranty  because of the contract type and terms in contracts that we reviewed.  Such conditions limit the incentive to discover every deficiency during the  guaranty period, and may negatively affect quality improvements over  time.\nThe Navy\u2019s FFG(X) plans suggest that the Navy may be prematurely  discounting warrantees as a mechanism to improve ship quality and  decrease cost to the government. Navy officials told us that mandating  that industry propose a warranty could result in additional costs to the  government because the initial cost of the ship could be raised  substantially to include the cost of the warranty. Additionally, Navy  officials said a requirement for warranty pricing could serve to limit  industry participation in the FFG(X) competition if offerors are unwilling to  accept the risk associated with a warranty and unable to provide  reasonable pricing. The Navy provided no analysis to support these  claims and confirm a clear understanding of whether a warranty could  provide greater value than the $5 million guaranty the Navy is proposing  for FFG(X).\nAs part of the competitive proposal process for FFG(X) detail design and  construction, the Navy could maintain its plans to require a guaranty but  also seek ship warranty pricing. The full and open competition for the  FFG(X) contract award may increase the potential for receiving warranty  pricing that provides a cost-effective alternative to the Navy\u2019s guaranty  plans. By limiting the request for proposal to guarantees, the Navy misses  an opportunity to obtain information on what comprehensive warranty  coverage against defects would cost, and use it to evaluate whether  warranties could further reduce risk for the FFG(X) program.\n\n\tConclusions\n\nAs the Navy approaches the Milestone B review for FFG(X), it is critical  that funding and other major programmatic decisions are fully informed by  the knowledge necessary to support them. This is especially important to  help ensure that the FFG(X) program does not face some of the same  cost, schedule, and performance shortfalls that have been faced by the  LCS program. The Navy\u2019s fiscal year 2020 budget request to authorize  and appropriate funding for the lead frigate was developed and submitted  without the benefit of key cost and design information, such as the  independent cost estimate and the final results from conceptual design.  As a result, it is necessary that the Navy provide Congress with a clear  understanding of FFG(X) cost expectations, including CAPE\u2019s  independent cost estimate, prior to awarding the detail design and  construction contract. This will help ensure that the FFG(X) program is  grounded in cost and design expectations that reflect the specific aspects  of the ship that the Navy selects for construction.\nWith the start of the planned $20 billion FFG(X) procurement  approaching, the Navy has limited time left to position the government to  obtain the best deal possible to fix any deficiencies discovered upon  delivery of the first 10 ships. The Navy\u2019s guaranty plan for FFG(X) offers  some improvements compared to recent shipbuilding programs, but does  not offer the degree of coverage that could potentially be provided by a  warranty. The competitive qualities of the FFG(X) acquisition approach  present an opportunity for the Navy to, at a minimum, obtain warranty  pricing from industry so that the program may use that input to evaluate  whether a warranty would be a cost-effective means of reducing the  government\u2019s cost risk.\n\n\tRecommendations for Executive Action\n\nWe are making two recommendations to the Secretary of the Navy:\nEnsure that the Assistant Secretary of the Navy for Research,  Development, and Acquisition provides to Congress the finalized  independent cost estimate prior to award of the detail design and  construction contract and demonstrates that the estimate is consistent  with the fiscal year 2020 budget request for the lead ship.  (Recommendation 1)\nEnsure that the Assistant Secretary of the Navy for Research,  Development, and Acquisition directs the FFG(X) program office to  request pricing for warranties for the lead ship and the nine follow-on  ship options planned for FFG(X) as part of the detail design and  construction request for proposals. (Recommendation 2)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD for comment. DOD provided  written comments, which have been reproduced in appendix I. In  responding to the draft report, DOD concurred and described the actions  it planned to take to address our two recommendations.\nIn response to the second recommendation to request pricing for  warranties for the lead ship and the nine follow-on ship options planned  for FFG(X) as part of the detail design and construction request for  proposals, DOD acknowledged that the Navy will receive guaranty rather  than warranty pricing, but stated that the solicitation allows industry to  propose a higher limitation of liability amount, up to an unlimited limitation  of liability, in its guaranty pricing for FFG(X). While this could allow for a  better value to the government than has been typical for recent  shipbuilding programs, permitting higher limitation of liability guaranty  pricing but not requesting warranty pricing from offerors means the Navy  will not have complete information on whether a warranty could be more  cost-effective than a guaranty. Our prior work found that the use of  Federal Acquisition Regulation warranty provisions improved shipbuilding  program cost and quality outcomes. As a result, we maintain our belief  that the FFG(X) program office should implement this recommendation by  seeking warranty pricing as part of the detail design and construction  request for proposals. The full and open competition for the FFG(X)  contract award may increase the potential for receiving warranty pricing  that provides a cost-effective alternative to the Navy\u2019s guaranty plans.\nDOD stated that modifying the solicitation to incorporate a warranty  pricing component would cause an unacceptable delay to the FFG(X)  program, but did not provide an analysis to support this assertion or  specify the extent of delay associated with adding a warranty pricing  request. The current FFG(X) schedule has roughly 10 months between  the request for proposals deadline and the contract award, and the  program originally had been planning for the solicitation period to end in  December 2019 before moving the deadline to September 2019 shortly  before its release. We recognize the substantial effort the proposal  development and review process requires, but we continue to believe that  the government would benefit from adding a request for warranty pricing  to the detail design and construction solicitation. While DOD stated that  the Navy will support the recommendation after award by requesting  pricing for an unlimited warranty before exercising the first ship option,  doing so would eliminate any potential warranty pricing advantages that  would occur as a result of the competitive conditions that currently exist  for the current detail design and construction contract.\nIn addition to DOD\u2019s written response to the report, DOD officials and  industry representatives associated with the FFG(X) conceptual design  activities provided separate technical comments, which we incorporated  as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of the Navy.  This report will also be available at no charge on GAO\u2019s website at  http:\/\/www.gao.gov.\nIf 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 II.\n\nAppendix I: Comments from the Department of Defense\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nShelby S. Oakley, (202) 512-4841 or oakleys@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, the following staff members  made key contributions to this report: Diana Moldafsky (Assistant  Director), Lori Fields, Kurt Gurka, Stephanie Gustafson, Chad Johnson,  Jennifer Leotta, Sean Merrill, Miranda Riemer, Jillena Roberts, Hai Tran,  and Alyssa Weir.","output":null}
{"id":"crs_R46178","pid":"crs_R46178_0","input":"\tIntroduction\n\nThis report provides a brief history of the major legislative changes to the charitable deduction for individuals, from its enactment in 1917 through the recent changes enacted at the end of 2017. Policymakers considering changes to this tax benefit may find it helpful to understand how this benefit has evolved over the past 100 years. This report does not address all the legislative changes made to this tax benefit, nor does it provide a broad overview of charitable giving in general, charitable giving tax incentives, their economic effects, or policy options to modify them. Those issues are discussed in CRS Report R45922, Tax Issues Relating to Charitable Contributions and Organizations , by Jane G. Gravelle, Donald J. Marples, and Molly F. Sherlock, and CRS In Focus IF11022, The Charitable Deduction for Individuals , by Margot L. Crandall-Hollick and Molly F. Sherlock. \nThis report begins with a brief overview of the current charitable deduction for individuals. It then describes major legislative changes made to the deduction from 1917 through the present day, with the most recent changes being those made in 2017. For the purposes of this report, major legislative changes include those that changed the amount that taxpayers could deduct. The bills summarized in this report do not include those that temporarily modified the charitable deduction in response to a disaster. Laws that modified definitions or changed substantiation requirements for taxpayers claiming the deduction are also generally excluded. This report will be updated as necessary to reflect future legislative changes. \n\n\tCurrent Tax Benefit for Individual Charitable Donations\n\nUnder current law, taxpayers who itemize their deductions can\u00e2\u0080\u0094subject to certain limitations\u00e2\u0080\u0094deduct charitable donations to qualifying organizations. (Individuals who take the standard deduction may not deduct their charitable contributions.) Deductions that cannot be claimed in the current tax year can be carried forward for up to five years, subject to certain limitations. \n\n\t\tTypes of Qualifying Organizations\n\nUnder current law, charitable contributions are tax deductible when made to qualifying Section 501(c)(3) organizations, governmental units, veterans' organizations, fraternal organizations, and cemetery companies. A Section 501(c)(3) organization is either a public charity or private foundation. \nPrivate foundations often are tightly controlled, receive significant portions of their funds from a small number of donors or a single source, and make grants to other organizations rather than directly carry out charitable activities. Most private foundations\u00e2\u0080\u009491% of all private foundations in 2015 \u00e2\u0080\u0094primarily make grants to other charitable organizations and to individuals. These foundations are referred to as nonoperating foundations . Foundations that directly operate their own charitable programs are referred to as operating foundations . \nIn contrast, public charities tend to have broad public support and provide charitable services directly to beneficiaries. Public charities include organizations \"organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition \u00e2\u0080\u00a6 or for the prevention of cruelty to children or animals.\"\n\n\t\tTypes of Donations\n\nTax-deductible donations to qualifying organizations can be in the form of cash, securities, or property. Properties or securities held for more than a year are often referred to as long - term capital gain properties . Properties or securities held for less than a year are often referred to as short - term capital gain properties. (For more information on general valuation rules of noncash property, see Appendix B .) Depending on (1) the type of property donated and (2) the type of qualifying organization that receives the donations, there are limitations on the total dollar amount that the taxpayer can deduct, as illustrated in Table 1 . The limitations are defined as a percentage of the taxpayer's adjusted gross income (AGI).\n\n\tHistory of the Charitable Deduction\n\nEnacted in 1917, the deduction for charitable giving has changed over the years from \"a short statutory provision into a complex set of rules.\" Below is a brief legislative history of the major legislative changes to the charitable deduction that have occurred over the past 100 years, focusing on changes to the amount that taxpayers could deduct. Table 2 summarizes these changes. \nOver the past 100 years, Congress has generally increased the amount that eligible taxpayers can deduct for their charitable donation. The history of the charitable deduction illustrates two main policy objectives of this benefit. In its early years, the charitable deduction served to ensure that resources given to charity would not be treated as income for the purposes of taxation. When the charitable deduction was created, the income tax was in its early years, and applied only to the very top of the income distribution. Thus, when the deduction was created, it could be viewed as having been designed to \"protect voluntary giving to public goods by rich industrialists who had made their fortunes in business.\" Today, many policymakers are focused on the charitable deduction's impact on giving, and its efficacy at inducing additional giving. As the deduction has changed over time, policymakers have continued to discuss its effectiveness at increasing charitable giving, the broader role of the government in the philanthropic sector, and reform proposals\u00e2\u0080\u0094a discussion that continues to this day. \n\n\t\tThe War Income Tax Revenue Act of 1917\n\nThe charitable deduction was initially enacted to offset the potential negative effects of increased income taxes on charitable giving among the wealthy. The federal income tax, enacted four years earlier as part of the Tariff Act of 1913, generally applied a top rate of 7% to only the wealthiest Americans. The War Income Tax Revenue Act of 1917 (P.L. 65-50) increased federal income tax rates\u00e2\u0080\u0094the top rate on individuals rose to 67% by 1917 \u00e2\u0080\u0094as a way to pay for the costs of the United States' involvement in World War I. According to the Joint Committee on Taxation (JCT), some \n[l]egislators feared that the [tax] increase would reduce individuals' income \"surplus\" from which they supported charity. It was thought that a decrease in private support would create an increased need for public support and even higher rates, so the [charitable] deduction was offered as a compromise. \nIn short, some policymakers were concerned that without the charitable deduction, wealthy taxpayers subjected to these higher tax rates would no longer contribute to charities or institutions of higher education (or would contribute less). As Senator Hollis stated,\nUsually people contribute to charities and educational objects out of their surplus. After they have done everything else they want to do, after they have educated their children and traveled and spent their money on everything they really want or think they want, then, if they have something left over, they will contribute it to a college or to the Red Cross or for some scientific purposes. Now when war comes and we impose these very heavy taxes on income, that will be the first place where wealthy men will be tempted to economize, namely in donations to charity. They will say, \"Charity begins at home.\" I should not favor allowing any man to deduct all of his contributions to these objects from his income-tax return, but if we limit it to 20 percent of his income we cannot be doing much harm to the Public Treasury. Look at it this way: For every dollar that a man contributes for these public charities, educational, scientific, or otherwise, the public gets 100 percent; it is all devoted to that purpose.\nAnd since \"many believed charities could deliver social services better than the government,\" a drop in funding to charitable groups could have led to what many may have perceived as the inefficient provision of social services and public goods by the government. \nThe law allowed a deduction for cash or gifts made to organizations operated for religious, charitable, scientific, or education purposes, or for the prevention of cruelty to animals or children. The overall amount that could be deducted was limited to 15% of net taxable income \"to ensure that individual taxpayers could not eliminate their tax liability through the deduction.\" \n\n\t\tThe Revenue Act of 1924\n\nSeveral years later, Congress waived the 15% limitation for taxpayers who made consistently large charitable donations. Specifically, as a result of the Revenue Act of 1924 (P.L. 68-176), taxpayers who donated \"more than 90% of their net taxable income in the current year and in each of the previous 10 years\" were not subject to the 15% net taxable income limitation. This provision was often referred to as the \"Philadelphia nun\" provision, after Mary Katherine Drexel, a wealthy Philadelphia native who became a nun and underwrote her charitable activities from her sizable inheritance. (In later years, it was also referred to as the \"unlimited charitable deduction\" (UCD), or \"unlimited charitable contribution deduction.\") \n\n\t\tThe Individual Income Tax Act of 1944\n\nIn 1944, Congress changed the limitation of the charitable deduction, which effectively increased the maximum amount that taxpayers could deduct. As previously discussed, for most taxpayers the charitable deduction was limited to 15% of net taxable income. The Individual Income Tax Act of 1944 (P.L. 78-315) changed the measurement of this limitation from net taxable income to adjusted gross income. Since AGI was generally larger than net taxable income, the maximum amount that could be deducted in dollar terms was larger.\nThis law also created a standard deduction, which some charities worried would result in a reduction in charitable giving. The federal income tax, which before the early 1940s had been levied only on high-income Americans, was expanded to apply to most working-age Americans by the end of World War II. According to the IRS,\nIn 1939 only about five percent of American workers paid income tax. The United States' entrance into World War II changed that figure. The demands of war production put almost every American back to work, but the expense of the war still exceeded tax-generated revenue. President Roosevelt's proposed Revenue Act of 1942 introduced the broadest and most progressive tax in American history, the Victory Tax. Now, about 75 percent of American workers would pay income taxes.\nThis expansion was driven by increasing needs for revenue to finance World War II expenses. As more Americans became subject to the federal income tax, Congress became interested in simplifying tax preparation for these new taxpayers, which motivated the creation of a standard deduction. However, some worried that among those who used the standard deduction, there would be a reduction in charitable giving since there would be no additional tax benefit for these donations.\nOthers who advocated for the standard deduction contended that charitable contributions were made for more than just financial reasons, and that especially among lower- and middle-income taxpayers (who were most likely to claim the standard deduction), the tax benefit for giving was not an important factor in their decisions to give. According to Senator Walter George, Chairman of the Senate Finance Committee,\nThe committee does not believe that it can be proved that a tax incentive has been an important factor in the making of such gifts by individuals having less than $5,000 of adjusted gross income, and certainly the $500 standard deduction will not remove the tax incentive for persons in the higher brackets, upon whom the charities depend for contributions in substantial amounts. \n\n\t\tActs Increasing the AGI Limitations: 1952-1964\n\nIn 1952, as part of P.L. 82-465, Congress further increased the maximum amount taxpayers could deduct, raising the limitation to 20% of AGI. \nIn 1954, Congress further increased the maximum deduction limit to 30% of AGI (P.L. 83-591) for any contributions to certain charitable organizations \u00e2\u0080\u0094namely churches, educational institutions, or hospitals. The 10% of additional AGI that taxpayers could deduct was allowable only for contributions made to one of these eligible organizations. Deductible donations to other eligible organizations were still limited to 20% of AGI. One commentator noted that this was \"the first time that Congress encouraged certain charitable giving by granting more generous deductions for donations to certain charitable organizations than to others \u00e2\u0080\u00a6 [to] encourage additional contributions to these organizations to offset their rising costs and modest returns on endowment funds.\"\nCongress expanded the list of organizations for which taxpayers could claim the 30% charitable deduction as part of the Revenue Act of 1964 (P.L. 88-272) to include those that \"receive a substantial part of [their] support from a governmental unit \u00e2\u0080\u00a6 or from direct or indirect contributions from the general public.\" This effectively expanded the 30% AGI limitation to most charitable organizations except private nonoperating foundations, which were still subject to the 20% limitation. In addition, the law included a provision that allowed for charitable contributions in excess of the AGI limits to be carried forward up to five years. This five-year carryforward allows taxpayers who contributions exceed the AGI limit in a given year to still potentially receive a tax benefit from that contribution in future years. \n\n\t\tThe Tax Reform of 1969\n\nThe Tax Reform of 1969 (P.L. 91-172) made several modifications to the charitable deduction, including increasing the maximum AGI limits, phasing out the \"Philadelphia nun\" provision, and creating certain limitations on donations of appreciated property. Many of the current parameters of the charitable deduction for individuals were enacted as part of this law.\nAt the time that Congress was debating this legislation, there was increased concern that taxpayers were using tax benefits like the charitable deduction to avoid paying income taxes. In particular,\n\u00e2\u0080\u00a6 the unlimited charitable contribution deduction (UCD) had become a sanctuary in which many of the very wealthy were sheltered from the income tax. Prior to its repeal, the UCD was being used by an estimated 100 taxpayers who generally had economic income in excess of one million dollars. Since the UCD had a particular appeal to taxpayers having large amounts of appreciated capital which could be donated to charitable institutions, with the deduction based on the full market value rather than acquisition value, it not surprisingly became a prime target for reformers.\nThe Tax Reform Act of 1969 phased out the \"Philadelphia nun provision\" over five years while also raising the maximum AGI limitation to 50% of AGI for donations of cash\/short-term capital gain property to public charities. The increase in the AGI limit was intended to \"offset any decreased incentive resulting from the repeal of the unlimited charitable contributions deduction.\" In addition, the increased AGI limitation was intended to \n[s]trengthen the incentive effect of the charitable contributions deduction for taxpayers.\u00e2\u0080\u00a6 It is believed that the increase in the limitation will benefit taxpayers who donate substantial portions of their income to charity and for whom the incentive effect of the deduction is strong\u00e2\u0080\u0094primarily taxpayers in the middle- and upper-income ranges.\nThe new 50% limitation generally did not apply to gifts of property that had appreciated in value (e.g., capital gains), which were still generally subject to the 30% AGI limitation. In addition, the 20% AGI limitation for donations to private nonoperating foundations (irrespective of the form of the donation) was unchanged by the law.\n\n\t\tThe Economic Recovery Act of 1981\n\nUnder the Economic Recovery Act of 1981 ( P.L. 97-34 ), taxpayers who did not itemize their deductions\u00e2\u0080\u0094i.e., those who took the standard deduction\u00e2\u0080\u0094could claim a new deduction for charitable giving. This was a temporary provision that went into effect in 1982 and was scheduled to expire at the end of 1986. (The law made no change to the itemized deduction for charitable giving.) The amount that nonitemizers could deduct was limited to a percentage of the contributed amount, subject in some years to an additional fixed dollar cap. In 1982 and 1983, 25% of contributions could be deducted, subject to a $100 cap. In 1984, the contribution percentage remained unchanged (25%), but the dollar cap rose to $300. In 1985, 50% of contributions could be deducted, and the contribution cap was eliminated, and in 1986 100% of contributions could be deducted with no contribution cap. In addition to these caps, the amounts that could be deducted were also subject to the AGI limits applicable to the itemized deduction for charitable giving.\nThis temporary provision was opposed by the Treasury Department and some economists at the time. For example, Donald Lubick, Assistant Secretary for Tax Policy at the Treasury Department, argued that the main beneficiaries of the above-the-line deduction\u00e2\u0080\u0094lower- and moderate-income taxpayers\u00e2\u0080\u0094would be less responsive than higher-income taxpayers in terms of additional giving. Lubick argued that the above-the-line deduction \"would go, in very large measure, to those who are already giving with respect to their existing gifts,\" providing them with a windfall gain. He testified that an above-the-line deduction \"would result in a large revenue loss to the Treasury and little increased giving for the charities.\"\nBut according to JCT, Congress disagreed.\nThe Congress believed that allowing a charitable deduction to nonitemizers stimulates charitable giving, thereby providing more funds for worthwhile nonprofit organizations, many of which provide services that otherwise might have to be provided by the Federal government.\nIn addition, supporters of this provision believed that \"[p]eople ought not be taxed on money they contribute to charitable causes. This should be true whether or not their other economic actions make it advantageous for them to itemize their deductions.\"\nThis tax benefit expired as scheduled at the end of 1986, and was not extended as part of the Tax Reform Act of 1986. According to one commentator, \"The big idea of the '86 Act was to pare away deductions and credits to broaden the base so you could bring the top rates down. And that was a pretty powerful tide and the nonitemizer [deduction] just wasn't strong enough to swim against that current.\"\n\n\t\tThe Deficit Reduction Act of 1984\n\nAs part of the Deficit Reduction Act of 1984 ( P.L. 98-369 ), Congress increased the contribution limits on donations of cash or ordinary income property to private nonoperating foundations from 20% of AGI to 30% of AGI. (Donations of long-term capital gain property to private nonoperating foundations remained limited to 20% of AGI.) In explaining this increase, JCT noted the following:\nBecause as a general rule public charities and operating foundations directly carry out charitable function and programs, expend charitable donations more promptly and have public involvement, support, and supervision, the Congress concluded that a tax preference for contributions to public charities and operating foundations [50% AGI limitation] continues to be appropriate. However, acknowledging the substantial role of many grant making foundations in private philanthropy, the Congress believed that the extent of this tax preference should be narrowed by increasing to 30 percent the deduction limitation for gifts by individuals of cash and ordinary-income property to nonoperating foundations.\n\n\t\tThe Tax Cuts and Jobs Act of 2017\n\nAt the end of 2017, President Trump signed into law P.L. 115-97 , often referred to as the Tax Cuts and Jobs Act (TCJA), which made numerous changes to the federal income tax for individuals and businesses. Among the many changes, the law temporarily increased the AGI limit for cash donations made to public charities from 50% to 60%. This change went into effect in 2018, and is scheduled to expire on December 31, 2025.\nAccording to the House Ways and Means Committee report that accompanied H.R. 1 (the House-passed version of P.L. 115-9 ):\nThe Committee believes that a robust charitable sector is vital to our economy, and that charitable giving is critical to ensuring that the sector thrives. For this reason, the Committee believes that it is desirable to provide additional incentives for taxpayers to provide monetary and volunteer support to charities. Increasing the charitable percentage limit for cash contributions to public charities will encourage taxpayers to provide essential monetary support to front-line charities.\nWhile this change to the charitable deduction may increase the amount that some taxpayers can deduct and hence may encourage more charitable giving, other changes made by the law are expected to result in an overall reduction in charitable giving. TPC estimates that even after including the increased 60% limitation, the changes TCJA made to the tax code could result in charitable donations falling by 5%. \nAppendix A. Definitions of Commonly Used Terms \nAppendix B. Valuation of Noncash Donations for the Charitable Deduction\nFor noncash donations, there are certain rules on how to value the property. Depending on the type of property and the recipient organizations, the property is generally valued either at its basis (i.e., what the taxpayer originally paid for the property) or its fair market value (how much the taxpayer would receive in an open market for the property at the time it is donated), as summarized in Table B-1 . For an overview of these and other terms often used in the context of the charitable deduction, see Appendix A . If a property increases or appreciates in value, its fair market value when sold will be greater than its basis. If property decreases or depreciates in value, its fair market value when sold will be less than its basis. Hence, deducting the fair market value of an appreciated (depreciated) property results in a larger (smaller) deduction for the taxpayer than the basis value of that same property.","output":null}
{"id":"crs_R46245","pid":"crs_R46245_0","input":"\tIntroduction\n\nThe primary source of federal aid in support of elementary and secondary education is the Elementary and Secondary Education Act (ESEA)\u00e2\u0080\u0094particularly its Title I-A program, which authorizes federal aid for the education of disadvantaged students. The ESEA was initially enacted in 1965 (P.L. 89-10) \"to strengthen and improve educational quality and educational opportunities in the Nation's elementary and secondary schools.\" It was most recently comprehensively amended and reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), which was enacted \"to ensure that every child achieves.\" The ESSA authorized appropriations for ESEA programs through FY2020. FY2020 appropriations for ESEA programs were $25.9 billion. The ESSA also enacted a series of revisions to educational accountability requirements that are applicable to recipients of ESEA funds. \nUnder Title I-A of the ESEA, as amended by the ESSA, if a state accepts Title I-A funds then the state, its local educational agencies (LEAs), and its public schools are required to focus on educational accountability as a condition of receiving federal grant funds. States, LEAs, and individual public schools are held accountable for monitoring and improving achievement outcomes for students and closing achievement gaps. Each state is required to have content standards, academic achievement standards, and aligned assessments in reading\/language arts (RLA), mathematics, and science for specific grade levels. States must also have an accountability system that incorporates (1) long-term and interim performance goals for specified measures; (2) weighted indicators based, in part, on these goals; and (3) an annual system for meaningful differentiation that is used to identify schools that need additional support to improve student achievement. These academic accountability requirements must be detailed in each state's Title I-A state plan.\nEach state educational agency (SEA) is required to submit a state plan delineating its academic accountability system, among other state plan requirements, for approval by the U.S. Department of Education (ED) in order to receive Title I-A funds. This plan must be developed by the SEA with \"timely and meaningful consultation\" with other education stakeholders, including the governor, the state board of education, members of the state legislature, school staff, and parents. The plan must be peer-reviewed through a process established by the Secretary of Education (hereinafter referred to as the Secretary) and then approved by the Secretary. The state plan will remain in effect for the duration of the state's participation in Title I-A and must be periodically reviewed and revised as necessary by the SEA to reflect any changes in the state's strategies or programs under Title I-A. As part of this plan, the SEA is required to provide information on its standards, assessments, and academic accountability system. \nState plans can be submitted for individual formula grant programs or, if permitted by the Secretary, the SEA may submit a consolidated state plan based on requirements established by the Secretary. Following the enactment of the ESSA, all SEAs submitted consolidated state plans. The Secretary has approved these plans for all 50 states, the District of Columbia, and Puerto Rico.\nThis report discusses the Title I-A requirements related to academic standards, assessments, and state accountability systems that are in effect under current law. This is followed by a brief discussion of special rules that apply to schools operated or funded by the Bureau of Indian Education (BIE), and an examination of SEA and LEA report card and reporting requirements related to standards, assessments, and accountability systems. Frequently asked questions (FAQs) related to each of these areas are included at the end of the report. \n\n\tAcademic Standards\n\nAs a condition of receiving Title I-A funds, each state must have state standards in specific subject areas that meet certain requirements. This section discusses general requirements related to standards, as well as alternate achievement standards for students with the most significant cognitive disabilities and English language proficiency standards.\n\n\t\tGeneral Requirements Related to Academic Standards\n\nEach state receiving Title I-A funds is required to provide an assurance in its state plan that it has adopted challenging academic content standards and aligned academic achievement standards in RLA, mathematics, and science (and any other subject selected by the state). The achievement standards must include at least three levels of achievement (e.g., basic, proficient, and advanced). Except as discussed below, the same standards and achievement levels must be applied to all public schools and all public school students. The standards must include the same knowledge, skills, and levels of achievement expected of all public school students in the state. In addition, states are required to demonstrate that these academic standards are aligned with entrance requirements for credit-bearing coursework in the state's system of public higher education and relevant state career and technical education standards.\n\n\t\tAlternate Achievement Standards\n\nStates may adopt alternate achievement standards for students with the most significant cognitive disabilities. The term most significant cognitive disabilities is not defined in federal legislation. States are required to define the term relative to a student's cognitive functioning and adaptive behavior.\nAlternate achievement standards must be aligned with state academic content standards, promote access to the general education curriculum, and reflect professional judgment as to the highest possible standards achievable by such students. The standards must be designated for use in the student's individualized education program (IEP) and developed in accordance with the Individuals with Disabilities Education Act (IDEA). Alternate achievement standards must also ensure that a student is on track to pursue postsecondary education or employment.\n\n\t\tEnglish Language Proficiency Standards\n\nStates must adopt English language proficiency (ELP) standards that cover the four domains of language: speaking, listening, reading, and writing. The standards must address different proficiency levels of English learners (ELs) and be aligned with the state academic content standards.\n\n\tAcademic Assessments\n\nStates must implement a set of high-quality academic assessments in mathematics, RLA, science, and any other subject chosen by the state. The assessments must be the same academic assessments used to measure the achievement of all public elementary and secondary schools in the state and be administered to all students in the state within the required grades and subjects. \n\n\t\tGeneral Requirements Related to Assessments\n\nAcademic assessments must be aligned with state academic content standards and provide coherent and timely information about student attainment of the academic standards and whether a student is performing at grade level. The state assessments must be the same for all public elementary and secondary school students in the state. Assessments must be used for purposes for which they are reliable and valid and be of adequate technical quality for each purpose required by the ESEA. Assessments must objectively measure academic achievement, knowledge, and skills without assessing personal or family beliefs and attitudes. They must involve multiple up-to-date measures of student academic achievement, including measures that assess higher-order thinking. Assessments may be administered through a single summative assessment or through multiple statewide interim assessments during the academic year that result in a single summative score. The format of assessments may be \"partially delivered\" in the form of portfolios, projects, or extended performance tasks. \nIn general, a state is required to administer mathematics and RLA assessments in grades 3 through 8 and once in high school. For science, the assessment must be administered at least once in each of three grade spans (3-5, 6-9, and 10-12). For any other subjects chosen by the state, assessments are administered at the discretion of the state. Thus, for any given school year, a state must administer 17 assessments to comply with these Title I-A requirements but no student would be required by federal legislation to take more than 3 assessments (mathematics, RLA, and science).\nThe assessments must allow for the participation of all students, including students with disabilities and ELs by using principles of universal design and allowing appropriate accommodations. States, however, may exempt students with the most significant cognitive disabilities, provided these students participate in an alternate assessment based on alternate achievement standards. States may provide the RLA assessment in another language or form for ELs if (1) a student has attended school in the United States for less than three consecutive years, and (2) doing so \"would likely yield more accurate and reliable information on what such student knows and can do.\" Furthermore, an LEA may, on a case-by-case basis, extend the time period during which a student is assessed in a language other than English by up to an additional two years if the student has not reached a level of English language proficiency sufficient to yield valid and reliable results on a test administered in English. \nUnder the ESEA, states are required to use assessment results for accountability purposes, reporting purposes, or both. Assessment results for accountability purposes inform the statewide accountability system. Some assessment results are used for reporting purposes only and have no bearing on the statewide accountability system. For accountability purposes, assessments must enable results to be disaggregated within the SEA, LEAs, and schools by the following groups (commonly referred to as subgroups ): (1) each major racial and ethnic group, (2) economically disadvantaged students compared to students who are not economically disadvantaged, (3) students with disabilities compared to students without disabilities, and (4) English proficiency status. For reporting purposes, in addition to the four aforementioned subgroups of students, assessment results must also be disaggregated by gender, migrant status, homeless status, foster care status, and whether a student has a parent who is a member of the Armed Forces on active duty, including a parent on full-time National Guard duty. \nFor reporting purposes, assessments must also provide for timely individual student reports regarding achievement that allow parents, teachers, principals, and other school leaders to understand and address specific academic needs of a student. Individual student reports of achievement must allow for itemized score analyses to assist LEAs and schools in addressing the needs of students based on their responses to specific assessment items, provided that personally identifiable information is not publicly disclosed.\n\n\t\tAssessments for English Learners\n\nStates must include all ELs in their statewide assessment systems and disaggregate results for these students. Under certain circumstances, the ESEA allows ELs to participate in assessments in a language other than English. ELs also participate in other English language proficiency assessments. ELs participate in statewide assessment and accountability systems in different ways, depending on their level of language proficiency and number of years of schooling in the United States. The following sections describe the statutory requirements regarding the assessment of ELs.\n\n\t\t\tLanguage Assessments for English Learners\n\nEach state plan must identify languages other than English that are spoken \"to a significant extent\" in the student population of the state and indicate the languages for which state assessments are not available and are needed. The state must make every effort to develop such assessments that are needed. The state may request assistance from the Secretary to identify appropriate assessments, but the Secretary shall not mandate a specific assessment.\n\n\t\t\tEnglish Proficiency Assessments\n\nEach state plan must demonstrate that LEAs will administer an annual assessment of English proficiency of all ELs in the schools served by the SEA. Such assessments must be aligned with the state's ELP standards. Regulations reiterate that English proficiency assessments must be administered annually in each domain (reading, writing, speaking, and listening) for all ELs in kindergarten through grade 12 served by the LEA. ELP scores from previous years may not be banked and counted as proficient for a student in the following year. For example, proficient listening scores and speaking scores cannot be banked in first grade and allow for an EL to be administered only reading and writing assessments in the following year. All domains must be assessed annually. \n\n\t\t\tExceptions for Recently Arrived English Learners\n\nThe ESEA includes provisions regarding recently arrived ELs. As was previously permitted prior to the enactment of the ESSA, a state may exclude an EL from one administration of the RLA assessment if the student has been enrolled in school in the United States for less than 12 months and may exclude the EL's performance on the mathematics or ELP assessment for the first year of the EL's enrollment in school for accountability purposes. However, the EL does still have to participate in the mathematics and ELP assessments.\nThe ESSA added a second option regarding the assessment of recently arrived ELs. A state may choose to assess and report the performance of a recently arrived EL on the statewide RLA and mathematics assessments for each year of the student's enrollment. However, for the first year of the student's enrollment, the state may exclude his or her results on the RLA and mathematics assessments from the state's accountability system. In the second year of the student's enrollment, the state must include a measure of student growth on the RLA and mathematics assessments. In the student's third year of enrollment and all subsequent years, the state must include his or her performance on the RLA and mathematics assessments in the state's accountability system. \nThe results of statewide academic assessments must be disaggregated for ELs. A state may include the scores of formerly identified ELs in the EL subgroup for a period of four years after the student ceases to be identified an EL. That is, once an EL becomes proficient in English, his or her score may still be included in the \"EL subgroup\" for RLA and mathematics assessment results for four years.\n\n\t\tAssessments for Students with Disabilities\n\nStates are required to include all students with disabilities in the statewide assessment system. Furthermore, states are required to disaggregate assessment results for students with disabilities. The majority of students with disabilities participate in the general academic assessment with their peers. However, the ESEA allows students with the most significant cognitive disabilities to participate in an alternate assessment based on alternate achievement standards. The following sections describe the statutory requirements regarding the assessment of students with disabilities.\n\n\t\t\tAlternate Assessments for Students with the Most Significant Cognitive Disabilities\n\nStudents with the most significant cognitive disabilities may be eligible to participate in an alternate assessment. As mentioned above, the term most significant cognitive disabilities is not defined in federal legislation. States are required to define the term relative to a student's cognitive functioning and adaptive behavior. The IEP team for a student with a disability determines when the student shall participate in an alternate assessment, using guidelines provided by the state. In this situation, parents must be notified (1) that their child's achievement will be measured with an alternate assessment based on alternate achievement standards, and (2) how participation in an alternate assessment may affect the attainment of a regular high school diploma. \nA state must ensure that alternate assessments are administered in accordance with ESEA requirements. Alternate assessments must be aligned with alternate achievement standards. The ESEA requires that within a state, the number of students assessed in each subject with alternate assessments does not exceed 1% of the total number of students in the state who are assessed in that subject. A state may request a waiver from the Secretary to exceed the 1% cap. The 1% cap, however, does not apply at the LEA level. An LEA may administer alternate assessments to more than 1% of students, provided that the LEA submits information to the SEA justifying the need to exceed the cap. \nMore specifically, if a state anticipates that it will exceed the 1% cap, it must submit a waiver request to the Secretary. The waiver request must meet the following criteria:\nIt must be submitted at least 90 days prior to the start of the state's testing window. It must include (1) the number and percentage of students in each subgroup of students who took the alternate assessment, and (2) data demonstrating that the state has measured the achievement of at least 95% of students in the \"children with disabilities\" subgroup for all grades in which the alternate assessment is administered. It must include state assurances that the state is appropriately monitoring its LEAs. If an LEA anticipates that it will assess more than 1% of students with disabilities using an alternate assessment, the state must ensure that the LEA followed the state's guidelines and the LEA will address any issues of disproportionality in the percentage of students participating in alternate assessments. It must include a plan and timeline for improving the implementation of state guidelines regarding alternate assessments. Such a plan may include revising the definition of students with the \"most significant cognitive disabilities.\" The state must take additional steps to support LEAs and describe how LEAs that assess more than 1% of students will be monitored and evaluated. The state will address any disproportionality in the percentage of students participating in alternate assessments. If the state is requesting to extend the waiver for an additional year, the state must meet all requirements described above and demonstrate substantial progress towards achieving each component of the prior year's plan and timeline.\nThe use of alternate assessments must be consistent with tenets of IDEA that emphasize that students with disabilities have access to the general education curriculum. That is, if a student is selected to participate in an alternate assessment, he or she must not be excluded from involvement and progress within the general education curriculum. The state must also describe within the state plan (1) how it has incorporated universal design in alternate assessments, and (2) that general and special educators know how to administer the alternate assessment and provide appropriate accommodations.\n\n\t\tState and Local Flexibility in Assessment\n\nThe ESEA, as amended by the ESSA, provides for some additional flexibility in assessment systems. New provisions allow states to (1) administer advanced mathematics assessments in middle school, (2) administer locally selected assessments in high school, (3) administer computer adaptive assessments, and (4) design an innovative assessment and accountability program. The following sections describe each flexibility.\n\n\t\t\tAdvanced Mathematics Assessments in Middle School\n\nA state may exempt any 8 th -grade student from the regular mathematics assessment if the student participates in a more advanced end-of-course assessment that can be used to measure mathematics achievement within the state's Title I-A accountability system. This flexibility allows the state to avoid double testing students who take advanced mathematics courses in 8 th grade. When the student is in high school, however, he or she must take another mathematics end-of-course or other assessment that is more advanced than the assessment administered in middle school and is used to determine a student's mathematics proficiency in grades 9-12 for Title I-A accountability purposes. \n\n\t\t\tLocally Selected Assessments\n\nAn LEA may administer a locally selected, nationally recognized high school academic assessment (hereinafter referred to as a locally selected high school assessment ) in lieu of the state test in high school, provided that the assessment has been approved by the state. Though specific locally selected high school assessments are not referenced in legislation, education groups posit that the term generally refers to the SAT and ACT, as well as several other types of assessments, such as Advanced Placement or International Baccalaureate exams, ACCUPLACER, and the Armed Services Vocational Aptitude Battery (ASVAB). \nIf a state has already approved one of the above mentioned assessments as the high school assessment used for accountability, the LEA is not required to request using it. For example, if the SAT or ACT is already approved as the statewide assessment in high school, an LEA would not need to request its use as a locally selected high school assessment. In other cases where a state uses a state assessment, such as PARCC or Smarter Balanced, the LEA may request the use of another test like the SAT or ACT in lieu of the state test provided the assessment meets the requirements discussed below.\nBefore LEAs may use this flexibility, the state must approve the assessment for use. The SEA is required to establish technical criteria to determine whether a locally selected high school assessment meets the requirements of the statutory flexibility. At a minimum, the SEA must (1) conduct a review of the assessment to determine whether it meets or exceeds the technical criteria established by the SEA, (2) submit evidence for peer review, and (3) approve such assessment for selection and use by any LEA that requests to use it. \nTo receive approval from the SEA, a locally selected high school assessment must meet the following criteria:\nbe aligned with the state's academic content standards, address the depth and breadth of the standards, and be equivalent to the state assessment with regard to content coverage, difficulty, and quality; provide comparable, valid, and reliable data on academic achievement as compared to the state assessment (for all students and each subgroup of students) and results must be expressed in terms consistent with the state academic achievement standards; meet the general requirements of assessment systems, including technical criteria, with the exception that the locally selected high school assessment need not be the same assessment used for all students in the state and administered to all students in the state; and provide unbiased, rational, and consistent differentiation between schools within the state.\nThe LEA may choose to submit a locally selected high school assessment to the SEA for approval. If the LEA requests to use a locally selected high school assessment, it must notify parents of its request and, upon approval of the request and at the beginning of each subsequent school year in which the assessment is used, inform them that the locally selected high school assessment is different from the state high school assessment.\n\n\t\t\tComputer Adaptive Assessments\n\nStates may develop and administer computer adaptive assessments, provided that these assessments meet the general requirements of state assessment systems. A computer adaptive assessment can measure a student's academic ability above and below the student's current grade level. Because of this assessment property, the ESEA specifies additional requirements to ensure compliance with the general assessment requirements. The provision allowing states to use computer adaptive assessments clarifies that the language in Section 1111(b)(2)(B)(i) requiring that all students participate in same academic assessment shall not be interpreted as requiring that all students be administered the same assessment items. The computer adaptive assessment must, at a minimum, measure each student's academic proficiency with respect to state academic standards for the student's grade level and growth toward such standards. Once the assessment has measured the student's proficiency at grade level, it may measure the student's level of academic proficiency above or below his or her grade level.\nStates may use computer adaptive assessments for students with the most significant cognitive disabilities, provided that the assessments (1) meet the legislative requirements for alternate assessments, and (2) assess the student's academic achievement and whether the student is performing at grade level. States may also use computer adaptive assessments to assess English language proficiency, provided that the assessments (1) meet the requirements for the assessment of English language proficiency, and (2) assess the student's language proficiency, which may include growth towards proficiency.\n\n\t\t\tInnovative Assessment and Accountability Demonstration Authority\n\nESEA, Section 1204 includes a new demonstration authority for the development and use of an innovative assessment system . Over time, the innovative assessment system could replace assessments required by Title I-A. States or consortia of states may apply for the demonstration authority to develop an innovative assessment system that \"may include competency-based assessments, instructionally embedded assessments, interim assessments, cumulative year-end assessments, or performance based assessments that combine into an annual summative determination for each student\" and \"assessments that validate when students are ready to demonstrate mastery or proficiency and allow for differentiated student support based on individual learning needs.\" A maximum of seven SEAs, including not more than four states participating in consortia, may receive this authority. Separate funding is not provided under the demonstration authority; however, states may use formula and competitive grant funding provided through the State Assessment Grant program to carry out this demonstration authority.\nStates and consortia may apply for an initial demonstration period of three years to develop innovative assessment systems and implement them in a subset of LEAs. If the initial demonstration period is successful, states and consortia may apply for a two-year extension in order to transition the innovative assessment system into statewide use by the end of the extension period. If the SEA meets all relevant requirements and successfully scales the innovative assessment system for statewide use, the state may continue to operate the innovative assessment system.\nIn general, applications for the demonstration authority must show that the innovative assessments meet all the general requirements of Title I-A state assessments discussed above. The only explicit differences between state assessment systems and innovative assessment systems are the format of the innovative assessment (i.e., competency-based assessments, instructionally embedded assessments, interim assessments, cumulative year-end assessments, and performance-based assessments) and that the reporting of results from the innovative assessments may be expressed in terms of student competencies aligned with the state's achievement standards. \n\n\t\tAdministration and Special Requirements Regarding Assessment\n\nThere are several additional considerations in the administration of state assessments. Specifically, there are provisions relevant to parent rights regarding student assessment, limitations on assessment time, and participation in the National Assessment of Educational Progress (NAEP).\n\n\t\t\tParent Rights\n\nThe ESEA does not preempt a state or local law regarding the decision of a parent not to have his or her child participate in an academic assessment. If a state or local law allows parents to permit their student to \"opt-out\" of an assessment, the student cannot be required to participate in a state assessment. \n\n\t\t\tLimitation on Assessment Time\n\nThere have been concerns over the amount of time schools spend on assessment and assessment preparation activities. Each state may set a limit on the total amount of time devoted to the administration of assessments for each grade, expressed as a percentage of annual instructional hours.\n\n\t\t\tNAEP\n\nAs a condition of receiving Title I-A funds, a state must agree to participate in the biennial state NAEP assessments in reading and mathematics in grades 4 and 8 if the Secretary pays the costs of administering these assessments. NAEP is referred to as the \"Nation's Report Card\" because it is the \"largest nationally representative and continuing assessment of what America's students know and can do in various subject areas.\" A sample of public schools and students are selected for the assessments to create a representative sample of students within each state. Participation in the NAEP assessments is voluntary at the individual level. Results are reported at the national and state levels, as well as at the LEA level for a limited number of LEAs that participate in the trial urban district assessment (TUDA). Results are not reported at the school or individual student levels.\n\n\tAccountability Systems\n\nIn order to receive funds under Title I-A, each state is required to submit a plan to ED that, among other items, describes its accountability system. The system must incorporate the state's academic standards and aligned assessments in RLA and mathematics. In addition, the system must meet numerous requirements discussed below.\n\n\t\tSubgroups and Minimum Number of Students\n\nEach state's accountability system must disaggregate data by specified student subgroups. These subgroups, which must receive separate accountincludeability determinations, include (1) economically disadvantaged students, (2) students from major racial\/ethnic groups, (3) children with disabilities, and (4) English learners, provided the number of students in each subgroup meets the state's minimum number of students (also referred to as minimum group size) for inclusion in accountability determinations. Each state establishes its own minimum group size.\nIn selecting its minimum group size, each state is required to describe the minimum number of students that are necessary to implement requirements related to the disaggregation of data by subgroup and how the number selected is statistically sound. The state must explain how the minimum number of students was determined, including whether stakeholders were included in the determination process, and how the state ensures that the selected minimum number of students is sufficient to not reveal any personally identifiable information. The same state determined minimum group size number must be used for all students and for each subgroup of students in the state. \n\n\t\tInterim and Long-Term Goals\n\nThe system must include state established long-term goals (and measures of interim progress) for all students, and separately for subgroups of students, for academic achievement as measured by proficiency on the state RLA and mathematics assessments and high school graduation rates. In addition, the goals for subgroups of students who are behind on any of these measures must take into account the improvement needed to close statewide achievement gaps. Also, the system must include long-term goals (and measures of interim progress) for increases in the percentage of English learners making progress in achieving English proficiency, as defined by the state.\n\n\t\tIndicators\n\nA state must then use a set of indicators that are based, in part, on the long-term goals established by the state to annually measure the performance of all students and each subgroup of students to evaluate public schools. These indicators must include the following: \n1. Student Proficiency on RLA and Mathematics Assessments. For all public schools, student performance on the RLA and mathematics assessments as measured by student proficiency, and for high schools may also include a measure of student growth on such assessments. 2. Measure s of Student Growth or Another Indicator of School Performance . For public elementary and secondary schools that are not high schools, a measure of student growth or another indicator that allows for meaningful differentiation in school performance. 3. Graduation Rates. For public high schools only. 4. English Language Proficiency. For all public schools, ELs' progress in achieving English language proficiency. 5. School Quality or Student Success. For all public schools, at least one indicator of school quality or student success (e.g., measure of student engagement, postsecondary readiness, school climate) that allows for meaningful differentiation in school performance. \n\n\t\t95% Participation Rate and Calculating Proficiency on Assessments\n\nEach state is required annually to measure the performance of not less than 95% of all public school students and not less than 95% of all public school students in each subgroup on the mathematics and RLA assessments. For example, assume a school had 100 students enrolled in grades where state RLA and mathematics assessments were required (e.g., grades 3-6), but only 80 students participated in the RLA assessment. The school's participation rate for the RLA assessment would be 80% (80\/100).\nThe state is required to provide a clear and understandable explanation of how it will factor the participation rate requirement into the state's accountability system. Thus, each state is able to determine the extent to which failing to meet the 95% participation rate will be factored into its accountability system for evaluating school performance. For example, a state might decide that failing to meet the 95% participation rate requirement only has consequences if a school fails to meet it for the all students group or a subgroup for multiple years. Alternatively, a state could decide that for any year, failing to meet the participation rate requirement means that a school cannot receive the highest rating level in the state's accountability system.\nFor the purposes of measuring, calculating, and reporting student proficiency on the mathematics and RLA assessments, the state must use as the denominator the greater of either (1) 95% of all public school students or 95% of all public school students in the subgroup (whichever is applicable to the calculation), or (2) the number of students participating in the assessments. Returning to the previous example, the school's maximum proficiency rate for the RLA assessment would be calculated by dividing the 80 participating students by 95% of all students in the school (i.e., 95 students) as 95% of the students is higher than the number of participating students. This would mean that the school's proficiency rate on the RLA assessment could be no higher than 84.2%. \n\n\t\tSystem of Annual Meaningful Differentiation\n\nBased on the aforementioned indicators, the SEA must establish an annual system for meaningfully differentiating all public schools that gives substantial weight to each indicator but in the aggregate provides greater weight to the first four indicators than to the measure of school quality or student success. The system must also identify any school in which any subgroup of students is \"consistently underperforming, as determined by the state,\" based on all the aforementioned indicators and the system for annual meaningful differentiation (AMD). \n\n\t\tComprehensive Support and Improvement\n\nBased on the state's system for AMD, each SEA must establish a state-determined methodology to identify schools for comprehensive support and improvement (CSI), beginning with school year 2018-2019, and at least once every three years thereafter, \n1. at least the lowest-performing 5% of all schools receiving Title I-A funds, 2. all public high schools failing to graduate 67% or more of their students, 3. schools required to implement additional targeted support and improvement (see below) that have not improved in a state-determined number of years, and 4. additional statewide categories of schools, at the state's discretion. \nThe first category of CSI schools is the only category strictly limited to Title I-A schools. High schools can be identified for CSI regardless of whether they receive Title I-A funds or not. The third category of schools only includes Title I-A schools that have been identified for additional targeted support and improvement (ATSI) but have failed to improve within a state determined number of years. States have the discretion to determine whether any other schools will be identified for CSI. The statutory language does not specify whether this category of schools must be limited to only schools receiving Title I-A funds. Non-Title I-A schools that are identified for CSI are eligible to receive school improvement funds under Section 1003. However, the receipt of school improvement funds does not make a non-Title I-A school a Title I-A school.\nEach SEA is required to notify each LEA in the state if any of the schools served by the LEA have been identified for CSI. The LEAs in which schools are identified for CSI are then required to work with stakeholders, including principals or other school leaders, teachers, and parents, to develop a comprehensive support and improvement plan that meets the following requirements:\nis informed by all of the aforementioned indicators; includes evidence-based interventions; is based on a school-level needs assessment; identifies resource inequities to be addressed through the comprehensive support and improvement plan; is approved by the school, LEA, and SEA; and upon approval and implementation, is monitored and periodically reviewed by the SEA. \n\n\t\t\tEvidence-Based Interventions\n\nThe ESEA includes a definition of evidence-based . In general, when the term is used with respect to a state, LEA, or school activity, it means an \"activity, strategy, or intervention\" that (1) demonstrates a statistically significant effect on improving student outcomes or other relevant outcomes based on one of three levels of evidence, or (2) demonstrates a \"rationale based on high-quality research findings or positive evaluation that such activity, strategy, or intervention is likely to improve student outcomes or other relevant outcomes.\" The three levels of evidence for demonstrating a statistically significant effect are the following:\n1. \"strong evidence from at least 1 well-designed and well-implemented study\"; 2. \"moderate evidence from at least 1 well-designed and well-implemented quasi-experimental study\"; and 3. \"promising evidence from at least 1 well-designed and well-implemented correlational study with statistical controls for selection bias.\"\nFor activities, strategies, or interventions funded under Section 1003 (School Improvement), which can be used to support CSI and other support and improvement activities, the term evidence-based only includes activities, strategies, or interventions that meet one of the three levels of evidence for a statistically significant effect. School improvement funds may not be used for activities, strategies, or interventions that are likely to improve outcomes based only on a rationale constructed from high-quality research findings or positive evaluations. \n\n\t\t\tSpecial Provisions for High Schools\n\nFor high schools that are identified for CSI, the SEA may permit differentiated improvement activities that use evidence-based interventions at a school that predominantly serves students who (1) have returned to high school after previously leaving secondary school without a regular high school diploma, or (2) \"based on the grade or age, are significantly off track to accumulate sufficient academic credits to meet high school graduation requirements.\" In addition, if a high school serves fewer than 100 students, the SEA may permit the LEA to \"forego implementation\" of CSI activities.\n\n\t\t\tPublic School Choice\n\nAn LEA may offer students enrolled in a school identified for CSI the option to transfer to another public school served by the LEA, unless doing so is prohibited by state law. If an LEA offers public school choice, it must give priority to the lowest-achieving children from low-income families. A student who opts to transfer to another school must be permitted to remain in that school until he or she has completed the highest grade available at it. The student must also be permitted to enroll in classes and other activities in the same manner as all other students at the school. An LEA may use not more than 5% of its Title I-A allocation to pay for transportation costs associated with the public school choice option.\n\n\t\tTargeted Support and Improvement\n\nStates are also required to identify for targeted support and improvement (TSI) any school in which a subgroup of students is consistently underperforming. As previously discussed, the state has sole discretion to determine how the term consistently underperforming is defined. SEAs must notify each LEA in the state if a school served by the LEA has been identified as having at least one subgroup that is consistently underperforming and ensure that the LEA notifies such school with respect to which subgroup(s) is consistently underperforming. Once an LEA notifies a school that it has been identified for TSI, the school is required to work in partnership with stakeholders, including principals and other school leaders, teachers, and parents, to develop a school-level TSI plan to improve student outcomes based on the aforementioned indicators for each subgroup of students that was the subject of the notification provided by the SEA. The TSI plan must meet the following requirements:\nis informed by all of the aforementioned indicators; includes evidence-based interventions; is approved by the LEA prior to implementation; upon submission and implementation, is monitored by the LEA; and results in additional action, should implementation of the plan be unsuccessful after a number of years determined by the LEA.\n\n\t\t\tAdditional Targeted Support and Improvement\n\nFor a school in which one or more subgroups is performing at a level that, if reflective of an entire school's performance, would result in its identification for CSI as one of the lowest performing 5% of schools in the state, the school must be identified for additional targeted support and improvement (ATSI) activities. Schools identified for ATSI must include an identification of resource inequities as one of its activities. If a Title I-A school identified for ATSI does not improve within a state-determined number of years, the state is required to identify the school for CSI.\nStatutory language includes a special rule with respect to the identification of schools for ATSI. For the 2017-2018 school year, based on the state's system of meaningful differentiation, the SEA was required to notify an LEA if any of its schools met the ATSI identification requirements, as SEAs did not have to identify schools for TSI for the 2017-2018 school year. ED subsequently provided SEAs with an extra year to meet this requirement, so SEAs had to begin identifying schools for ATSI by the 2018-2019 school year. In some states, ATSI schools were identified prior to any TSI schools being identified, as statutory language did not include a requirement for when TSI schools had to be identified for the first time. For subsequent years, schools are required to be identified for ATSI following their initial identification for TSI based on the requirements of Section 1111(c)(4)(C)(iii). Thus, the frequency with which additional schools are identified for ATSI will depend on the frequency with which states identify schools for TSI.\nIn determining which schools identified for TSI will also have to meet the additional ATSI requirements, each school is to be evaluated individually. If a school meets the ATSI criteria, then it is subject to the additional requirements and could ultimately be identified for CSI if it is a Title I-A school and fails to improve. There is no cap on the number of schools identified for TSI that may also be identified for ATSI. Thus, it is possible that every school identified for TSI could also be identified for ATSI, depending on how the state chooses to define consistently underperforming , when identifying TSI schools. However, if the state establishes a definition of consistently underperforming that is more restrictive than the ATSI requirement, it is possible that schools that would otherwise qualify for ATSI would not be identified for ATSI, as they would not be identified for TSI. \n\n\t\tState Support and Additional Action\n\nIf schools identified for CSI fail to improve in a state-determined number of years (not to exceed four years), the state must implement more rigorous State-determined action , and Title I-A schools identified for ATSI that fail to improve within a state-determined number of years must be identified for CSI. In addition, SEAs are required to periodically review the resource allocation to support school improvement in each LEA that serves a \"significant number\" of schools identified for CSI and a \"significant number\" of schools implementing TSI. SEAs are also required to provide technical assistance to each LEA serving a \"significant number\" of schools implementing CSI plans or TSI plans. \nSEAs have the option to initiate additional improvement in any LEA with (1) a \"significant number of schools that are consistently identified\" for CSI and are not meeting the exit criteria to be removed from this status, or (2) a \"significant number of schools\" implementing TSI plans. As part of these efforts, SEAs may establish alternative evidence-based state-determined strategies for use by LEAs to assist schools identified for CSI. The statutory language does not specify whether LEAs would have to use one or more of the strategies, or whether these would be the only strategies that could be used. Statutory language also does not address the state establishing alternative evidence-based state-determined strategies for LEAs to use to assist schools implementing TSI plans.\n\n\t\tReservation of Funds to Support School Improvement Under Section 1003\n\nSection 1003 of the ESEA provides for a state reservation of Title I-A funds for school improvement. An SEA is required to reserve the greater of (1) 7% of the amount the state receives under Title I-A, or (2) the sum of the amount the state reserved for school improvement under Title I-A in FY2016, and the amount the state received under the School Improvement Grants (SIG) program in FY2016. No LEA is permitted to receive less Title I-A funding than it received in the prior year as a result of this provision in FY2018 and subsequent fiscal years. \nOf the funds reserved for school improvement, states are required under ESSA provisions to provide at least 95% to LEAs through formula or competitive grants to serve schools that are implementing CSI activities or TSI activities. In allocating funds, an SEA must give priority to LEAs that serve high numbers or a high percentage of schools implementing CSI and TSI plans; demonstrate the strongest need for the funds, as determined by the state; and demonstrate the strongest commitment to using the funds to help the lowest-performing schools to improve student achievement and outcomes. Funds reserved by the SEA must be used for establishing the method by which funds will be allocated to LEAs; monitoring and evaluating the use of funds by LEAs; and, as appropriate, \"reducing barriers and providing operational flexibility to schools\" to implement CSI and TSI activities.\n\n\t\tDirect Student Services (Section 1003A)\n\nIn addition to the required reservation of Title I-A funds for school improvement, SEAs have the option of reserving up to 3% of the Title I-A funds they receive for direct student services. This optional reservation of funds was not included in the law prior to the ESSA. Of the funds reserved, states must distribute 99% to geographically diverse LEAs using a competitive grant process that prioritizes grants to LEAs that serve the highest percentages of schools identified for CSI or that are implementing TSI plans. Funds may be used by LEAs for a variety of purposes, including to pay the costs associated with the enrollment and participation of students in academic courses not otherwise available at the students' school; credit recovery and academic acceleration courses that lead to a regular high school diploma; activities that lead to the successful completion of postsecondary level instruction and examinations that are accepted for credit at institutions of higher education (IHEs), including reimbursing low-income students for the costs of these examinations ; and public school choice if an LEA does not reserve funds for this purpose under Section 1111.\n\n\t\tTeacher and Paraprofessional Requirements\n\nTitle I-A also holds states accountable for teachers and paraprofessionals working in a program supported with Title I-A funds. These teachers or paraprofessionals must meet applicable state certification and licensure requirements. In addition, states participating in Title I-A must describe in their state plans how low-income and minority children enrolled in Title I-A schools are not served at disproportionate rates by \"ineffective, out-of-field, or inexperienced teachers.\" The state must also describe the measures that will be used to measure and evaluate the state's success in this area.\n\n\tSpecial Rules for Bureau of Indian Education Schools\n\nThe BIE oversees a total of 183 elementary, secondary, residential, and peripheral dormitory (i.e., \"boarding\") schools across 23 states. Of these 183 schools, 130 are tribally controlled and 53 are operated by the BIE. There are special rules regarding standards, assessment, and accountability for schools operated or funded by the BIE included in Section 1111(k) that apply until the requirements of Section 8204 (discussed below) are met. The special rules are as follows:\nEach BIE school accredited by the state in which it is operating shall use the assessments and other academic indicators the state has developed and implemented to meet the requirements of Section 1111, or such other appropriate assessment and academic indicators as approved by the Secretary of the Interior. Each BIE school that is accredited by a regional accrediting organization (in consultation with and with the approval of the Secretary of the Interior, and consistent with assessments and academic indicators adopted by other schools in the same state or region) shall adopt an appropriate assessment and other academic indicators that meet the requirements of Section 1111. Each BIE school that is accredited by a tribal accrediting agency or tribal division of education shall use an assessment and other academic indicators developed by such agency or division, except that the Secretary of the Interior shall ensure that such assessment and academic indicators meet the requirements of Section 1111.\nESEA, Section 8204 contains provisions related to the setting aside of funds for the Department of the Interior to participate in the development of standards, assessments, and accountability systems in BIE-funded schools. For the purposes of Title I-A, the Secretary of the Interior, in consultation with the Secretary of Education (if requested by the Secretary of the Interior), shall use a negotiated rulemaking process to develop regulations that define the standards, assessments, and accountability systems for schools funded by the BIE. Using the negotiated rulemaking process, the Secretary of the Interior was required to develop regulations for implementation no later than the 2017-2018 school year.\nThe tribal governing body or school board of a school funded by the Bureau of Indian Affairs may waive the aforementioned requirements if they are determined by such body to be inappropriate. If the requirements are waived, the tribal governing body or school board must submit a proposal to the Secretary of the Interior for alternative standards, assessments, and accountability systems within 60 days. The Secretary of the Interior and the Secretary of Education shall approve such standards, assessments, and accountability systems unless the Secretary of Education determines that they do not meet the requirements of ESEA, Section 1111, while taking into account the unique circumstances and needs of the schools and students served.\nThe Secretary of the Interior and the Secretary of Education shall provide technical assistance, either directly or through a contract, to a tribal governing body or school board (if requested by such body) to develop alternative standards, assessments, and accountability systems.\n\n\tReport Cards and Other Reports\n\nSection 1111 includes specific requirements related to annual SEA, LEA, and school public report cards. It also includes requirements related to reporting data to the Secretary and Congress. This section discusses these requirements as well as privacy requirements that apply to Section 1111.\n\n\t\tReport Card Requirements\n\nStates and LEAs are required to prepare and disseminate annual report cards that include a range of information. LEAs are also required to prepare and disseminate report cards for each of their public schools.\n\n\t\t\tState Report Cards\n\nAny state that receives Title I-A funding is required to prepare and widely disseminate an annual, overall state report card. The report card must be concise. It must be presented in an \"understandable and uniform\" format that is developed in consultation with parents. And, to the extent practicable, it must be made available in a language that parents can understand. With respect to the dissemination of the document, an SEA is required to have a single page on its website that includes the state report card, all LEA report cards, and the annual report that the SEA must submit to the Secretary.\nThe state report card must include, at a minimum, several elements ranging from information about the state's accountability system to teacher qualifications. Each required element is discussed briefly below. In guidance issued in September 2019, ED included a table that summarizes subgroup disaggregation reporting requirements for each data element. \n\n\t\t\t\tDescription of State Accountability System\n\nEach state report card must include a \"clear and concise\" description of the state's accountability system required under Title I-A. This includes a description of the minimum number of students for each subgroup for use in the accountability system. The report card must also include the long-term goals and measures of interim progress for all students and the subgroups for which the SEA is held accountable. In addition, the report card must include a description of the state's system for meaningfully differentiating all public schools in the state, including the following:\nThe specific weight assigned to each of the indicators in the state's system for meaningful differentiation. The methodology used by the state to differentiate among schools; The methodology by which a state differentiates a school as \"consistently underperforming\" for any subgroup of students for which the SEA is held accountable. The report card must also indicate the number of years used in determining whether a school is consistently underperforming. The methodology used by the state to identify a school for CSI.\n\n\t\t\t\tSchools Identified for CSI or TSI\n\nThe report card must include the number and names of all public schools in the state identified for CSI or implementing TSI. There is no separate reporting requirement for schools implementing ATSI. The report card must also provide a description of the exit criteria established by the state for exiting CSI status and the number of years that ATSI schools have to fail to improve before being identified for CSI.\n\n\t\t\t\tDisaggregated Data on Student Performance\n\nEach state report card is required to include information about student performance. The report must include data for all students and data disaggregated by each major racial\/ethnic group, economically disadvantaged students, children with disabilities, English proficiency status, gender, migrant status, homeless status, foster care status, and status as a student with a parent who is a member of the Armed Forces on activity duty on student achievement on the mathematics, RLA, and science assessments required under Title I-A at each level of achievement.\nFurther, for the (1) \"all students\" group, (2) student subgroups with separate accountability determinations, (3) students who are homeless, and (4) students in foster care, the state report card must include information on performance on the other academic indicator included in the state's accountability system for elementary schools and secondary schools that are not high schools. For the same groups of students, the state report card must report on high school graduation rates, including the four-year adjusted cohort graduation rate and, at the state's discretion, any extended-year adjusted cohort graduation rates used by the state. \nThe state report card must also include other student-specific data. For only students in the EL subgroup, state report cards must provide data on the number and percentage of ELs achieving English language proficiency. For the (1) \"all students\" group, and (2) student subgroups with separate accountability determinations (with the exception of ELs), the state report card must include information on performance on the indicator(s) of school quality or student success used in the state's accountability system, as well as their progress toward meeting the state's long-term accountability system goals, including interim progress. And for the (1) \"all students\" group, (2) student subgroups with separate accountability determinations, (3) gender subgroups, and (4) migrant status group, the state report card must include data on the percentage of students assessed and not assessed.\n\n\t\t\t\tCivil Rights Data Collection (CRDC) Reports\n\nThe state report card is required to include information submitted by the SEA and each LEA in the state pursuant to Section 203(c)(1) of the Department of Education Organization Act (DEOA), which is a reference to data collected through the Civil Rights Data Collection (CRDC) administered by the Office of Civil Rights at ED. The CRDC is conducted every other year and the next CRDC is scheduled to collect data from the 2019-2020 school year. From the data reported on the CRDC, the state report card must include the following information:\n\"measures of school quality, climate, and safety, including rates of in-school suspensions, out-of-school suspensions, expulsions, school-related arrests, referrals to law enforcement, chronic absenteeism (including both excused and unexcused absences), incidences of violence, including bullying and harassment;\" the number and percentage of students in preschool programs; and the number and percentage of students in accelerated coursework to earn postsecondary credit while in high school (e.g., Advanced Placement, International Baccalaureate, dual or concurrent enrollment). \nFor some of the reporting requirements related to the CRDC, the CRDC collects multiple measures from which SEAs and LEAs must select at least one to include on the required report cards. The ESEA requires that these data be included annually on report cards. As the CRDC reports data biennially, SEAs and LEAs are permitted to include the same information for consecutive years provided it is the most recent data provided by ED. SEAs and LEAs also have the option to report, in addition to the ED-provided data, more recent data that the SEAs and LEAs have provided to ED through a more recent CRDC data collection as long as the data provided are reported separately from the ED-provided data.\nAdditional statutory language reinforces that the reporting requirement related to the aforementioned data elements is limited to data collected under the authority of Section 203(c)(1) of the DEOA and cannot require disaggregation for subgroups beyond economically disadvantaged students, students from major racial\/ethnic groups, children with disabilities, and ELs, as well as by homeless status and foster care status.\n\n\t\t\t\tTeacher Qualifications\n\nState report cards must provide data, in the aggregate, and disaggregated by high-poverty as compared to low-poverty schools, on the professional qualifications of teachers. More specifically, data must be provided on the number and percentage of inexperienced teachers, principals, and other school leaders; teachers teaching with emergency or provisional credentials; and teachers who are not teaching in the subject or field for which they are certified or licensed. Several of the terms related to the reporting of these data elements, such as high-poverty schools , low-poverty schools , and teachers who are not teaching in the subject or field for which the teacher is certified or licensed are not defined in statutory language. In its guidance, ED suggests that SEAs may want to develop uniform definitions for the undefined terms.\n\n\t\t\t\tPer-Pupil Expenditures\n\nThe state report card must provide data on LEA- and school-level per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of these funds, disaggregated by the source of funds for the preceding fiscal year. The data reported to meet the requirements of Section 1111 cannot be based on average staff salary data. The data must be reported for every LEA and public school in the state. An SEA may provide LEAs with the flexibility to develop their own procedures for calculating per-pupil expenditures or could opt to establish uniform statewide procedures for making these calculations. \nPer-pupil expenditure data have not been reported for LEAs and public schools in the past. Based on guidance issued by ED, SEAs and LEAs may delay reporting per-pupil expenditures until they issue report cards for the 2018-2019 school year. However, if an LEA decides to delay the reporting of per-pupil expenditures, the SEA and its LEAs are required to provide information on their report cards for the 2017-2018 school year about the steps they are taking to provide such information on the 2018-2019 school year report card. ED has indicated that it expects SEAs and LEAs to make these data public by the end of the school year during which the other report card data are released.\n\n\t\t\t\tStudent Assessments\n\nThe state report card must include additional information related to student assessments. It must include the number and percentage of students with the most significant cognitive disabilities who take an alternate assessment (see previous discussion) by grade and subject. It must also include the results on the state's National Assessment of Education Progress (NAEP) for reading and mathematics in grades 4 and 8 compared to the national average. As NAEP is administered biennially, report cards should reflect the most recent data available. \nIn states where data are available, SEAs must include data on the cohort rate for all students and disaggregated for economically disadvantaged students, students from major racial\/ethnic groups, children with disabilities, and English learners who graduate from high school and enroll, for the first academic year following the students' graduation, (1) in public postsecondary education programs in the state, and (2) if data are available and to the extent practicable, in private postsecondary education programs in the state or in postsecondary education programs outside of the state.\n\n\t\t\t\tState-Determined Information\n\nThe state may include any additional information on its state report card that it believes will provide members of the public, including parents and students, with information about the progress of each of the state's elementary and secondary schools. Statutory language notes that this may include the number and percentage of students attaining career and technical proficiencies.\n\n\t\t\tState Data Cross Tabulations\n\nSEAs are required to provide specific information included on the state report card to the public in an \"easily accessible and user-friendly manner\" that allows the data to be cross-tabulated by, at a minimum, each major racial and ethnic group, gender, English proficiency status, and children with or without disabilities. The ability to cross-tabulate data applies to data reported on\nstudent achievement on the RLA, mathematics, and science assessments at all achievement levels; performance on the other academic indicator used for public elementary schools and secondary schools that are not high schools; high school graduation rates, including the four-year adjusted cohort graduation rate and, at the state's discretion, any extended-year adjusted cohort graduation rates used by the state; and the percentage of students assessed and not assessed. \nSEAs may choose to include this information in the annual state report card. The data provided for cross-tabulation purposes must not reveal any personally identifiable information about an individual student and cannot include a number of students in any cross-tabulation that is insufficient to provide statistically reliable information or that would reveal any personally identifiable information about an individual student. It must also be consistent with the Family Educational Rights and Privacy Act (FERPA) of 1974.\n\n\t\t\tLEA and School Report Cards\n\nAn LEA that receives Title I-A funds is required to prepare and disseminate an annual LEA report card that includes information on the LEA overall and each public school it serves. Similar to the requirements for state report cards, an LEA report card must be concise. It must be presented in an understandable and uniform format and, to the extent practicable, in a language that parents can understand. The report card must also be publicly accessible, including on the LEA's website. \nAn SEA is required to ensure that each of its LEA collects necessary data and includes information on all of the items that are also required to be reported on the state report card, including the disaggregation of data as specified above, with one exception: the LEA report card does not have to include NAEP scores, as these scores are only available at the LEA level for a subset of all LEAs in the United States. In addition, requirements for the state report card that require comparisons between the state and the nation as a whole are modified to be a comparison between an LEA and the state as a whole in the case of LEA report cards, and a comparison between a school and the LEA as a whole and the state as a whole in the case of school report cards. LEAs are permitted to include additional information on their report cards that the LEA determines will provide members of the public, including parents and students, with information about the progress of each of the state's elementary and secondary schools, regardless of whether the information is also included on the state report card.\n\n\t\tState Reports to the Secretary\n\nEach SEA receiving Title I-A funds is required annually to report to the Secretary, and make several pieces of information \"widely available\" in the state. The SEA must provide information on student achievement on the mathematics, RLA, and science assessments required under Title I-A, and must disaggregate the results for student subgroups with separate accountability determinations. The report must also include information on the acquisition of English proficiency by ELs. The SEA must include the number and names of each public school in the state that has been identified for CSI and the number and names of each public school in the state that is implementing TSI. There is no separate reporting requirement for schools identified for or implementing ATSI. In addition, the report must include information on the professional qualifications of teachers, including the number and percentage of inexperienced teachers, teachers teaching with emergency or provisional credentials, and teachers who are not teaching in the subject or field in which they are certified or licensed.\n\n\t\tSecretary Reports to Congress\n\nThe Secretary is required annually to submit a report to the House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and Pensions that provides national and state-level data based on the data that were submitted to the Secretary by the states. The report must be submitted electronically only. There is no requirement that the report be made available publicly.\n\n\t\tPrivacy\n\nAny information collected and disseminated in response to the aforementioned reporting requirements must be collected and disseminated in such a way that it protects the privacy of individuals consistent with FERPA. In addition, the report cards and reports shall only include data that \"are sufficient to yield statistically reliable information.\" Data reported in the report cards and reports do not have to be disaggregated if doing so will reveal personally identifiable information about a student, teacher, principal, or other school leader. Data also do not have to be disaggregated if doing so will provide data that are insufficient to yield statistically reliable information.\n\n\tFrequently Asked Questions\n\nThe last part of this report provides responses to frequently asked questions (FAQs) about various aspects of the educational accountability requirements enacted in the ESEA, as amended by the ESSA. In particular, FAQs related to academic content standards, assessment, accountability systems, and report cards are addressed. \n\n\t\tStandards\n\nThis section highlights two frequently asked questions with respect to the state standards requirements under Title I-A. \n\n\t\t\tDoes the Secretary tell states what standards they have to use?\n\nThe ESEA explicitly says that a state is not required to submit its challenging state academic standards, alternate achievement standards, or English language proficiency standards to the Secretary for review or approval. The Secretary also does not have the authority \"to mandate, direct, control, coerce, or exercise any direction or supervision over any of the challenging State academic standards adopted or implemented by a State.\"\n\n\t\t\tWhat are the Common Core State Standards? Do states have to use them?\n\nConcerns related to the diversity of accountability systems, student mobility, consistent expectations for students, preparation of students for global competition, and skills students need for employment spurred an effort led by the National Governors Association and the Council of Chief State School Officers to develop common standards for English language arts\/literacy and mathematics in grades K-12 (referred to as the Common Core State Standards). This effort is referred to as the Common Core State Standards Initiative (CCSSI). According to the CCSSI, \nThe purpose of this state-led initiative ... is to create a rigorous set of shared standards that states can voluntarily adopt. The standards are crafted to \"define the knowledge and skills students should have within their K-12 education careers so they graduate from high school able to succeed in entry-level, credit-bearing academic college courses and workforce training programs.\" \nOverall, 45 states, the District of Columbia, four outlying areas, and the Department of Defense Education Activity (DoDEA) adopted the Common Core State Standards at some point in time. Adoption of the Common Core State Standards has always been optional. However, some federal initiatives such as the Race to the Top (RTT) State Grant competition that began in 2009 provided substantial incentives to states that had adopted college- and career-ready standards that met specified requirements, and the Common Core State Standards was the most widely available set of standards that met such requirements. \nAs discussed above, however, the Secretary does not have the authority to tell states what standards they must use to comply with the requirements of Title I-A. Thus, the decision to adopt (or not adopt) the Common Core State Standards as a state's standards rests solely with the state.\n\n\t\tAssessment\n\nThis section discusses some examples of FAQs that have arisen as SEAs and LEAs implement the assessment requirements. The FAQs are related to the use specific assessments, assessment of students with disabilities, and the new assessment flexibilities. \n\n\t\t\tCan the Secretary tell states what assessments they have to use?\n\nThe ESEA contains multiple provisions that prohibit the Secretary from specifying the assessments that a state must use to comply with the requirements of Title I-A.\n\n\t\t\tDo states have to use the assessments developed to align with the Common Core State Standards?\n\nAs previously discussed, the Secretary is prohibited from prescribing which assessments a state must use, provided the assessments selected by the state meet statutory requirements. Through the Race to the Top Assessment Grant competition, the Partnership for the Assessment of Readiness for College and Careers (PARCC) and the SMARTER Balanced Assessment Consortium (Smarter Balanced) received grants to develop assessments aligned with the Common Core State Standards. Many states continue to use assessments developed by these organizations, but doing so is optional.\n\n\t\t\tCan a state or LEA use a test like the SAT or ACT for its high school assessment in its statewide accountability system?\n\nA state may use the SAT or ACT for its high school assessment in its statewide accountability system, provided that the assessment is approved for use in the state plan. In short, the state must provide evidence that the SAT or ACT (1) is aligned with and equivalent to the state's academic content standards; (2) provides comparable, valid, and reliable data compared to the state assessment; (3) meets the general requirements of assessment systems with the exception that it need not be administered to all students in the state; and (4) provides unbiased, rational, and consistent differentiation between schools within the state. While the use of the SAT or ACT is a potentially viable option, the alignment evidence that must be collected and submitted to ED may be a barrier to implementing the flexibility. \nIn March 2016, the SAT administered a newly redesigned assessment, which made a more focused effort to align itself with the Common Core Academic Standards. If there is a high degree of alignment between a state's academic content standards and the Common Core Academic Standards, the SAT may be suitable for use in accountability systems (provided the SAT meets the other requirements). The ACT was redesigned prior to the development of the Common Core Academic Standards; however, a representative from the ACT maintains that there is \"significant overlap\" between the common core and the college- and career-readiness constructs measured by the ACT. An Education Week survey of the states found that 25 require students to take the SAT or ACT, and 12 currently use the SAT or ACT for federal reporting and statewide accountability systems. \nIf the SAT or ACT is not already used by the state in its accountability system, an LEA may request the use of a locally selected high school assessment (such as the SAT, ACT, Advanced Placement or International Baccalaureate exams, ACCUPLACER, or the ASVAB). The locally selected high school assessment must be approved by the state before an LEA uses it for accountability purposes. An Education Week article cites several reasons why states may not be adopting this flexibility more quickly, including the requirements that a state (1) figure out how to pay for the flexibility, (2) design a process for districts to apply for the flexibility, and (3) collect evidence that compares data from the statewide assessment and the locally selected high school assessment. Furthermore, an assessment expert explains in the article that it is difficult to have this flexibility and a comparable accountability system. By allowing the flexibility, states are opening the door to LEAs requesting different assessments from one year to the next. While the locally selected high school assessment must be comparable to the statewide assessment, it will not overlap 100% with the statewide assessment. If assessments continue to change from one year to the next, it may be more difficult to compare results across assessments and track progress over time than if only one assessment was allowed.\nSome states have applied for waivers of the locally selected high school assessments requirements. In one case, a state requested a waiver because an LEA requested to administer the ACT in lieu of the high school assessment before the state approval process was completed. The waiver was not approved, in part because the state had not submitted a timely request and did not demonstrate how the results of the ACT would be comparable to the results of the state test used in other high schools.\n\n\t\t\tAre states applying for the alternate assessment waiver for students with disabilities?\n\nFor school year 2017-2018, 28 states requested a waiver to exceed the 1% cap for alternate assessments. Of the 28 states that requested waivers, 23 received them. At least 19 of the 23 states were granted a one-year extension of the waiver for school year 2018-2019, and 3 additional states were granted new waivers for school year 2018-2019.\nThe National Center on Educational Outcomes (NCEO) tracks student participation in alternate assessments by state. The most recent NCEO publication reports on participation from school year 2015-2016, before the new alternate assessment requirements were in place. These data provide a baseline for expected rates of participation in alternate assessment in the short term. In general, most states reported alternate assessment participation rates between less than 1% and 2.5%; a participation rate of 2% is twice the allowable rate in statutory language. \n\n\t\t\tAre states still permitted to identify students for alternate assessments based on modified achievement standards?\n\nThe ESEA, as amended by the ESSA, no longer allows the use of modified achievement standards (AA-MAS). Assessment options for students with disabilities have changed over the last several years. In the past, students with disabilities could participate in the general state assessment, alternate assessments based on alternate achievement standards (AA-AAS), or alternate assessments based on AA-MAS. States have been transitioning away from AA-MAS since around 2014. Therefore, students with disabilities who previously participated in AA-MAS are now required to participate either in the general state assessment or the AA-AAS (if they are determined to be students with the most significant cognitive disabilities and eligible to participate in an alternate assessment). \nThe prohibition on the use of modified achievement standards (and therefore the AA-MAS option) may have led to an overidentification of students found eligible to participate in AA-AAS. As discussed above, approximately 40% of states have requested waivers to the 1% cap on AA-AAS, which may suggest that some of the students who were once eligible for AA-MAS are now eligible for AA-AAS. States may need to consider revising their definition of most significant cognitive disability and consider strategies for successfully transitioning students who took the AA-MAS to the general assessment.\n\n\t\t\tHave any states applied for and received the innovative assessment authority?\n\nAs of September 2019, the Secretary has granted innovative assessment and accountability demonstration authority to four states: Georgia, Louisiana, New Hampshire, and North Carolina. , , Georgia is piloting two technology-based assessments designed to provide educators with data that can be used to target instruction during the school year. Louisiana is developing a new format for the Louisiana Educational Assessment Program (LEAP) in ELA and social studies. New Hampshire is building on its Performance Assessment for Competency Education (PACE) system. North Carolina is using a customized, end-of-year assessment (referred to as the \"route\"), which is developed for individuals based on their performance on two formative assessments administered during the school year.\n\n\t\t\tWhat are some possible consequences if numerous students in a school, LEA, or state choose to opt out of the required assessments?\n\nExcessive numbers of opt-outs may have consequences for both assessment and accountability purposes. In terms of assessment, excessive numbers of opt-outs may undermine the validity of the measurement of student achievement because they may create a scenario in which states are measuring student achievement that is not representative of the whole student population. When at least 95% of all students and 95% of students in each student subgroup participate in the assessments, the conclusions based on the results are more likely to be valid and reliable for differentiating schools based on academic achievement.\nIn terms of accountability, excessive numbers of opt-outs may lead to states failing to meet the requirement that 95% of all students and 95% of students in each student subgroup are assessed in the Title I-A assessment and accountability system. The specific consequences for failing to meet this 95% threshold for accountability purposes are determined by the state. \n\n\t\tAccountability Systems\n\nThis section includes FAQs that have arisen as SEAs, LEAs, and schools implement ESEA accountability requirements. They cover topics such as the use of student growth measures, the identification of schools for improvement, and whether accountability requirements can be waived.\n\n\t\t\tAre SEAs required to use measures of student growth in their accountability system?\n\nNo, but states have the discretion to do so. Statutory language requires that the proficiency of students on the RLA and mathematics assessments be included as an indicator for all public schools in a state. It provides states with the option to use measures of student growth on the state assessments for high school students. The use of these growth measures would be in addition to the use of the proficiency measures. Public elementary and secondary schools that are not high schools are required to use, in addition to the proficiency measures, either a measure of student growth, \"if determined appropriate by the state,\" or another \"valid and reliable statewide indicator that allows for meaningful differentiation in school performance.\" Thus, the state also has the option to use student growth as measured by the RLA and mathematics assessments as an indicator for elementary and secondary schools that are not high schools. \n\n\t\t\tCan an LEA use measures of student growth if they are not part of the state accountability system?\n\nAn LEA may use measures of student growth only for limited purposes if the state chooses not to use them. As previously discussed, the SEA is charged with developing and implementing the state accountability system, including selecting the indicators that will be included in the system. The use of student growth measures as indicators in the accountability system is left to the SEA's discretion. If an SEA does not choose to incorporate these measures into the accountability system that is used by the state to meaningfully differentiate schools and identify schools for CSI or TSI, then student growth is not an accountability system indictor. However, an LEA could choose to include student growth measures, for example, in the data that it uses at the LEA level for data analysis purposes or makes publicly available.\n\n\t\t\tCan an LEA substitute its indicators for those used in the state accountability system?\n\nAn LEA may only use additional indicators for limited purposes. Statutory language requires SEAs to include specific indicators in the state accountability system and provides SEAs with some flexibility in including other indicators. The indicators included in the state accountability system are required to apply to all public schools in the state. The SEA is required to use its accountability system to determine which schools in the state will be identified for CSI or TSI. While an LEA could choose to add additional indicators, for example, in the data that it uses at the LEA level for data analysis purposes or makes publicly available, the LEA could not use these additional indicators as replacements for the SEA-selected indicators.\n\n\t\t\tCan accountability requirements be waived?\n\nYes. Section 8401 provides the Secretary with the authority to waive various ESEA statutory and regulatory provisions. An SEA or Indian tribe that receives funds under any ESEA program may submit a request to the Secretary to waive any statutory or regulatory requirement pertaining to the ESEA, unless the Secretary is prohibited by law from waiving such provision. An LEA that receive funds under any ESEA program may also request a waiver of ESEA statutory and regulatory provisions, but the LEA must submit its request to its SEA. The SEA then has the option of submitting the LEA's waiver request if the SEA \"determines the waiver appropriate.\"\nThus, an SEA could request a waiver related to its accountability system. For example, an SEA could request that only measures of student growth rather than student proficiency be used in the accountability system or that the SEA be permitted to create a combined measure based on student proficiency and student growth. An LEA could submit a waiver request to operate under a modified accountability system, such as an accountability system where the LEA uses different indicators than those selected by the state. However, as the LEA waiver request would have to be approved by the SEA prior to being submitted to the Secretary, it is possible that an SEA would deny the request and require that all public schools be evaluated using the state established accountability system, as is currently required by statutory language.\n\n\t\t\tDo SEAs have to include subgroup performance when identifying the lowest-performing 5% of Title I-A schools for CSI?\n\nIn identifying the lowest-performing 5% of Title I-A schools for CSI, statutory language requires each state to select these schools using a \"state-determined methodology\" that is based on the \"system of meaningful differentiation.\" As there are no regulations clarifying the identification of schools for CSI, based on ED's approval of state plans it appears that a state can decide whether to use all of the data included in the system of meaningful differentiation, including data for subgroups, or use only selected elements from the system of meaningful differentiation in its state-determined methodology for identifying CSI schools. There are ED-approved state plans that include subgroup performance in the identification of the lowest performing 5% of schools for CSI and also approved state plans that do not include it. For example, the District of Columbia's state plan bases 25% of a school's overall accountability framework rating on student subgroup performance. Based on this accountability framework, the lowest performing 5% of schools are identified for CSI. On the other hand, North Carolina's state plan only considers a school's total score on the state accountability model for the all students group when identifying the lowest performing 5% of schools.\n\n\t\t\tDo schools identified for ATSI during the 2019-2020 school year and subsequent school years have to be a subset of the schools identified for TSI?\n\nFor all years following the first school year in which schools are identified for ATSI, the methodology for identifying schools for TSI begins with an SEA's identification of schools with at least one subgroup that is \"consistently underperforming, as determined by the state.\" As such, an SEA has the flexibility to define this group of schools as broadly or as narrowly as it chooses. This could result in a large group of schools being identified for TSI, of which only a subset will be identified for ATSI. It could also result in an SEA identifying schools for TSI in such a way that every one of these schools would also meet the requirements for being identified for ATSI. \nBecause a school's designation for ATS I hinges on being identified for TSI afte r the first sc hool year in which schools are identified for ATSI , ATS I schools are a subset of TSI schools. Because the ESEA allows SEAs to define what a consistently underperforming subgroup of students means for designation as a TSI school, it appears that an SEA could use the ATS I criteria\u00e2\u0080\u0094a school having at least one subgroup of students whose level of performance, if reflective of the entire school's performance, would cause the school to be among the lowest-performing 5% of schools receiving Title I-A funds in the state\u00e2\u0080\u0094as its definition of a school having a consistently underperforming subgroup of student s. Under such circumstances, the SEA 's TSI and ATS I schools would be the same. A state could also choose to implement a more restrictive definition of a consistently underperforming subgroup of students than the ATSI definition, resulting in fewer schools being identified for ATSI than would otherwise be identified if schools did not have to be initially identified for TSI.\n\n\t\tThe Bureau of Indian Education\n\nAs previously discussed, there are special rules regarding standards, assessment, and accountability for schools operated or funded by the BIE that apply until the requirements of Section 8204 are met. Section 8204 requires the Department of the Interior to participate in the development of standards, assessments, and accountability systems in BIE-funded schools using a negotiated rulemaking process. The process was required to result in the development of regulations for the implementation of standards, assessments, and accountability systems no later than the 2017-2018 school year. \n\n\t\t\tHas the BIE met the requirements of Section 8204?\n\nOn June 10, 2019, the Bureau of Indian Education proposed a rule developed using a negotiated rulemaking process as required by the ESEA to meet the Secretary of the Interior's obligation to define standards, assessments, and accountability system consistent with the ESEA for BIE-funded schools. Comments on the rule were due on August 9, 2019. A final rule had not been issued as of February 14, 2020. \n\n\t\tReport Cards\n\nThis section includes two FAQs related to state and LEA report cards. \n\n\t\t\tWhen do report cards first need to reflect the new ESSA requirements?\n\nSEA and LEA report cards for the 2017-2018 school year must include the information required by ESSA with the exception of the per-pupil expenditures data. ED is allowing SEAs and LEAs to delay reporting per-pupil expenditures data until report cards for the 2018-2019 school year. SEAs and LEAs are required to explain the delay in reporting per-pupil expenditures if the data are not being reported until the 2018-2019 school year. In addition, while the per-pupil expenditures data do not have to be reported at the same time as other report card data are released, ED expects SEAs and LEAs to make these data public by the end of the school year during which the other report card data are released. \n\n\t\t\tDo report cards have to indicate why a school was identified for improvement?\n\nSEAs and LEAs are not required to say why a school was identified for CSI, TSI, or ATSI. For example, a report card does not have to indicate whether a school was identified for CSI because it was one of the lowest-performing 5% of Title I-A schools, had a graduation rate of 67% or less, or failed to exit ATSI status in a state-determined number of years. In its report card guidance, ED indicates that SEAs and LEAs \"may wish\" to provide this information on report cards and provides examples of the types of information that an SEA or LEA might consider including. For example, an SEA or LEA might indicate which subgroup(s) led to the school's identification for TSI.\n\n\t\t\t\tAppendix. Glossary of Acronyms","output":null}
{"id":"gao_GAO-20-54","pid":"gao_GAO-20-54_0","input":"\tBackground\n\n\t\tHurricanes Irma and Maria\n\nIn September 2017, Hurricane Irma struck the islands of St. Thomas and  St. John, and two weeks later, Hurricane Maria struck the island of St.  Croix in the USVI, causing catastrophic damage across the entire territory  and neighboring Caribbean islands (see fig. 2).\nThe storms severely damaged the USVI\u2019s critical infrastructure, leaving  many of the territory\u2019s 107,000 residents without electricity, phone  service, food, or running water. According to a September 2018 report  from the USVI Hurricane Recovery and Resilience Task Force (USVI  Task Force Report), the hurricanes devastated the territory\u2019s electricity  grid and telecommunications systems, shutting down both for months.  Further, the storms damaged more than half of the territory\u2019s housing  units, as well as its hospitals, government buildings, schools, water and  wastewater facilities, and more (see figs. 3 and 4). Overall, the report  estimated that the hurricanes caused approximately $10.7 billion in total  damages across the USVI.\nIn response to the request of the Governor of the USVI, the President  declared a major disaster the day after each hurricane struck the  territory. Major disaster declarations can trigger a variety of federal  response and recovery programs for government and nongovernmental  entities and households and individuals, including assistance through the  Public Assistance program and Hazard Mitigation Grant Program.  Under the National Response Framework and National Disaster  Recovery Framework, DHS is the federal department with primary  responsibility for coordinating disaster response and recovery, and within  DHS, FEMA has lead responsibility. The Administrator of FEMA serves  as the principal adviser to the President and the Secretary of Homeland  Security regarding emergency management.\n\n\t\tFEMA\u2019s, States\u2019, and Territories\u2019 Roles and Responsibilities for Disaster Recovery\n\nOnce the President has declared a major disaster, FEMA, the state or  territorial government (the recipient), and local or territorial entities (the  subrecipient) work together to, among other things, identify and develop  projects through the Public Assistance program and Hazard Mitigation  Grant Program. After a project has completed FEMA\u2019s review process  and is approved, FEMA obligates funding for the project by placing  money into an account where the recipient has the authority to draw  down\u2014or expend\u2014funding to pay for eligible work upon completion.  Further, when a project has been completed, FEMA conducts a close-out  process to certify that all eligible work has been completed and reconciles  the actual cost incurred. If the actual cost of the completed work is less  than the amount of money FEMA obligated for the project, FEMA will  deobligate funding. However, if the actual cost of the completed work is  greater than the amount of money FEMA obligated for the project, FEMA  may reimburse the subrecipient for these additional costs.\nA state or territorial governor may designate a governor\u2019s authorized  representative to oversee all aspects of disaster assistance\u2014including  Public Assistance program and Hazard Mitigation Grant Program  funding\u2014to ensure the USVI\u2019s compliance with federal regulations and  FEMA requirements. Among other responsibilities, the governor\u2019s  authorized representative is to confirm that subrecipients submit complete  documentation demonstrating that all eligible work completed is in  accordance with program requirements.\n\n\t\tFEMA\u2019s Public Assistance Program and Hazard Mitigation Grant Program\n\nFEMA\u2019s Public Assistance program provides grant funding to state,  territorial, local, and tribal governments, as well as certain types of private  nonprofit organizations, to assist with the repair or replacement of  disaster-damaged public infrastructure. To develop projects under the  Public Assistance program, FEMA and USVI officials collaborate to  identify and document the damage caused by a disaster to a particular  system or facility. These officials then use this damage assessment to  formulate the scope of work\u2014or activities required to fix the identified  damage\u2014as well as the estimated cost of these activities.\nAs shown in figure 5, Public Assistance grant funds are organized broadly  as \u201cemergency work\u201d or \u201cpermanent work.\u201d Within these areas are  separate categories of work. In addition to emergency work and  permanent work, the program includes category Z, which represents  indirect costs, direct administrative costs, and any other administrative  expenses associated with a specific project.\nUnder the Public Assistance program\u2019s permanent work categories,  FEMA also provides grant funding for cost-effective hazard mitigation  measures to reduce or eliminate the long-term risk to people and property  from future natural and man-made disasters and their effects. FEMA  provides this funding in conjunction with the repair of disaster-damaged  facilities to enhance their resilience during future disasters. For example,  this funding could be used to replace damaged wooden utility poles with  composite fiberglass ones to increase the resilience of an electricity  distribution system and mitigate the potential for future damage from  hurricane-force winds.\nFEMA\u2019s Hazard Mitigation Grant Program provides grant funding for long- term mitigation solutions to reduce the risk of loss of life and property  from future disasters. Unlike mitigation measures funded through the  Public Assistance program to further protect disaster-damaged  infrastructure, the Hazard Mitigation Grant Program may fund measures  for systems, facilities, or properties that were not damaged in the disaster.  For example, program funding can be used to construct floodwater  control measures\u2014such as berms and rock linings\u2014that did not exist  prior to the disaster, or to update existing hazard mitigation plans to  accurately reflect current mitigation goals.\n\n\t\tThe Public Assistance Alternative Procedures Pilot Program in the USVI\n\nIn July 2018, FEMA approved the use of the Public Assistance alternative  procedures pilot program for permanent work projects in the territory.  Unlike the standard Public Assistance program wherein FEMA will fund  the actual cost of a project, the alternative procedures require awards for  permanent work projects to be made on the basis of fixed-cost estimates.  As a result, the recipient or subrecipient is ultimately responsible for any  project costs that exceed the agreed-upon fixed-cost estimate at the time  of the close-out process.\nHowever, the alternative procedures program also provides the USVI with  financial incentives for the timely and cost-effective completion of work  and additional flexibilities that are not available through the standard  Public Assistance program. For example, the USVI may use excess grant  funding for cost-effective hazard mitigation measures and, in certain  circumstances, consolidate permanent work projects approved under the  alternative procedures and share obligated funding across these projects.  Further, section 20601 of the Bipartisan Budget Act of 2018 authorizes  FEMA, when using the alternative procedures, to provide assistance to  fund the replacement or restoration of disaster-damaged infrastructure  that provide critical services without regard to pre-disaster condition (see  fig. 6). For example, through the Act, FEMA may fund the restoration of  a disaster-damaged school building\u2014which provides a critical service\u2014to  accepted industry standards applicable to the construction of education  facilities. Therefore, according to FEMA policy, if components of the  school building were not up to industry standards or in poor condition  prior to the 2017 hurricanes, the Act allows FEMA to fund the restoration  of this building to a better condition than it was in prior to the storms.\n\n\t\tThe Sheltering and Temporary Essential Power Pilot Program\n\nThe Sheltering and Temporary Essential Power (STEP) pilot program is  an emergency sheltering program implemented under FEMA\u2019s  emergency work authority and funded through the Public Assistance  program\u2019s category B emergency work. The program\u2014which was  created following Hurricane Sandy in 2012\u2014allows FEMA to fund  emergency, temporary repairs to make damaged homes habitable by, for  example, restoring electricity to a private home and applying temporary  patches to roofs and windows to protect the interior. In funding these  types of repairs, FEMA\u2019s goal is to quickly make damaged homes  habitable in the short term until the homeowner could complete more  permanent repairs independently through other FEMA programs or  private insurance payments. Since 2012, FEMA has implemented the  program as a tool in addressing the unique circumstances and challenges  associated with providing safe sheltering options for disaster survivors.\n\n\tFEMA Obligated More Than $1.9 Billion through Two USVI Recovery Programs as of June 30, 2019, but Faced Some Challenges in Implementing Recovery Projects\n\n\t\tStatus of FEMA Public Assistance Program and Hazard Mitigation Grant Program Funding in the USVI\n\nAs of June 30, 2019, FEMA obligated more than $1.9 billion in grant  funding for 640 projects through the (1) Public Assistance program and  (2) Hazard Mitigation Grant Program in the USVI. First, FEMA obligated  more than $1.8 billion in Public Assistance grant funding for 618 projects  across the USVI (see fig. 7). Specifically, FEMA obligated more than  $1.1 billion for emergency work projects (categories A and B), about  $588.5 million for permanent work projects (categories C through G), and  about $141.2 million for management costs (category Z). Of the  approximately $1.8 billion FEMA obligated in Public Assistance grant  funding as of June 30, 2019, the USVI had expended nearly $1.1 billion  (59 percent) to reimburse subrecipients for completed work. Appendix I  provides more detailed information on the status of Public Assistance  grant funding in the USVI.\nSecond, FEMA obligated about $60.6 million for 22 Hazard Mitigation  Grant Program projects in the territory as of June 30, 2019. These  projects are designed to fund mitigation measures to increase the longer- term resilience of the USVI\u2019s infrastructure during future disasters. Of the  $60.6 million FEMA obligated as of June 30, 2019, the USVI expended  about $1.7 million (3 percent) across 5 projects. Appendix II provides  more detailed information on the status of Hazard Mitigation Grant  Program funding in the USVI.\nWhile these data represent the status of grant funding as of June 30,  2019, the amount of FEMA obligations and USVI expenditures for both  programs will likely increase over time as additional projects are finalized  and approved.\n\n\t\tLimited Availability of Local USVI Personnel and Territory\u2019s Difficult Fiscal Situation Presented Challenges to Program Implementation\n\nFEMA, USVI officials, and contractor personnel identified challenges  across three areas that affected the implementation of the Public  Assistance program and the Hazard Mitigation Grant Program in the  USVI. Specifically, they cited: (1) the limited availability of local staff in the  USVI to implement and oversee recovery programs, (2) the inability of  local construction crews to undertake the large number of recovery  projects, and (3) the impact of the USVI\u2019s difficult fiscal situation on  recovery efforts.\nLimited availability of local staff. USVI and FEMA officials cited the  limited number of local USVI personnel with the knowledge and expertise  necessary to staff recovery-related positions in key USVI agencies as a  significant challenge following the 2017 hurricanes. For example, USVI  officials told us that the Virgin Islands Territorial Emergency Management  Agency\u2014the agency initially responsible for overseeing all aspects of  both the Public Assistance program and Hazard Mitigation Grant Program  in the territory\u2014did not have enough employees on staff to effectively  implement and manage these programs. Further, a senior FEMA official  noted that after the storms, the USVI had only one individual responsible  for managing all aspects of the Hazard Mitigation Grant Program across  the territory. In addition, the limited availability of local staff in the USVI  was exacerbated by the departure of qualified individuals following the  hurricanes as well as competition among recovery agencies to hire  qualified staff that remained in the territory, according to USVI officials.\nTo address these challenges, the USVI hired two contractors to augment  the territory\u2019s capacity in the shorter term and established a new Office of  Disaster Recovery to oversee recovery efforts in the longer term. First, in  December 2017, the USVI hired two contractors to assist the territory in  planning, developing, implementing, and overseeing recovery projects,  among other responsibilities. Second, in February 2019, the USVI  established the Office of Disaster Recovery as the primary territorial  agency responsible for coordinating and overseeing all disaster recovery  efforts in the USVI, including the Public Assistance program and Hazard  Mitigation Grant Program. The office\u2019s Director told us that while  contractor personnel had been valuable in augmenting the USVI\u2019s  capacity, the territory was prioritizing the hiring and training of qualified  local hires to replace these contractors for the longer term.\nShortage of local construction crews. Due to the territory\u2019s relatively  small population, FEMA and USVI officials stated there were not enough  local construction crews to address the large amount of construction work  required to repair and rebuild damaged infrastructure following the 2017  hurricanes. These officials told us this construction crew shortage  affected the USVI\u2019s ability to keep Public Assistance program and Hazard  Mitigation Grant Program projects proceeding on time. FEMA and  contractor personnel stated that unlike in the contiguous United States,  the USVI does not have neighboring states that can easily send  construction crews to affected areas to augment local crews. In addition,  historically, the USVI relied on Puerto Rico to supplement the territory\u2019s  capacity, but this was not an option as Puerto Rico was undergoing its  own massive recovery effort as a result of Hurricane Maria.\nThe USVI\u2019s fiscal situation. USVI officials and contractor personnel  stated that the challenging fiscal situation in the territory directly affected  its ability to effectively implement recovery programs. Specifically, USVI  officials told us that the territory\u2019s financial condition made it difficult to  provide initial funding to reimburse subrecipients for completed work prior  to drawing down funding from the account holding FEMA-obligated money. These officials stated this process was problematic because  instead of funding all eligible projects as quickly as possible to move the  recovery forward, the USVI had to prioritize certain recovery projects over  others based on the availability of funding. Further, USVI contractor  personnel told us that the territory often does not have the cash on hand  necessary to provide these reimbursements to subrecipients, which can  result in delays in paying subrecipients and contractors. According to  USVI officials, pursuing projects under the Public Assistance alternative  procedures program may help to address these issues by providing more  flexibility regarding when and how projects are funded.\n\n\t\tChallenges Implementing the Public Assistance Alternative Procedures Program Have Delayed Recovery Projects in the USVI\n\nThe Public Assistance alternative procedures program provides the USVI  with financial incentives and new flexibilities in implementing recovery  projects that are not available through the standard Public Assistance  program. However, FEMA and USVI officials stated that implementing the  alternative procedures program in the USVI presented challenges that  affected recovery efforts and delayed the obligation of funding for  permanent work projects. Specifically, they cited challenges in (1)  developing accurate fixed-cost estimates for program projects and (2)  implementing the new flexibilities authorized by section 20601 of the  Bipartisan Budget Act of 2018. Senior USVI officials told us that due to  these challenges and the financial risk associated with the use of fixed- cost estimates, the USVI is planning to take a cautious approach in  pursuing alternative procedures projects. As established in FEMA  guidance, USVI officials have a deadline of March 2020 to finalize the  fixed-cost estimates for such projects for inclusion in the alternative  procedures program.\nFixed-cost estimates. As the USVI is financially responsible for any  actual costs that exceed the fixed-cost estimate for any given alternative  procedures project, ensuring the accuracy of these estimates is critical  due to the USVI\u2019s already difficult fiscal situation. However, USVI  officials told us that developing fixed-cost estimates that accurately  forecast the future costs of completing large, complex permanent work  projects in the remote island territory is difficult given the unique  circumstances that influence construction costs in the USVI, such as the  limited availability of local resources and the need to import construction  materials and labor. To address this challenge, in October 2018, FEMA  asked an independent contractor to analyze whether a USVI-specific  \u201ccost factor\u201d should be incorporated into FEMA\u2019s process for developing  fixed-cost estimates to ensure the actual costs of implementing  permanent work projects in the territory were captured. According to  FEMA officials, the independent contractor determined that a cost factor  was appropriate for use in the USVI and the contractor proposed several  options. However, territorial officials contended that these proposals did  not sufficiently or accurately capture the unique circumstances that  influence construction costs in the territory. Further, USVI officials stated  that ensuring the accuracy of the cost factor was critical given the  significant financial risk using fixed-cost estimates posed to the USVI.\nSince incorporating a cost factor into the process for developing fixed- cost estimates increases the base cost for any given permanent work  project\u2014and therefore the amount of funding FEMA obligates\u2014FEMA  officials explained the USVI had an incentive to delay the obligation of  projects until FEMA finalized this factor. As a result, FEMA officials told us  in May 2019 that obligations for permanent work projects had been  mostly on hold since October 2018 while the contractor worked to  develop the USVI-specific cost factor. As the USVI is reliant on federal  recovery funding to reimburse subrecipients for completed work, this  delay in obligations directly affected the USVI\u2019s ability to move recovery  projects forward.\nIn May 2019, the contractor proposed a new cost factor, which FEMA  approved on an interim basis pending further analysis. In July 2019,  FEMA officials told us that while additional analyses are required to  ensure its final process for developing fixed-cost estimates in the USVI  accurately captures construction costs, using this interim cost factor in the  meantime allows FEMA and USVI officials to move forward with the  development and final approval of alternative procedures projects. In  August 2019, a senior USVI official told us the territory plans to begin  using the interim cost factor, where appropriate, to keep projects  progressing forward. However, she stated that the USVI questioned  whether the interim cost factor did, in fact, sufficiently capture the actual  costs of construction in the USVI. Given the uncertainty around these  fixed-cost estimates, USVI officials told us the territory will need to  balance the potential flexibilities provided by the alternative procedures  program with the financial risk posed by cost overruns when deciding  whether to use the alternative procedures or the standard Public  Assistance program for any given permanent work project. We are  currently assessing FEMA\u2019s process for developing cost estimates for  projects under both the standard and alternative procedures programs,  and plan to report our results in early 2020.\nThe Bipartisan Budget Act of 2018. While FEMA and USVI officials told  us that section 20601 of the Bipartisan Budget Act presented a valuable  opportunity to advance the USVI\u2019s recovery, they also reported  challenges with implementing the new flexibilities authorized by the Act,  which made developing eligible permanent work projects difficult. For  example, USVI officials stated that, at times, they were unclear about the  implementation process for key components of the Act and thus ensuring  subrecipients understood the process was difficult. Further, FEMA  officials in the USVI told us that initially, they had difficulty obtaining  clarification from FEMA headquarters regarding how to implement key  provisions of the Act, such as the process for identifying and incorporating  relevant industry standards for specific alternative procedures projects.  As a result, permanent work projects that were eligible to use the  flexibilities provided by the Act remained on hold until FEMA could clarify  the process for implementing the Act and pertinent industry standards  could be approved.\nIn addition, the Bipartisan Budget Act was signed into law in February  2018 and applies exclusively to federal disaster assistance to the USVI  and Puerto Rico. As a result, FEMA officials faced the challenge of  interpreting the Act\u2019s language and appropriately implementing its  provisions for the first time. For example, the Act allows for a new process  for determining whether a disaster-damaged facility is eligible to receive  funding to (1) repair the existing facility or (2) replace the facility with a  new structure. Under the standard Public Assistance program, this  determination is calculated using the \u201c50 percent rule\u201d\u2014if the cost of  repairing the disaster-related damage sustained by the facility exceeds 50  percent of the cost of replacing it, FEMA may fund the replacement of the  facility. In contrast, the Act does not provide a similar cost estimating  process for use in developing fixed-cost estimates through the alternative  procedures program. In September 2018, FEMA issued guidance for  implementing section 20601 of the Bipartisan Budget Act through the  Public Assistance alternative procedures program, which provides that  critical services infrastructure\u2014such as medical and educational  facilities\u2014is eligible for replacement \u201cif repair is feasible, but replacement  is more prudent.\u201d FEMA officials in the USVI told us that since the agency  did not have further guidance or criteria on the appropriate process for  evaluating repair or replacement under this new standard, they were  responsible for developing the agency\u2019s first justification to support the  replacement of a hospital in St. Croix based on their interpretation of the  new standard. These officials also stated that since their rationale  justifying the facility\u2019s eligibility for replacement was the first of its kind and  would set a precedent for future projects, they submitted it to FEMA  headquarters for review. In May 2019, FEMA officially approved the  replacement of this hospital through the alternative procedures program.  For more information on how the Public Assistance program and the  Bipartisan Budget Act are affecting recovery efforts at this facility, see  appendix III.\nThe Additional Supplemental Appropriations for Disaster Relief Act of  2019, which was signed into law in June 2019, provides additional  direction to FEMA regarding the implementation of section 20601 of the  Act. Among other things, this legislation includes a provision directing  FEMA to change its process for determining whether a disaster-damaged  facility is eligible for repair or replacement. FEMA evaluated this and  other provisions of the Act and, in September 2019, issued an updated  policy to provide clear guidance moving forward, according to agency  officials.\nThe USVI Governor and senior territorial officials stated that due to the  challenges outlined above and the financial risk posed by exceeding  fixed-cost estimates, the USVI plans to take a cautious approach in  implementing the Public Assistance alternative procedures program.  Specifically, the Governor told us the territory will most likely pursue  alternative procedures projects that are simple, have clear scopes of  work, and do not include high levels of uncertainty to reduce the financial  risk of potential cost overruns. USVI officials added that if they are not  comfortable with the fixed-cost estimate for any given alternative  procedures project, the territory has the option to pursue the project under  the standard Public Assistance program. Under the standard program,  the USVI cannot take advantage of the flexibilities and financial incentives  provided by the alternative procedures and the Bipartisan Budget Act, but FEMA would reimburse the USVI for the actual cost\u2014including any cost  overruns\u2014of all work completed in accordance with a project\u2019s approved  scope of work, thereby mitigating the territory\u2019s financial risk. The USVI is  ultimately responsible for deciding whether the benefits provided through  the alternative procedures program and the Bipartisan Budget Act  outweigh the financial risk associated with agreeing to fixed-cost  estimates for permanent work projects. Since the territory has until March  2020 to finalize these fixed-cost estimates, it remains too early to  determine the extent to which the alternative procedures program will play  a role in the USVI\u2019s long-term recovery strategy.\n\n\tFEMA Discontinued the STEP Pilot Program After Expanding It in the USVI, but Has Not Evaluated Options for Providing Future Emergency Sheltering Assistance\n\n\t\tFEMA Expanded the STEP Pilot Program in the USVI\n\nIn October 2017, FEMA authorized the STEP pilot program in the USVI in  response to the widespread damage to homes that displaced residents  and overwhelmed sheltering and temporary housing resources in the  territory. Through the program, FEMA funded minimal, temporary  protective repairs (or \u201cPhase I\u201d repairs) to private homes to allow  residents a safe place to shelter. For example, Phase I emergency  repairs included applying temporary patches to roofs and windows to  protect the interior from outside weather conditions and ensuring a  functional kitchen and bathroom and safe sleeping area. According to  FEMA documentation, the intent of these minimal temporary repairs was  to quickly make damaged homes habitable in the short term until  homeowners could complete more permanent repairs independently  through other FEMA programs or using private insurance payments.\nIn August 2018, FEMA expanded the STEP pilot program to include the  \u201cpermanent\u201d repair or replacement of damaged roofs (or \u201cPhase II\u201d  work)\u2014the first time in its history that FEMA authorized such work  through this pilot program. Phase II work funded more permanent work on  USVI residents\u2019 damaged roofs\u2014either by repairing damages to the  existing roof or replacing it with a new one. In addition, Phase II work  included incorporating roof hardening measures, such as installing  hurricane clips to the roof berms, to increase the resiliency of the roofs  against hurricane-force winds. Figure 8 provides two examples of USVI  homes that participated in Phase II of the STEP pilot program.\nFEMA expanded the STEP pilot program to address the USVI\u2019s unique,  longer-term sheltering needs. Specifically, as the 2018 hurricane season  arrived, FEMA was faced with the challenge of ensuring adequate  sheltering options were available to USVI residents in the event that  another hurricane struck the territory. The following factors contributed to  FEMA\u2019s decision to expand the STEP pilot program:  Infeasibility of other sheltering programs. Alternate sheltering  options were not viable in the USVI due to the unique circumstances  in the territory. For example, the Transitional Sheltering Assistance  program\u2014where FEMA funds non-congregate sheltering (typically in  hotels or motels) for displaced residents who cannot safely return to  their homes\u2014was not a feasible option as there was only one  operating hotel in the USVI capable of sheltering disaster survivors.  Further, FEMA officials told us that temporary housing units\u2014such as  manufactured housing units or recreational vehicles\u2014could not be  deployed to supplement the territory\u2019s available housing stock due to  logistical challenges, including the prohibitive costs of shipping these  units to the remote territory and the limited availability of space to  install them.\nOperation Blue Roof caused additional damage to homes.\nAccording to FEMA officials, FEMA\u2019s decision to allow homes that had  received temporary blue tarps as an emergency roofing measure  through Operation Blue Roof to be eligible for the STEP pilot program  led to expanding the scope of allowable work funded by the  program. FEMA and USVI officials told us this change was  implemented to address several issues with the blue tarps installed on  homes, including the temporary nature of the tarps\u2014which had a  post-installation lifespan of only 30 days\u2014and the need to fix the  damage caused by installing the blue tarps on undamaged sections of  roofs. FEMA officials stated that expanding the STEP pilot program  to conduct more permanent roof repairs on these homes helped to  ensure homeowners were able to safely shelter in the event of  another hurricane.\nShortage of construction crews. As previously discussed, FEMA  and USVI officials cited the limited number of construction crews  available to implement recovery work as a challenge, including for the  STEP pilot program. Specifically, this challenge made it difficult for  private homeowners to independently hire qualified contractors to  conduct permanent repairs to their homes, according to FEMA  officials. Therefore, these officials explained that using Phase II of the  STEP pilot program to manage contractors in an official capacity  made it more likely that necessary permanent repairs would be  completed in a timely manner.\nEvacuation was not an option. When requested, FEMA is  responsible for providing safe sheltering options following a disaster  and, in the absence of feasible local sheltering options, FEMA is  responsible for evacuating residents to a safe location outside the  potentially affected area. However, according to FEMA  documentation, developing and executing a plan to evacuate the  USVI\u2019s more than 100,000 residents in the event of another hurricane  was impractical.\nGiven these factors and the risk of another hurricane, FEMA officials  determined that authorizing Phase II roof repairs or replacements of a  permanent nature represented an appropriate solution to ensure eligible  program participants could safely shelter in their homes.\nThe STEP pilot program in the USVI officially ended on April 15, 2019.  FEMA reported that 7,381 homes ultimately received repairs through the program. Specifically, 6,372 homes received Phase I temporary repairs  and 1,631 homes received Phase II roof repairs or replacements of a  permanent nature. In addition, 622 homes received both Phase I and  Phase II repairs. According to FEMA officials, the agency is now  conducting the close-out process for the STEP pilot program in the USVI,  which includes reviewing the paperwork for each participating home to  ensure all work was completed in accordance with both the home\u2019s  approved scope of work and overall programmatic requirements.\n\n\t\tFEMA Has Decided Not to Use the STEP Pilot Program During Future Recovery Efforts, but Has Not Evaluated Its Options for Providing Similar Emergency Sheltering Assistance\n\nIn May 2019, FEMA\u2019s Chief Counsel stated that FEMA had decided to  discontinue the STEP pilot program due to significant challenges and  lessons learned from prior experiences implementing the program.  Specifically, FEMA stated that while FEMA had implemented the STEP  pilot program within its authority pursuant to Section 403 of the Stafford  Act, the agency was no longer \u201ccomfortable from a legal, policy, or  pragmatic perspective\u201d with implementing the STEP pilot program  following future disasters.\nFEMA cited two main challenges in implementing the program in the  USVI and elsewhere: (1) limiting the program\u2019s scope to provide only  minimal, emergency repairs, as intended, and (2) completing these  emergency repairs in a timely manner. First, FEMA stated that in multiple  iterations of the STEP pilot program\u2014including in the USVI\u2014FEMA  officials had \u201csuccumbed to the pressure\u201d from state and territorial leaders  to expand the scope of allowable repairs under the program to conduct  more extensive repairs. For example, in the USVI specifically, although  expanding the program to authorize permanent roof repairs was legally  supportable and represented an earnest effort to meet the territory\u2019s  needs, the expansion did \u201cpush the boundaries of appropriateness\u201d and  increased FEMA\u2019s risk of interfering with the agency\u2019s authority to provide  assistance through other FEMA programs.\nSecond, FEMA stated that the lengthy process for delivering the STEP  pilot program\u2014including in the USVI\u2014undercut the program\u2019s stated  intent of providing emergency sheltering within 3 to 4 months following a  disaster. For example, while FEMA authorized the program in the USVI in  October 2017, initial repairs did not begin until March 2018 and eligible  work was not completed until April 2019\u201418 months after the program\u2019s  authorization. According to FEMA, completing STEP pilot program repairs  took longer than intended across most instances of the program\u2019s  implementation due to the amount of time required to develop disaster- specific program guidance, hire a large number of construction crews to  undertake the repair work, obtain the necessary permissions from  homeowners, and ultimately complete the repairs. Given the STEP pilot  program\u2019s protracted period of implementation, FEMA stated the agency  had not been successful in ensuring that program repairs provided  disaster survivors with emergency shelter in a timely manner.\nFEMA\u2019s decision to discontinue the STEP pilot program following future  disasters raises questions about how the agency plans to address the  emergency sheltering needs of disaster survivors in the future\u2014especially  in communities that face challenges and circumstances similar to those  the program was specifically designed to address. Since implementing it  in 2012, FEMA used the STEP pilot program to supplement other FEMA  sheltering programs and provide necessary additional capacity to help  address the emergency sheltering needs of disaster-affected  communities, as described below. In certain cases, the program  provided assistance to more disaster survivors than other relevant FEMA  programs, including the Transitional Sheltering Assistance program and  the provision of temporary housing units. FEMA implemented the STEP  pilot program in the following locations:\nLouisiana: FEMA authorized the STEP pilot program to supplement  other federal programs implemented in Louisiana following severe  storms and flooding in 2016. Specifically, the Transitional Sheltering  Assistance program was not a viable option for most survivors,  partially due to the limited availability of hotels and motels in the  affected area, and FEMA ultimately used this program for  approximately 4,300 households. In addition, FEMA deployed  temporary housing units for approximately 4,600 households. FEMA  also funded repairs through the STEP pilot program for nearly 11,000  homes.\nTexas: FEMA authorized the STEP pilot program to supplement other  federal programs in Texas following Hurricane Harvey in 2017.  Specifically, FEMA determined that implementing the STEP pilot  program provided a useful option since the number of displaced  survivors significantly exceeded the available capacity for sheltering  survivors in local hotels and motels. FEMA used the Transitional  Sheltering Assistance program for approximately 55,000 households  and deployed temporary housing units for more than 3,500  households. FEMA supplemented these programs by funding repairs  through the STEP pilot program for approximately 15,700 homes.\nPuerto Rico: FEMA authorized the STEP pilot program to address  the unique emergency sheltering needs in Puerto Rico following  Hurricanes Irma and Maria in 2017. Specifically, FEMA determined  that approximately 80 percent of the island did not have power and  would not have it restored for an extended period of time. As a result,  FEMA implemented the STEP pilot program to, among other repairs,  reconnect homes to a functioning electricity grid or, as necessary,  fund the installation of generators if the grid could not be restored in a  timely manner. Further, similar to what occurred in the USVI, FEMA  authorized the STEP pilot program to repair homes that participated in  Operation Blue Roof to address the roof damage caused by the  installation of the blue tarps. FEMA funded repairs through the STEP  pilot program for nearly 108,500 homes in Puerto Rico. In addition,  due to the lack of available hotels and motels in Puerto Rico,  participation in FEMA\u2019s Transitional Sheltering Assistance program  was limited to approximately 7,000 households, most of which were  relocated to hotels and motels in the contiguous United States.  Further, as detailed below, FEMA implemented its new Voluntary  Agencies Leading and Organizing Repair program for the first time in  Puerto Rico to conduct repairs to approximately 4,600 homes.\nNorth Carolina: FEMA authorized the STEP pilot program to address  the particular emergency sheltering needs in North Carolina following  Hurricane Florence in 2018. FEMA amended the STEP pilot program  to allow both contracted construction crews and voluntary  organizations to conduct the repairs, and ultimately funded repairs  through the program for approximately 2,200 homes. In addition,  FEMA used the Transitional Sheltering Assistance program for more  than 870 households and deployed temporary housing units for  approximately 650 households.\nOverall, FEMA authorized the STEP pilot program following 8 declared  disasters since 2012 and obligated approximately $2.6 billion to fund  repairs to more than 167,000 disaster survivors\u2019 homes, according to  FEMA documentation. While the program may not have provided  repairs as rapidly as FEMA intended, these repairs nonetheless played a  significant role in ensuring these disaster survivors could safely shelter in  their homes.\nSince discontinuing the program, FEMA has not evaluated its options for  addressing the emergency sheltering needs of disaster survivors. FEMA  stated that it continues to support the use of congregate sheltering and  will consider authorizing the Transitional Sheltering Assistance program,  among other options, to address disaster survivors\u2019 needs following future  disasters. However, as detailed above, FEMA used the STEP pilot  program for the specific purpose of providing necessary additional  capacity to supplement these and other federal programs. Further, in  certain cases, the STEP pilot program was used when implementing  these other programs was unfeasible, such as in the USVI and New York  where the particular circumstances on the ground made using the  Transitional Sheltering Assistance program or deploying temporary  housing units impractical.\nFEMA officials also told us the agency could utilize voluntary  organizations to a greater extent than in the past to conduct the same  types of repairs provided through the STEP pilot program. Specifically,  FEMA officials stated that the Voluntary Agencies Leading and  Organizing Repair program\u2014which was implemented in Puerto Rico in  response to the 2017 hurricanes and used to repair about 4,600 homes\u2014 could be used for this purpose following future disasters. However, given  the program\u2019s limited implementation, it is too early to determine the  extent to which it represents a feasible solution for addressing emergency  sheltering needs, or is capable of providing assistance on as large a scale  as other federal programs, such as the STEP pilot program that funded  repairs on more than 100,000 homes in Puerto Rico alone. Further, in  North Carolina\u2014where FEMA amended the STEP pilot program to allow  both hired construction crews and voluntary organizations to conduct the  repairs\u2014the number of homes repaired by the construction crews\u2014about  2,000\u2014far exceeded the number of homes repaired by voluntary  organizations\u2014about 150\u2014which raises questions about the ability of  voluntary organizations to undertake the large volume of repairs  necessary following disasters.\nStandards for Internal Control in the Federal Government states that  management should identify, on a timely basis, significant changes to  internal conditions that have already occurred, including changes to the  entity\u2019s programs or activities. Further, management should identify,  analyze, and respond to risks related to achieving the entity\u2019s defined  objectives. FEMA has not assessed how its decision to discontinue the  STEP pilot program will affect its ability to provide emergency sheltering  assistance following future disasters. While FEMA officials told us they  plan to use other sheltering programs when the next disaster strikes,  these programs may not be sufficient in addressing the emergency  sheltering needs of disaster survivors, especially in communities where  implementing such programs is not feasible. FEMA officials also stated  that given the agency\u2019s decision to discontinue the STEP pilot program,  conducting a broad evaluation of FEMA\u2019s emergency sheltering programs  and the agency\u2019s options for addressing emergency sheltering needs  would be useful to ensure that FEMA is prepared to respond effectively to  future disasters. Conducting such an evaluation would help FEMA  understand its ability to provide sheltering options and to properly plan for  the provision of effective emergency sheltering assistance to disaster- affected communities.\n\n\tThe USVI and FEMA Established Structures for Overseeing Recovery Efforts, but FEMA Has Not Consolidated Hazard Mitigation Grant Program Monitoring Guidance\n\n\t\tThe USVI and FEMA Have Structures in Place for Overseeing Recovery Activities\n\nUSVI. As the recipient of federal disaster funding, the USVI is responsible  for providing oversight over the Public Assistance program and Hazard  Mitigation Grant Program to ensure they are implemented in compliance  with applicable laws and regulations, as well as FEMA policies and  guidance. Following the 2017 hurricanes, the USVI took steps to  address its responsibilities for receiving grant funding through these  programs, including by: (1) developing administrative plans, (2)  designating two territorial entities to manage the administration of disaster  recovery funding, and (3) establishing the new Office of Disaster  Recovery.\nFirst, as required by FEMA, the USVI developed administrative plans for  the Public Assistance program and Hazard Mitigation Grant Program to  ensure that subrecipients are in compliance with the conditions of these  grant programs. These plans outline programmatic and project monitoring  activities as well as the financial and administrative procedures for both  programs. The plans require, among other things, the USVI to submit  quarterly progress and financial reports on the status of projects to FEMA  and describe the USVI\u2019s specific roles and responsibilities for  implementing and overseeing these two programs.\nSecond, the Governor of the USVI designated two territorial entities to  manage and oversee the implementation of recovery programs\u2014the Virgin Islands Territorial Emergency Management Agency as the  programmatic manager and the governor\u2019s authorized representative as  the grant administrator for all federal recovery funding in the USVI.  Among other responsibilities, these entities are responsible for ensuring  that Public Assistance program and Hazard Mitigation Grant Program  participants are in compliance with all programmatic and administrative  requirements. For example, the Virgin Islands Territorial Emergency  Management Agency is responsible for, among other things, preparing  and submitting quarterly progress and financial reports to FEMA for  certain Public Assistance program projects and for all Hazard Mitigation  Grant Program projects. In addition, the governor\u2019s authorized  representative is responsible for ensuring the territory\u2019s compliance with  all requirements outlined in the FEMA-approved administrative plans.\nThird, in February 2019, the USVI\u2019s new Office of Disaster Recovery  assumed responsibility for overseeing the Public Assistance program and  Hazard Mitigation Grant Program, including tracking and reporting on the  progress of individual projects and overseeing the submission of  reimbursement requests for completed work. The office is also  responsible for monitoring and publicly reporting the status of federal  recovery funding at http:\/\/www.usviodr.com\/. In addition, according to  the office\u2019s Director, her team also meets with FEMA officials on a bi- weekly basis to discuss recovery activities more generally and raise any  potential issues for discussion, such as challenges with submitting  quarterly progress and financial reports to FEMA in a timely manner.\nFEMA. FEMA officials at the USVI, regional, and headquarters level are  responsible for overseeing the USVI\u2019s implementation of federal recovery  programs. Specifically, once FEMA obligates grant funding for a project,  FEMA officials on the ground in the USVI are responsible for the day-to- day monitoring of individual projects using a variety of tools. For  example, FEMA officials stated they use the information included in  quarterly progress and financial reports to help ensure that subrecipients  are in compliance with applicable federal requirements and that potential  problems are identified and addressed in a timely manner. Further, FEMA  officials are to conduct quarterly meetings with USVI officials to ensure  regular communication and coordination and to discuss program  implementation, raise potential challenges, and identify solutions.\nIn addition to monitoring ongoing projects, FEMA officials in the USVI are  responsible for managing the process for closing out Public Assistance  program and Hazard Mitigation Grant Program projects that have been  completed. To facilitate this close-out process, the USVI is to compile all  required documentation for an individual project and submit this  paperwork to FEMA. FEMA is to review the documentation to ensure that  all work has been completed in accordance with the project\u2019s scope of  work as well as relevant laws, federal regulations, and program  requirements.\nFEMA Region II officials and FEMA officials in the Grant Programs  Directorate in headquarters also provide higher-level oversight of Public  Assistance program and Hazard Mitigation Grant Program  implementation. For example, FEMA Region II officials stated they  analyze the USVI\u2019s quarterly financial reports to identify patterns that may  indicate financial challenges, such as irregularities in the amount of  funding the USVI has drawn down for projects or an excess or lack of  reimbursements to subrecipients for completed work. At FEMA  headquarters, officials in the Grant Programs Directorate stated they  assess the financial condition of projects annually to identify potential  challenges in administering grant funding and may enhance monitoring  efforts as needed. These officials stated they also review the timeliness,  completeness, and accuracy of information submitted in quarterly reports  to help monitor project milestones and identify potential challenges that  require FEMA\u2019s attention.\n\n\t\tFEMA Has a Consolidated Standard Operating Procedures Document for Monitoring Public Assistance Projects, but Not for Hazard Mitigation Grant Program Projects\n\nFEMA has issued numerous documents that provide useful information  and guidance for implementing and monitoring the Public Assistance  program and the Hazard Mitigation Grant Program, such as program and  policy documents, fact sheets, job aids, and operational manuals. For  example, one document for monitoring the Public Assistance program is  the Public Assistance Program Management and Grant Closeout  Standard Operating Procedure. This standard operating procedures  document provides FEMA officials across all disasters nationwide with a  common understanding of the expectations and requirements for  managing projects. It also clearly and concisely outlines the roles and  responsibilities, requirements, key tasks and milestones, and  performance measures associated with monitoring and closing out Public  Assistance program projects. However, FEMA has not developed a  similar consolidated standard operating procedures document to provide  a clear and concise roadmap for monitoring and closing out projects  under the Hazard Mitigation Grant Program.\nIn July 2019, FEMA officials in headquarters and FEMA Region II told us  that guidance on key policies and procedures for managing FEMA\u2019s  varied hazard mitigation efforts can be found across multiple sources.  However, these officials stated that FEMA has not consolidated this  guidance into a single document for FEMA-wide use that focuses on the  oversight of Hazard Mitigation Grant Program projects specifically.  Further, FEMA\u2019s existing guidance documents do not provide a concise  roadmap that outlines roles and responsibilities, key tasks and  milestones, and performance measures for FEMA officials to use when  monitoring and closing out individual program projects for any given  disaster. For instance, the Hazard Mitigation Assistance Guidance  includes information on many topics, such as program eligibility  requirements; roles and responsibilities for recipient and subrecipient  personnel; and oversight requirements spanning three separate FEMA  mitigation programs. Likewise, FEMA\u2019s 250-page Hazard Mitigation  Field Operations Guide includes operating procedures, descriptions of  major tasks for mitigation positions, and job aids, including samples and  templates of tools to help hazard mitigation staff implement defined tasks.  While these and other FEMA documentation collectively provide  important information regarding the agency\u2019s broader hazard mitigation  efforts, they are not focused specifically on the Hazard Mitigation Grant  Program, or the detailed processes FEMA officials on the ground should  use to conduct the day-to-day monitoring of individual projects. Further,  these documents do not detail the use of performance measures in  effectively monitoring Hazard Mitigation Grant Program projects\u2014 information that is included in FEMA\u2019s standard operating procedures  document for the Public Assistance program.\nWhen we asked FEMA officials responsible for implementing the program  in the USVI why the agency had not developed a consolidated standard  operating procedures document specific to the Hazard Mitigation Grant  Program, they stated that developing this document had not been a  priority for the agency\u2014which could be due to the relatively small size of  this program compared to larger and more complex recovery programs,  such as the Public Assistance program. Although FEMA obligates more  funding through the Public Assistance program, the Hazard Mitigation  Grant Program nonetheless plays a critical role in ensuring that disaster- affected communities can undertake mitigation measures specifically  designed to enhance the resilience of their infrastructure during future  disasters.\nStandards for Internal Control in the Federal Government states that  management should document in policies and procedures each unit\u2019s  responsibility for an operational process\u2019s objectives in the appropriate  level of detail to allow management to effectively monitor the control  activity. In addition, these standards state that management should  define objectives in specific and measurable terms so they are  understood at all levels of the organization. This includes clearly defining  what is to be achieved, who is to achieve it, how it will be achieved, and  the timeframes for achievement. Further, leading practices identified in  the Program Management Institute\u2019s Standard for Program Management  call for agencies to develop a program roadmap outlining information on  the program\u2019s intended direction and providing a set of documented  success criteria for each key milestone and decision point. This  roadmap can be a valuable tool for managing the execution of the  program and for assessing the program\u2019s progress toward achieving its  goals. FEMA\u2019s consolidated standard operating procedures document for  the Public Assistance program provides such a roadmap, stating that  FEMA\u2019s main goal is to provide effective assistance and excellent  customer service necessary to assist disaster-affected communities to  recover while also ensuring the responsible stewardship of public funds.\nFEMA does have guidance on key policies and procedures for managing  its hazard mitigation efforts, including through the Hazard Mitigation Grant  Program. However, FEMA could further strengthen its existing guidance  by consolidating this information into a single document for FEMA-wide  use, similar to the one FEMA uses for the Public Assistance program.  FEMA officials told us that having a detailed standard operating  procedures document for the Hazard Mitigation Grant Program that  clearly and concisely outlined roles and responsibilities, key objectives  and tasks, and milestones for conducting monitoring and close-out  activities would be helpful in effectively overseeing program projects. In  addition to FEMA officials, the governor\u2019s authorized representative in the  USVI also told us that such a document would help to ensure that both  FEMA and USVI officials are following the necessary procedures and  guidance when conducting program management and close-out activities.  Assessing the need for such a consolidated standard operating  procedures document for the Hazard Mitigation Grant Program would  help FEMA determine whether existing guidance should be strengthened  to ensure that agency officials across all disasters are using a consistent  approach in carrying out their responsibilities under the program.\n\n\tConclusions\n\nAs of June 30, 2019, FEMA had obligated more than $1.9 billion in grant  funding through the Public Assistance program and Hazard Mitigation  Grant Program to help the USVI recover from the catastrophic 2017  hurricane season. As part of the Public Assistance program, FEMA  authorized the STEP pilot program in the USVI\u2014and in other locations\u2014 to supplement other FEMA programs and provide necessary additional  capacity to help address the emergency sheltering needs of disaster  survivors. While FEMA decided to discontinue the STEP pilot program,  the agency has not evaluated how this decision will affect its ability to  provide emergency sheltering assistance in the future. FEMA has a  responsibility to provide assistance, when requested, to address the  emergency sheltering needs of disaster survivors. Given that FEMA will  no longer use the STEP pilot program, taking steps to evaluate its options  for addressing these needs will help FEMA to assess its capacity for  providing effective emergency sheltering assistance in the future and to  properly plan for when the next disaster inevitably strikes.\nIn addition, FEMA has issued numerous policy documents, guides, and  other useful documents to assist FEMA officials to effectively monitor and  oversee Hazard Mitigation Grant Program projects. However, FEMA has  not developed a consolidated standard operating procedures document  specific to the Hazard Mitigation Grant Program that provides a clear and  concise roadmap for FEMA officials\u2019 use in monitoring individual projects.  Assessing the need for a consolidated roadmap for agency-wide use  would help FEMA determine whether existing guidance for effectively  monitoring Hazard Mitigation Grant Program projects should be  strengthened.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to FEMA:  The FEMA Administrator should evaluate the agency\u2019s options for  providing future emergency sheltering assistance. (Recommendation 1)\nThe FEMA Administrator should assess the need for an agency-wide  consolidated standard operating procedures document for the Hazard  Mitigation Grant Program that provides detailed information on the roles  and responsibilities, requirements, and key tasks and milestones for  monitoring and closing out program projects. (Recommendation 2)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to DHS and the USVI government for  review and comment. DHS provided written comments, which are  reprinted in appendix IV and summarized below. DHS and the USVI  government provided technical comments, which we incorporated as  appropriate.\nDHS concurred with both our recommendations and described the  actions it plans to take in response. With regard to our first  recommendation, DHS stated that it will evaluate FEMA\u2019s options for  providing emergency sheltering assistance through its Individual  Assistance Division and provide any recommendations for action, as  appropriate, to FEMA\u2019s Assistant Administrator for Recovery. DHS  anticipates completing this evaluation by February 2020. This action, if  fully implemented, should address the intent of the recommendation.\nWith regard to our second recommendation, DHS stated that FEMA will  assess the need for an agency-wide consolidated standard operating  procedures document for the Hazard Mitigation Grant Program and, if  deemed necessary, FEMA will develop this document. DHS anticipates  this effort will be completed by August 2020. This action, if fully  implemented, should address the intent of the recommendation. In the  meantime, DHS noted that FEMA will consider updating its website to  include a single portal providing access to all existing guidance  documents relevant to monitoring and overseeing Hazard Mitigation  Grant Program projects. We will monitor DHS\u2019s and FEMA\u2019s efforts to  address these two recommendations.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the FEMA  Administrator, the USVI government, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you and your staff have any questions, please contact me at (202) 512- 8777 or curriec@gao.gov. GAO staff who made key contributions to this  report are listed in appendix V.\n\nAppendix I: Status of Public Assistance Program Funding in the U.S. Virgin Islands\n\nThe Federal Emergency Management Agency (FEMA) obligated more  than $1.8 billion in Public Assistance grant funding for 618 projects across  the U.S. Virgin Islands (USVI) as of June 30, 2019. Specifically, FEMA  obligated more than $1.1 billion for emergency work projects (categories  A and B), about $588.5 million for permanent work projects (categories C  through G), and about $141.2 million for management costs (category  Z). As of that date, the USVI expended nearly $1.1 billion\u2014about 59  percent of total Public Assistance obligations to the USVI\u2014to reimburse  subrecipients for completed work. Of this nearly $1.1 billion, the USVI  expended about $857.5 million (78 percent) for emergency work projects,  $211.3 million (19 percent) for permanent work projects, and $29.9 million  (3 percent) for management costs.\nThe majority of FEMA\u2019s obligations and the funding the USVI expended  as of June 30, 2019, are for emergency work because these projects  began soon after the disasters struck and focused on debris removal and  providing assistance to address immediate threats to life and property. In  contrast, permanent work projects take time to identify, develop, and  ultimately complete as they represent the longer-term repair and  restoration of public infrastructure. While the data below represent the  status of Public Assistance funding as of June 30, 2019, the amount of  grant funding FEMA obligates and the USVI expends will likely increase  over time as additional projects are finalized and approved.\nEmergency work. Of the more than $1.8 billion FEMA obligated as of  June 30, 2019, more than 1.1 billion (61 percent) was obligated for 410  emergency work projects in Public Assistance program categories A and  B.\nCategory A: Debris removal. FEMA obligated about $139.9 million for  88 projects focused on debris removal activities across the territory.  For example, FEMA obligated $81.8 million to the USVI Water and  Power Authority for territory-wide debris removal efforts (see fig. 9). Of  the $139.9 million FEMA obligated for debris removal, the USVI  expended about $76.9 million (55 percent) as of June 30, 2019.\nCategory B: Emergency protective measures. FEMA obligated about  $985.6 million for 322 projects focused on emergency measures. For  example, FEMA obligated about $278.2 million for the Sheltering and  Temporary Essential Power (STEP) pilot program as of June 30,  2019, to fund certain types of temporary repairs to private homes. In  addition, FEMA obligated approximately $111.9 million for the  purchase and installation of modular units to be used as temporary  classrooms and other facilities while permanent school buildings are  repaired or replaced (see fig. 10). Of the $985.6 million FEMA  obligated for emergency protective measures, the USVI expended  about $780.7 million (79 percent) as of June 30, 2019.\nPermanent work. Of the more than $1.8 billion in Public Assistance grant  funding FEMA obligated as of June 30, 2019, about $588.5 million (32  percent) was obligated for 200 permanent work projects across  categories C through G. These permanent work projects included more  than $383.1 million for cost-effective hazard mitigation measures to  reduce the future risk of disaster damage to infrastructure.\nCategory C: Roads and bridges. FEMA obligated about $5.9 million  for 40 projects focused on repairing roads and bridges in the territory,  9 of which included hazard mitigation measures totaling about $1.6  million. For example, FEMA obligated about $233,000 for one project  to repair a road on St. Croix damaged by floodwaters. This project  included approximately $61,000 for hazard mitigation measures to  reduce the likelihood of erosion during future flooding events. Of the  $5.9 million FEMA obligated for category C, the USVI expended about  $86,000 (1.5 percent) as of June 30, 2019.\nCategory D: Water control facilities. As of June 30, 2019, FEMA did  not have any projects in this category. According to FEMA officials,  the USVI does not have water control infrastructure\u2014such as berms  or levees\u2014that would fall under category D.\nCategory E: Buildings and equipment. FEMA obligated about $68.3  million for 101 projects focused on repairing damaged structures in  the territory, 49 of which included hazard mitigation measures totaling  about $3.1 million. For example, FEMA obligated about $59.7 million  for one project to replace 5 heavily damaged buildings in a public  housing facility in St. Thomas (see fig. 11). While FEMA obligated this  project through the standard Public Assistance program, FEMA and  the USVI plan to work to develop a fixed-cost estimate with the  intention of transitioning this project to the alternative procedures  program, according to FEMA documentation. Further, this  documentation states that hazard mitigation measures will be  incorporated into the new structures by implementing internationally  adopted building codes and standards for wall and window  replacements. Of the $68.3 million FEMA obligated for Category E,  the USVI expended about $533,000 (0.8 percent) as of June 30,  2019.\nCategory F: Utilities. Of the $588.5 million FEMA obligated for  permanent work projects, $505.6 million (86 percent) was obligated  for 23 projects focused on repairing utilities, 13 of which included  hazard mitigation measures totaling about $378.2 million.  Specifically, FEMA obligated $481.8 million\u2014or 95 percent of the  $505.6 million\u2014through the standard Public Assistance program for  projects focused on territory-wide permanent electrical distribution  system repairs. This includes replacing damaged wooden utility poles  with more resilient composite fiberglass poles that can withstand 200  mile per hour winds as well as power transmission lines and  transformers (see fig. 12). Of the $505.6 million FEMA obligated for  category F, the USVI expended about $210.4 million (42 percent) as  of June 30, 2019.\nCategory G: Parks, recreational, and other facilities. As of June 30,  2019, FEMA obligated about $8.8 million for 36 projects focused on  repairing parks, playgrounds, and other facilities, 5 of which included  hazard mitigation measures totaling about $214,000. For example,  FEMA obligated about $1.5 million in March 2019 for two projects to  repair the USVI\u2019s Tsunami Early Warning System, which comprises a  network of warning stations that alert residents of a potential tsunami  event (see fig. 13). As of September 2019, these were the only  projects FEMA had obligated under the Public Assistance alternative  procedures program in the territory, according to FEMA officials.  These projects included about $185,000 for hazard mitigation  measures to replace wooden poles with higher-rated steel poles that  are able to withstand high winds and impacts from flying debris during  a storm. Of the $8.8 million FEMA obligated for category G, the USVI  expended about $246,000 (3 percent) as of June 30, 2019.\n\nAppendix II: Status of Hazard Mitigation Grant Program Funding in the U.S. Virgin Islands\n\nAs of June 30, 2019, the Federal Emergency Management Agency  (FEMA) obligated about $60.6 million for 22 Hazard Mitigation Grant  Program projects in the U.S. Virgin Islands (USVI) and the USVI  expended about $1.7 million (3 percent) across 5 projects. Unlike Public  Assistance program projects that, in many cases, are focused on rapidly  providing emergency services or repairing critical disaster-damaged  infrastructure and systems, Hazard Mitigation Grant Program projects are  designed to fund a variety of measures to increase the longer-term  resilience of the USVI\u2019s infrastructure during future disasters. Information  on selected Hazard Mitigation Grant Program projects in the USVI that  received obligations as of June 30, 2019, is detailed below.\nVirgin Islands Territorial Emergency Management Agency and  Bureau of Information Technology Emergency Operations Center  and Safe Room Retrofit. FEMA obligated about $22.5 million to fund  the retrofit of the USVI Territorial Emergency Management Agency\u2019s  Emergency Operations Center. The new facility will serve as the  headquarters for both the USVI Territorial Emergency Management  Agency and the USVI Bureau of Information Technology and house a  911 Emergency Call Center. According to FEMA documentation, the  facility will include a safe room to allow emergency personnel to  shelter in place during disasters and will contain sufficient space to  house FEMA and other federal personnel, as necessary. Further, the  facility will include a hardened communications system to ensure  emergency responders are able to effectively communicate during  emergency events, among other improvements.\nThe Comprehensive Territorial Hazard Mitigation and Resilience  Plan Project. FEMA obligated nearly $5.0 million to fund the  development of an in-depth, comprehensive hazard mitigation and  resilience plan for territory-wide use. FEMA officials stated that unlike  in the contiguous United States, the USVI does not have any entities  responsible for formally developing similar plans to guide operations  and mitigation activities across various sectors, such as protecting the  potable water supply and assessing economically feasible options for  development. As a result, FEMA officials told us that this project  represents an important effort to develop a holistic, territory-wide  hazard mitigation plan that would cover all relevant sectors.\nThe Spring Gut Watershed Green Space Acquisition and  Stormwater Management Project. FEMA obligated nearly $1.0  million to fund the first phase of a $2.0 million project to purchase 50  acres of undeveloped land and develop storm water retention  measures\u2014such as berms and rock linings\u2014to reduce downstream  flooding and the associated damages to roads, homes, and  infrastructure (see fig. 14). FEMA officials told us that the first phase  of the project included an environmental and historical preservation  review of the target locations to confirm program eligibility before  actual construction activities can begin.\nFortuna\/Bordeaux Fire Station Retrofit. FEMA obligated more than  $470,000 to fund the first phase of a nearly $5.0 million project to  retrofit a fire station in St. Thomas. Specifically, the project will  upgrade the facility\u2019s structure to applicable codes and standards to  mitigate the risks posed by hurricane-force winds, including the  dangers posed by flying debris. Further, the retrofit will include the  installation of a steel-reinforced concrete safe room and a back-up  emergency power generator to ensure the safety and protection of  emergency personnel and the continuity of emergency response  activities during a disaster, according to FEMA documentation.\n\nAppendix III: The Governor Juan F. Luis Hospital and Medical Center in St. Croix, U.S. Virgin Islands\n\nThe Governor Juan F. Luis Hospital and Medical Center (JFL hospital) in  St. Croix provides an illustrative example of the processes and challenges  associated with developing and implementing Public Assistance program  projects in the U.S. Virgin Islands (USVI). In September 2017, Hurricane  Maria\u2019s strong winds and torrential rains caused severe damage to the  facility\u2019s roof; heating, ventilation, and air conditioning system; and  electrical, water, and sewage systems, according to Federal Emergency  Management Agency (FEMA) documentation. Further, the infusion of  water\u2014both during and after the storm\u2014saturated the interior of the  hospital, destroyed medical equipment and hospital furnishings, and  facilitated the growth of hazardous mold. Figure 15 details selected  hurricane damage to the facility.\nDue to the extensive damage, the JFL hospital has been operating at  reduced capacity since the hurricane and certain functions have been  relocated to undamaged areas, according to FEMA documentation. This  documentation states that while the hospital continues to provide limited  medical services to St. Croix residents, it is no longer capable of providing  critical care services. Since alternate options were either limited or  unavailable on the island following the storms, St. Croix residents in need  of life sustaining medical treatments such as chemotherapy infusions or  who are experiencing life-threatening health events such as cardiac  failure or trauma must be transported out of the territory to receive life- saving care, according to FEMA documentation.\n\n\tPublic Assistance Program Emergency Work Projects at the JFL Hospital\n\nFollowing Hurricane Maria, FEMA obligated grant funding for several  Public Assistance emergency work projects to help keep the JFL hospital  functioning and capable of providing limited medical services to St. Croix  residents. For example, in August 2018, FEMA obligated $119,000 in  grant funding to reimburse the JFL hospital for the use of an emergency  backup generator through Public Assistance program category B, which  provides funding for emergency protective measures. According to JFL  personnel, this funding covered the cost of using the backup generator  until the facility\u2019s primary electrical system could be restored. In another  example, FEMA obligated about $2.4 million in August 2018\u2014also  through Public Assistance program category B\u2014to fund the rental of  mobile dialysis trailers (see fig. 16). According to JFL personnel, these  trailers were acquired to replace all 14 of the facility\u2019s dialysis units that  were destroyed during the storm.\nIn addition to Public Assistance projects focused on maintaining the  existing facility, FEMA obligated $43.2 million in January 2018 to fund the  purchase and installation of modular units to serve as a temporary  medical facility through category B emergency work. According to FEMA  documentation, this temporary facility is intended to provide critical  medical services to St. Croix residents\u2014including an emergency room,  pediatric care, a labor and delivery ward, and an intensive care unit,  among other services\u2014until a permanent facility is completed (see fig.  17). JFL personnel told us that completing this project is a key priority as  it will enable them to transition all medical services from the main facility,  which continues to deteriorate over time. However, they stated that  implementing this project has been challenging.\nFor example, JFL personnel told us that when former JFL administrators  were developing the project, they incorporated the cost of procuring and  installing the modular units, but omitted the costs associated with  acquiring, installing, and certifying new medical equipment for use in the  interim facility. These personnel stated that these costs should have been  incorporated into the original project paperwork and clarified that the  acquisition and certification of new equipment was critical in ensuring the  hospital\u2019s provision of medical services would not be disrupted.  Specifically, they explained that relocating the facility\u2019s existing medical  equipment was not a feasible option as it would result in an unacceptable  lapse in medical services during the time-consuming process of  deconstructing, transferring, reinstalling, and recertifying this equipment in  the modular facility. JFL personnel stated they worked closely with  FEMA officials and contractor personnel to update the project\u2019s  paperwork and request additional program funding for this new medical  equipment. In August 2019, FEMA approved the updated paperwork and  obligated additional funding for this project, according to FEMA  documentation.\nJFL personnel also stated they have limited capacity to effectively  manage and oversee the construction of the temporary facility due to  competing responsibilities. In addition to managing this project, they  stated they were occupied with the continuous maintenance challenges  associated with keeping the deteriorating main facility functioning while  also working to develop options for a permanent facility through the Public  Assistance alternative procedures program, as discussed below. They  told us FEMA officials and contractor personnel had been helpful in  providing assistance, but stated they would benefit from a larger hospital  management team that could focus specifically on planning and  implementing the facility\u2019s numerous recovery efforts. As of July 2019,  JFL personnel stated their aim is to officially open the temporary facility in  the spring of 2020.\n\n\tPublic Assistance Alternative Procedures Permanent Work at the JFL Hospital\n\nIn conjunction with the temporary facility\u2019s construction, FEMA officials  and JFL personnel are working to develop a permanent work project  under the Public Assistance alternative procedures program to replace  the damaged hospital. Further, in providing a critical service, the JFL  hospital is eligible to use the new flexibilities provided by the Bipartisan  Budget Act of 2018. This Act allows FEMA\u2014when using the alternative  procedures\u2014to fund the repair or full replacement of the hospital to  accepted industry standards regardless of any pre-disaster damage or  wear and tear the facility may have sustained prior to the 2017  hurricanes. FEMA officials and JFL personnel stated the Act therefore  provides a valuable opportunity to restore the facility to a better condition  than it was in prior to the storms. However, JFL personnel told us that  pursuing this permanent work project included challenges. For example,  JFL personnel told us that maintaining the damaged facility while FEMA  determined whether the hospital was eligible for repairs to the existing  structure or a complete replacement under the Bipartisan Budget Act was  challenging. Specifically, they explained that while FEMA worked to  finalize this determination, management was in the difficult position of  deciding where and how to invest its finite resources to keep the  constantly deteriorating facility functioning. For example, these personnel  explained that if FEMA determined that the facility is ineligible for  replacement under the Act, they would immediately invest money into the  existing facility to address critical components that require urgent  attention, such as the water and wastewater systems. In contrast, if  FEMA determined that the facility is indeed eligible for replacement,  management would strategically invest the minimum amount of resources  required to keep the facility functioning with the full knowledge that it  would eventually be demolished. Figure 18 details selected examples of  temporary fixes JFL personnel implemented to keep the facility  functioning.\nIn May 2019, FEMA officially determined that the JFL hospital was eligible  under the Bipartisan Budget Act of 2018 for a complete replacement  through the Public Assistance alternative procedures program. JFL  personnel told us they are working with FEMA officials and medical  industry experts to ensure that they take advantage of the flexibilities  provided by the Bipartisan Budget Act when developing the project. As of  July 2019, these personnel explained they are in the early stages of  working with FEMA officials and territorial stakeholders to assess options  for the replacement facility and are designing a strategy to ensure the  future hospital is able to sufficiently address the healthcare needs of USVI  residents.\n\nAppendix IV: Comments from the Department of Homeland Security\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nChris Currie, (202) 512-8777 or curriec@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Joel Aldape (Assistant Director),  Bryan Bourgault (Analyst in Charge), Aaron Gluck, Eric Hauswirth, Brian  Lipman, Amanda Miller, Heidi Nielson, and Kevin Reeves made key  contributions to this report.","output":null}
{"id":"gao_GAO-20-402","pid":"gao_GAO-20-402_0","input":"\tBackground\n\nThe internet is a worldwide network of networks comprised of backbone  networks, servers, and routers. Network addresses are used to help send  information from one internet-connected device, such as a computer, to  another by routing the information to its final destination. The protocol that  enables the administration of these addresses is the IP.\nIP addresses provide a numerical description of the location of networked  devices such as computers, routers, and smartphones. These numerical  descriptions allow devices to be distinguished from each other over the  internet. In some ways, an IP address is like a physical street address.  For example, in the physical world, if you want to send a letter from one  location to another, the contents of the letter must be placed in an  envelope that lists both the sender\u2019s and the recipient\u2019s addresses.  Similarly, if data is transmitted across the internet from one device to  another, IP addresses must be placed in an IP header with sender and  recipient information. In addition to containing the addresses of the  sender and the receiver, the header also contains a series of fields that  provide information about what is being transmitted. Figure 1 provides a  simplified illustration of this concept.\nThe Internet Engineering Task Force, the principal body engaged in the  development of internet standards, developed IPv6 in the 1990s to  address IPv4\u2019s limited address space, among other things. Although IPv6  has been available for over 20 years, IPv4, the older IP, is still more  widely deployed. Nevertheless, IPv6 deployment is rising worldwide  amidst the exhaustion of available IPv4 addresses. However, IPv6 is not  backwards compatible with IPv4, which means that organizations such as  DOD have to change their network infrastructure and systems in order to  deploy IPv6.\nDOD relies on its current IPv4 networks to fulfill its mission to provide the  military forces needed to deter war and ensure our nation\u2019s security.  According to DOD officials leading the transition to IPv6, the department  utilizes IPv4 for enterprise-wide and mission partner wired and wireless  communications, including infrastructure, technologies, and devices  supporting large-scale globally dispersed command and control systems,  naval vessels, aircraft, satellites, and ground operations. Figure 2  presents a simplified depiction of the department\u2019s use of IPv4.\nDOD\u2019s mission requires considerable IP address space. The department  currently has 300,149,760 IPv4 addresses\u2014more than any other  organization in the world. These approximately 300 million addresses  are divided into blocks; each block contains a series of multiple  addresses. DOD has 13 particularly large blocks of addresses, each  containing 16,777,216 addresses. Also included in the approximately  300 million addresses are 59,767,040 IPv4 addresses that currently are  unused. These addresses are reserved for future use by DOD and its  components.\nDOD has stated that it expects to exhaust its reserve of unused IPv4  addresses by 2030. According to the officials leading the IPv6 transition  effort, the department expects to have to support IPv4 after it exhausts its  IPv4 address space in 2030 due to mission system modernization and  replacement timelines, as well as new emerging technologies that may  require IPv4 resources while the department transitions to IPv6.\n\n\t\tIPv6 May Improve Functionality and Provide Benefits\n\nAccording to prior government reports and DOD documentation, IPv6\u2019s  improved functionality would benefit the department in many ways. In  addition to the general benefits of eliminating IPv4 address space  limitations, enhancing mobility features, and integrating IP security, IPv6  has the potential to enhance DOD battlefield operations, improve  decision-making with the increased reliance on the Internet of Things  (IoT), support U.S. global technological competitiveness, and enhance  mission partner interoperability.\nIPv6 eliminates address space limitations. As previously  mentioned, IPv6 dramatically increases the amount of possible  address space from 4.3 billion addresses in IPv4 to approximately 340  undecillion (3.4 \u00d7 10In contrast to IPv4, the massive address space available in IPv6 will allow  almost any device to be assigned a unique IP address. This change  fosters greater end-to-end communication abilities between devices with  unique IP addresses and can better support the delivery of data-rich  content such as voice and video.\nEnhanced mobility improves connectivity. IPv6 improves mobility  features by allowing each device to have a unique IP address  independent of its current network or connection point to the internet.  This enables mobile IPv6 users to move from network to network  while keeping the same unique IP address. The ability to maintain a  constant IP address while switching networks is cited as a key factor  for the success of a number of evolving capabilities, such as  telephone technologies, laptop computers, and internet connected  automobiles.\nAdded IP security helps to protect data. IP security\u2014a means of  authenticating the sender and encrypting the transmitted data\u2014is  better integrated into IPv6 than it is in IPv4. This improved integration,  which helps make IP security easier to implement, can help support  broader data protection efforts. This extra security is accomplished  through the use of two header extensions that can be used together  or separately to improve the authentication and confidentiality of data  being sent via the internet. These headers serve to provide the  receiver with a greater assurance of the sender\u2019s identity and provide  encryption protection for the transmitted data.\nEnhanced capabilities could improve DOD battlefield operations.  According to the 2014 DOD IG report on DOD\u2019s IPv6 transition efforts,  use of IPv6 could provide DOD with several potential benefits related  to battlefield operations, such as improved communication, warfighter  mobility, situational awareness, and quality of service. IPv6 auto- configuration capabilities provide secure ad hoc networking and  mobility, as well as improved end-to-end security and simplified  network management capabilities. This could potentially enable  individuals and entire units to disconnect from military base networks,  travel into theater, and quickly establish communications.  Additionally, IPv6 capabilities could allow warfighters and  commanders to improve situational awareness and mission execution  during deployment and battle operations, allowing units to securely  move from one wireless network to another.\nIncreased use of the IoT may improve decision-making. The  increased address space available with IPv6 enables the increased  connectivity necessitated by the proliferation of the IoT. DOD\u2019s IoT  could include any object for which remote communication, data  collection, or control might be useful, such as vehicles, appliances,  medical devices, electric grids, transportation infrastructure,  manufacturing equipment, or building systems. According to DOD\u2019s  Digital Modernization Strategy from July 2019, IoT could be significant  to the department\u2019s decision-making processes because the  assortment of connected objects that comprise IoT could enable  technology to gain the ability to sense, predict, and respond to DOD\u2019s  needs. The department could use computers to track, count, and  analyze data from these objects in order to reduce waste, loss, and  cost. DOD managers could also know whether these objects were  running well or needed replacing, repairing, or recalling.\nIPv6 could support U.S. global technological competitiveness.  According to a DOD presentation, the transition to IPv6 could allow  the department to remain technologically competitive globally.  Interest in IPv6 is gaining momentum around the world, particularly in  parts of the world that have limited IPv4 address space to meet their  industry and consumer communications needs. Regions that have  limited IPv4 address space, such as Asia and Europe, have  undertaken efforts to develop, test, and implement IPv6. For example,\nChina has been aggressive at deploying IPv6.\nJapan has set up an IPv6 Promotion Council, using tax incentives  to encourage research and adoption of IPv6 by its private sector.\nEurope has a task force that has the dual mandate of initiating  country and regional IPv6 task forces across European states and  seeking global cooperation around the world.\nTransitioning to IPv6 may preserve mission partner  interoperability. According to an August 2017 report from DOD\u2019s  CIO, deploying IPv6 capabilities is essential to preserve  interoperability with mission partners in the private sector and in other  countries and to assure future access to technology. Since the pools  of unassigned IPv4 addresses are exhausted, DOD\u2019s mission  partners may increasingly rely on IPv6 addresses in the future,  furthering the department\u2019s need to increase its IPv6 capabilities.\n\n\t\tTransitioning to IPv6 Could Also Present Challenges\n\nAlong with the potential benefits, the National Institute of Standards and  Technology (NIST) has indicated that transitioning to IPv6 also could  present challenges for organizations such as DOD. These challenges  include the complexity added by dual IPv4 and IPv6 operations and the  immaturity of IPv6 security products and processes.\nComplexity added by dual IPv4\/IPv6 operations. DOD plans to  deploy IPv6 while still supporting IPv4 for legacy applications,  services, and clients. This will result in a dual protocol environment  and increased complexity. With two protocols, DOD would have to  ensure the proper functioning of two separate, but interrelated,  networks instead of only one network. Further, hackers and other  online adversaries could exploit either the department\u2019s IPv4 or IPv6  network connections when launching cyberattacks.\nImmaturity of IPv6 security processes. While IPv6 could offer  enhanced security, NIST states that its deployment could also lead to  new challenges with respect to the types of threats facing an  organization such as DOD. For example, organizations in the  process of transitioning to IPv6 may lack robust IPv6 security controls  and may have security staff members who lack an overall  understanding of IPv6. This could allow attackers to exploit IPv6  assets or leverage IPv6 access to exploit IPv4 assets. While general  security concepts are the same for both IPv4 and IPv6 protocols, it  may take time and effort for transitioning organizations such as DOD  to acquire the level of operational experience and practical  deployment solutions that have been developed for IPv4 over the  years.\n\n\t\tOMB Issued Guidance for Federal Agencies\u2019 IPv6 Transition Planning\n\nIn August 2005, OMB issued a memorandum to federal CIOs specifying a  series of IPv6 transition planning and implementation requirements and  associated due dates for federal agencies to enable the use of IPv6.  Specific to planning for the transition, the memorandum required  agencies to assign an official to lead and coordinate IPv6 transition  planning efforts, complete an inventory of IP-compliant devices and  technologies, and complete an impact analysis comprised of a cost  estimate and a risk analysis by specific due dates during fiscal year  2006. Table 1 lists the transition planning requirements and due dates  defined in the OMB memorandum.\n\n\tDOD Has Engaged in IPv6 Transition Efforts since 2003\n\nAware of the limitations of IPv4, DOD first began planning for the  implementation of IPv6 in June 2003. At that time, the department\u2019s CIO  issued the memorandum, \u201cInternet Protocol Version 6 (IPv6).\u201d According  to this memorandum, the department\u2019s initial goal was to complete its  transition to IPv6 by fiscal year 2008.\nWithin a month of the issuance of DOD\u2019s June 2003 memorandum, the  department designated the Defense Research and Engineering Network  (DREN) as the first DOD IPv6 pilot network. DREN, being a research  and development network, is not connected to DOD\u2019s operational  networks, such as the department\u2019s nonclassified IP router network,  which transmits nonclassified operations traffic. According to a DOD  report about the DREN pilot, the entire DREN wide-area network was  routinely supporting end-to-end IPv6 traffic by July 2005. According to  the department, DREN remains DOD\u2019s only IPv6-enabled network.\nFurther, DOD\u2019s IG reported that the department had undertaken an initial  transition effort that temporarily satisfied OMB\u2019s August 2005  implementation requirement to demonstrate IPv6 on its infrastructure by  the end of June 2008. Specifically, DOD was able to demonstrate IPv6  within the department\u2019s Defense Information Systems Network.  However, according to the report, the department\u2019s IPv6 transition  manager said DOD disabled IPv6 functionality due to a lack of trained  personnel and potential security risks. We received additional information  about why DOD disabled the IPv6 functionality, but we are not including it  in the report due to the information being marked as for official use only.\nDOD began its next effort to plan and implement IPv6 in response to  OMB\u2019s subsequent 2010 guidance. In this guidance, OMB gave  agencies\u2014including DOD\u2014requirements intended to further their  transitions to IPv6. Two of these requirements stated that agencies were  to: upgrade their public-facing IT servers and services (e.g., web and  email) to IPv6 by the end of September 2012; and upgrade internal client applications that communicate with public  internet servers and supporting enterprise networks to IPv6 by the  end of September 2014.\nAccording to DOD, the department originally planned to meet the 2010  OMB requirements; however, it decided not to complete the upgrades  due to security concerns. Again, we received additional information about  the department\u2019s security concerns; however, we are not including those  details in this report because they were marked as for official use only.\n\n\tDOD Had Not Completed Most of the Selected OMB Planning Requirements\n\nOMB\u2019s IPv6 transition guidance requires federal agencies, such as DOD,  to perform specific tasks as part of their IPv6 planning efforts. These  tasks include: (1) assigning an official to lead and coordinate agency  planning, (2) completing an inventory of existing IP-compliant devices and  technologies, (3) developing a cost estimate (as part of an impact  analysis), and (4) developing a risk analysis (as part of an impact  analysis). Although these requirements were originally due in 2005 or  2006, they are still applicable; OMB has not replaced or rescinded them.\nAssigning an official to lead and coordinate agency planning can help  agencies better manage their transition to IPv6. Specifically, a senior- level focal point to lead IPv6 transition efforts can provide assurance that  the program is based on a coherent strategy and is well coordinated. A  lead official may also help an agency avoid duplicative, overlapping, and  fragmented efforts, which can result in avoidable additional costs.\nAccording to NIST, having an inventory of IP-compliant assets is crucial  to IPv6 transition planning because it helps determine transition  requirements and give an agency a clear understanding of the IP  capabilities of the devices on the network. Specifically, an inventory  helps determine which assets will transition to IPv6, the order in which  assets will transition, the transition methods selected, and the security  controls that would need to be implemented.\nFurther, cost estimates are critical to decision-makers not only because  they help establish budgets, but also because they are integral to  determining and communicating a realistic view of likely cost and  schedule outcomes that could be used to plan the work necessary to  develop, produce, install, and support a program. As we have previously  reported, without the ability to generate reliable cost estimates, agencies  are at risk of experiencing cost overruns, missed deadlines, and  performance shortfalls. In addition, a risk analysis enables an agency to  assess the significance of potential threats to the success of its transition  to IPv6, as well as assess how those threats could be mitigated or  avoided. Further, without a risk analysis to help the agency understand  the potential threats and obstacles facing the IPv6 transition initiative,  agencies run the risk of creating goals and plans that are too optimistic.\nAccording to DOD, the department began its most recent effort to  transition to IPv6 in April 2017. As part of this effort, in November 2019,  the department released its IPv6 implementation strategy, which  articulates DOD\u2019s overarching vision for its IPv6 transition initiative: to  provide secure and reliable IPv6 services that enable innovation for  competitive advantage. According to the strategy, DOD\u2019s goals for the  effort include implementing an interim solution of using both IPv4 and  IPv6 and then planning for an eventual IPv6-only environment.\nAs of March 2020, DOD had not yet completed three of the four selected  transition planning requirements. Specifically, the department had  completed the requirement of appointing an agency lead for its IPv6  transition efforts. However, it had not yet completed the three other  requirements: complete an inventory, develop a cost estimate, and  develop a risk analysis. Table 2 summarizes the status of DOD\u2019s  completion of the four selected OMB IPv6 transition planning  requirements.\nDOD completed OMB\u2019s requirement to have an official lead the IPv6  planning efforts by first assigning its Joint Information Environment  Executive Committee responsibility for overseeing the department\u2019s  transition to IPv6 in August 2017. The committee, in turn, established  the DOD IPv6 Working Group in November 2017 to coordinate and  manage department-wide IPv6 planning, implementation, and testing. An  official in the Office of the CIO serves as the chair of the working group,  and, according to the group\u2019s charter, is responsible for leading meetings,  soliciting and prioritizing issue topics for review, and overseeing the  coordination of working group activities supporting the department-wide  transition to IPv6.\nHowever, DOD did not complete the requirement to develop an inventory  of existing IP-compliant devices and technologies. In November 2005,  DOD provided a memorandum to OMB that indicated that the department  would not complete the inventory of IP-compliant devices and  technologies; instead, DOD would continue following its existing transition  plan, which did not require an inventory. Further, the DOD officials  leading the IPv6 transition effort informed us that the department had not  developed such an inventory and that it still does not plan to do so. The  officials said that conducting a task of this size would be impractical given  DOD\u2019s size and the number of IP-compliant devices in the department.\nThe officials leading the IPv6 transition also said that DOD has been  mitigating the risk of not having an inventory by ensuring that the  department has only been acquiring IPv6-capable IT devices since  December 2009. However, while only acquiring IPv6-capable devices  and applications could help the transition move forward, it would not be  as complete as an inventory, given that an inventory would include  technology purchased before December 2009.\nDOD also did not complete a cost estimate or a risk analysis. According  to the DOD officials leading the IPv6 transition effort, the initiative was not  a top priority until the CIO released the \u201cInternet Protocol Version 6  Implementation Direction and Guidance\u201d memorandum in February 2019.  This memorandum, which was developed to guide the department\u2019s IPv6  transition planning and implementation efforts, gave the transition  initiative greater attention in the department. Prior to the issuance of the  memorandum, the officials stated that they did not have sufficient  resources to conduct the cost estimate and did not have enough  understanding to complete the risk analysis. DOD officials leading the  IPv6 transition effort explained that the department plans to develop these  requirements by the end of May 2020; however, we have not received  any documentation confirming this deadline.\nUntil DOD develops an inventory of IP-compliant technologies and  devices, a cost estimate, and a risk analysis, the department\u2019s IPv6  transition initiative may have an increased likelihood of cost overruns,  schedule delays, and security vulnerabilities. Specifically, not having an  inventory of IP-compliant devices and technologies may lead to the  department developing plans without being aware of all the system and  infrastructure requirements necessary to successfully transition a large  organization such as DOD to IPv6. Further, without a cost estimate, DOD  may be making decisions without the benefit of relevant information on  the initiative\u2019s potential cost and schedule outcomes, thereby introducing  unnecessary risk into the implementation process. Finally, by moving  forward without a risk analysis, DOD increases the probability that it is not  proactively managing potential threats that could disrupt the transition or  introduce new IT security vulnerabilities.\n\n\tDOD Had Not Completed Most of Its Own Required Transition Activities\n\nDOD\u2019s February 2019 memorandum lists 35 required activities for  transitioning to IPv6 that DOD\u2019s various components or offices, such as  the Office of the CIO, are to complete or work on during fiscal years 2019  through 2021. Of these 35 activities, 18 were to be completed prior to  March 2020.\nHowever, DOD had not completed most of the required activities.  Specifically, of the 18 activities that were to be completed by March 2020,  the department had completed six and had not completed 12. In addition,  the department had completed one of eight other activities that did not  have specific due dates. Table 3 outlines the department\u2019s seven IPv6  transition activities that had been completed as of March 2020. (See  appendix I for a full list of DOD\u2019s transition activities and their completion  status.)\nOne notable required activity that DOD completed was to develop a CIO- approved strategy to implement its transition to IPv6. DOD\u2019s strategy  outlines, among other things, the overall goals for the IPv6 transition  initiative. These goals include implementing a network that is both IPv4  and IPv6 capable; planning for an IPv6-only environment; and  establishing and optimizing training for IPv6.\nIn addition, DOD\u2019s Defense Information Systems Agency leveraged  online training providers to offer on demand IPv6 training courses for  network engineers and cybersecurity personnel. In addition to basic  familiarization training for those new to IPv6, select training courses are  labeled as being at the advanced level.\nHowever, the department had not completed 12 of 18 activities that were  due prior to March 2020. Notably, DOD missed its original September  2019 deadline to enable IPv6 on all commercially hosted public facing  unrestricted services. According to the department officials leading the  IPv6 transition, DOD expects to be able to complete this task by the end  of July 2021. The department also missed its original June 2019 deadline  for identifying the public facing unrestricted services hosted by DOD. The  officials leading the IPv6 transition initiative stated that DOD currently  plans to complete this activity by May 2020. Other activities that were  past due in March 2020 include: developing supplemental guidance for  the acquisition of IPv6-capable products, updating and maintaining IPv6  standards and implementation profiles, and determining DOD\u2019s  cybersecurity architecture and posture impacts, among others.\nDOD officials leading the IPv6 transition effort stated that the department  had not yet completed its required activities because the original time  frames that the department had established were unrealistic. Although the  activities were initially thought to have been reasonable, DOD adjusted  the activities\u2019 due dates after the department began executing the tasks  and realized that it would take a large amount of work to accomplish their  goals and complete the activities.\nOne contributing factor for the unrealistic due dates is that DOD  developed this list of required activities without the benefit of an inventory  of IP-compliant devices and technologies, a cost estimate, or a risk  analysis. Without completing these basic planning requirements, DOD  significantly reduced the probability that it could have developed a  realistic transition schedule. Addressing requirements would supply DOD  with sources of meaningful information that would enable the department  to develop realistic, detailed, and informed transition plans and time  frames.\n\n\tConclusions\n\nWhile DOD\u2019s current IPv6 transition effort is showing progress, the  department has not completed most of OMB\u2019s planning requirements.  Notable signs of progress include the appointment of an official to lead  the initiative and the development of an overarching strategy document  that outlines the transition\u2019s scope and goals. Nevertheless, DOD had not  completed an inventory of IP-compliant technologies, a cost estimate, or  a risk analysis before moving ahead with developing its February 2019  guidance and working against the guidance\u2019s list of transition activities.  The lack of an inventory is problematic due to the role that it should play  in developing transition requirements. In addition, without a cost estimate  to guide decision-makers, DOD\u2019s current IPv6 transition plans could be  based on unrealistic assumptions about costs and resource demands.  Further, by moving forward without a risk analysis, DOD increases the  probability that it is not proactively managing potential threats that could  either disrupt the transition or introduce new IT security vulnerabilities.  Completing these longstanding planning requirements would enable DOD  to develop realistic plans with accurate transition requirements and  proactive risk mitigation strategies, among other things.\n\n\tRecommendations for Executive Action\n\nWe are making three recommendations to DOD.\nThe Secretary of Defense should direct the DOD CIO to complete a  department-wide inventory of existing IP-compliant devices and  technologies to help with planning efforts and requirements development  for the transition to IPv6. (Recommendation 1)\nThe Secretary of Defense should direct the DOD CIO to develop a cost  estimate as described in OMB memorandum M-05-22 for the  department\u2019s transition to IPv6. (Recommendation 2)\nThe Secretary of Defense should direct the DOD CIO to develop a risk  analysis as described in OMB memorandum M-05-22 for the  department\u2019s transition to IPv6. (Recommendation 3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD and OMB for review and  comment. In response, DOD agreed with two recommendations and  disagreed with one recommendation that we made to the department.  OMB did not state whether it agreed or disagreed with the report\u2019s  findings.\nIn written comments, DOD stated that it agreed with our  recommendations to develop a cost estimate and risk analysis for the  department\u2019s transition to IPv6 (Recommendations 2 and 3). The  department said that it plans to complete both the cost estimate and the  risk analysis by the end of May 2020.\nHowever, DOD stated that it did not agree with our recommendation to  complete a department-wide inventory of existing IP-compliant devices  and technologies (Recommendation 1). Specifically, the department  referred to the draft IPv6 guidance that OMB developed in March 2020,  stating that the draft guidance will rescind OMB\u2019s fiscal year 2005 IPv6  guidance, which includes the inventory requirement. DOD also said that  creating such an inventory would be impractical given the department\u2019s  size. It added that it has been mitigating the risk of not having an  inventory by only acquiring IPv6-capable devices since December 2009.\nWe acknowledge that OMB\u2019s March 2020 draft IPv6 guidance, once  finalized, would rescind its fiscal year 2005 IPv6 guidance. However, the  draft guidance focuses on completing the operational deployments of  IPv6, not on the initial key transition step of completing an inventory, as  required in the 2005 guidance.\nThe draft guidance also requests information on agencies\u2019 completion of  certain milestones using the percentage of IP-enabled devices that are  IPv6-only as the metric. DOD\u2019s completed inventory would be essential to  accurately responding to OMB\u2019s draft requirement. In addition, NIST\u2019s  current IPv6 transition guidance cites an inventory of IP devices as a key  step in transitioning to IPv6 since such information would help identify  requirements for transitioning, including which assets would transition and  what security controls would be needed. As DOD has acknowledged,  however, it has not yet completed an inventory. Accordingly, we believe  that our recommendation that DOD complete a department-wide  inventory of its existing IP-compliant devices and technologies is  warranted.\nIn addition, DOD provided a technical comment, which we incorporated  as appropriate. DOD\u2019s comments are reprinted in appendix II.\nIn comments provided via email on May 8, 2020, an Associate General  Counsel in OMB\u2019s Office of General Counsel expressed OMB\u2019s  appreciation for the opportunity to review and comment on our draft  report. The official did not state whether OMB agreed or disagreed with  the report\u2019s findings. OMB also provided a technical comment, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of DOD, and the Acting Director of OMB. In  addition, the report is available at no change on the GAO website at  https:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-6240 or dsouzav@gao.gov. Contact points for our  Offices of Congressional Relations and Public 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.\n\nAppendix I: DOD\u2019s IPv6 Implementation and Planning Activities\n\nIn February 2019, the Department of Defense\u2019s (DOD) Chief Information  Officer (CIO) released \u201cInternet Protocol Version 6 Implementation  Direction and Guidance,\u201d a memorandum containing guidance and a list  of required implementation and planning activities for the department\u2019s  transition to Internet Protocol version 6 (IPv6). For each activity, the  memorandum included information such as the component or office  responsible for completing the work and a description of the work to be  completed. Out of 35 total activities, seven were completed and 12 were  past due as of March 2020. One key contributing factor behind the  activities\u2019 unrealistic deadlines was that the department developed this list  of required activities without having completed key planning efforts, such  as an inventory of IP-compliant devices and technologies, a cost  estimate, or a risk analysis. Table 4 shows the status of the completion of  the required transition activities as called for in the department\u2019s  guidance.\n\nAppendix II: Comments from the Department of Defense\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Larry Crosland (Assistant  Director), Meredith Raymond (Analyst in Charge), Amy Apostol, Chris  Businsky, West Coile, Kristi Dorsey, Vernetta Marquis, and Evan Rapson  made key contributions to this report.","output":null}
{"id":"gao_GAO-20-56","pid":"gao_GAO-20-56_0","input":"\tBackground\n\nTSA is responsible for implementing and overseeing security operations  at roughly 440 commercial airports as part of its mission to protect the  nation\u2019s civil aviation system.\n\n\t\tScreening Technologies\n\nTSA is responsible for ensuring that all passengers, their carry-on bags,  and their checked baggage are screened to detect and deter the  smuggling of prohibited items, such as explosives, into the sterile areas of  airports and onto aircraft. Agency procedures generally provide that  passengers pass through security checkpoints where their person,  identification documents, and carry-on bags are screened by  transportation security officers (TSO). TSA uses a variety of screening  technologies\u2014screening systems, as well as software and hardware for  those systems\u2014to carry out its mission. Figure 1 depicts the various  screening technologies a passenger may encounter in primary and  secondary security screening.\n\n\t\tProcess for Acquiring and Deploying Screening Technologies\n\nTSA develops detection standards that identify and describe the  prohibited items\u2014such as guns, knives, military explosives, and  homemade explosives\u2014that each technology is to detect during the  screening process. The standards, which are classified, also identify  how often the technology should detect prohibited items (referred to as  the required probability of detection) and the maximum rate at which the  technology incorrectly identifies prohibited items (the probability of false  alarm). For explosive materials, the standards also identify what the  screening technology is to be able to detect in terms of (1) the minimum  amount or weight of the material (the minimum detection mass) and (2)  the chemical and physical makeup of the material (density range of the  explosive material).\nS&T supports TSA in the development of standards by, among other  things, analyzing the characteristics (threat mass, or the amount of  material that constitutes a threat, and density) of explosive materials. The  agency uses the resulting data to develop detection standards that are  specific to each screening technology.\nAfter a detection standard is approved, TSA decides whether to  operationalize\u2014put into effect\u2014detection standards by acquiring and  deploying technologies to update detection capabilities to meet the  standard. That is, it decides whether to take steps to develop new  technology capable of meeting the standard and put the new technology  in place at commercial airports. Technology can mean new software to  upgrade existing screening systems as well as entirely new screening  systems. TSA does not always or immediately operationalize detection  standards, for reasons which are explained later in this report.\nTo operationalize a detection standard, TSA must acquire technology  capable of meeting the standard. TSA officials told us they follow DHS  acquisition policies and procedures when acquiring new screening  technologies. Officials said they adapt detection standards as detection  requirements to guide the acquisition process, meaning the specifications  described in the standards are incorporated into the requirements  manufacturers must meet when developing new technology. Once  manufacturers have developed new technologies that meet detection  requirements, the technologies undergo a test and evaluation process,  known as the qualification process. The following are key steps in that  process:  1.  Certification \u2013 Certification is a preliminary step in TSA\u2019s qualification  process. For TSA to certify that a screening technology meets its  detection requirements, S&T\u2019s Transportation Security Laboratory  conducts certification testing on a manufacturer\u2019s initial submission of  its proposed screening technology to determine whether it meets  TSA\u2019s detection requirements (i.e., the rate at which it must accurately  detect each category of explosive it is designed to detect, among  other things).  2.  Integration\/Implementation Testing \u2013 TSA Systems Integration Facility  administers qualification testing to test system performance against  additional requirements, such as reliability, availability, and  maintainability. TSA also conducts field testing to ensure readiness for  operational test and evaluation.  3.  Operational Test and Evaluation - TSA deploys units to selected  airports to conduct operational testing. Operational testing allows TSA  to evaluate the operational effectiveness, suitability, and cyber  resiliency of the technology in a realistic environment.\nAfter new technologies have been tested and approved, TSA can  purchase and deploy them to commercial airports. When a deployed  screening system can no longer be updated to meet new detection  standards, TSA considers it obsolete and generally designates it for  replacement with a newer version of the technology.\nFigure 2 shows TSA\u2019s process for acquiring and deploying new screening  technologies to meet detection standards.\n\n\t\tDHS Risk Management\n\nDHS guidance provides that its components, including TSA, use risk  information about security threats and analysis to inform decision-making.  Risk management helps decision makers identify and evaluate potential  risks so that actions can be taken to mitigate them. DHS defines a risk  assessment as a function of threat, vulnerability, and consequence.  DHS guidance also says that risk assessments and transparency are key  elements of effective homeland security risk management.\n\n\tTSA Has a Process for Developing Detection Standards, but Has Not Updated Its Guidance or Documented Key Decisions\n\n\t\tTSA Has Consistently Followed Testing Protocols in Developing Detection Standards\n\nTSA has a process to develop new explosives detection standard in  response to emerging, credible threats involving a homemade explosive  (see sidebar for more information on homemade explosives). According  to TSA officials, the first step in the process is to determine whether a  new detection standard is needed, which they do by working with S&T  and other federal partners to \u201dcharacterize\u201d the threat material\u2014that is,  identify the chemical and physical properties of the material, such as the  threat mass and density. Below is the process (steps) TSA and S&T  officials told us they use to characterize a threat material and determine  whether a new detection standard is needed.\nHomemade Explosives   Homemade explosives are designed to cause  destruction when used in improvised  explosive devices. The picture below shows  damage to an aircraft panel from a homemade  explosive. Beginning in the early 2000s,  homemade explosives replaced military and  conventional explosives as the preferred tool  of terrorists, and challenged the capabilities of  existing screening technologies. Unlike  conventional threats, homemade explosives  are often made of common commercial items  and it can be challenging to distinguish them  from innocuous gels and liquids stored in  personal baggage or cargo. They also have  different detonation patterns from  conventional explosives in that they often  release energy much more slowly, which may  lead to incomplete or delayed detonation. This  pattern is not well understood, which makes it  much more difficult to predict the resulting  damage. of the explosive\u2014the minimum amount of the material that constitutes a  threat to civil aviation.\nMaterial down selection (selection of possible mixtures for testing).  Because the exact formulation of the explosive can vary, S&T must test  and model various formulations in different proportions to gain an  understanding of the homemade explosive. In this step, TSA determines  the representative formulations and preparations that are to be prepared  and tested, based on data provided by S&T.\nSynthesis, formulation, and preparation of materials. S&T establishes  how the threat material could be made, including its chemical synthesis  (as applicable), possible formulations or mixtures of the material with  other components, and the preparation of those mixtures. S&T uses this  information to develop samples of the threat material for testing.\nData acquisition and analysis. S&T examines the samples using micro- computed tomography and explosives detection system, and the resulting  data are sent to S&T\u2019s Transportation Security Laboratory for verification.  The verified data are then sent to the U.S. Department of Energy\u2019s  Lawrence Livermore National Laboratory for analysis.\nThe Transportation Security Administration  and the Science and Technology Directorate  have ranked 300 conventional and homemade  explosives that pose the most likely threat to  aviation security based on factors such as  availability, stability, performance, and method  of initiation.\nRegion of responsibility. Lawrence Livermore National Laboratory  generates preliminary results in the form of the \u201cregion of responsibility,\u201d  which is a map or explosive detection \u201cwindow\u201d outlining the  characteristics of the threat material in terms of density and effective  atomic number. These preliminary results are discussed among TSA and  S&T stakeholders, with TSA determining the final region of responsibility.  The region of responsibility data are used to develop software algorithms  that will allow screening technologies to recognize explosive materials  whose characteristics fall within the region of responsibility.\nDetection standard. TSA and S&T also use the region of responsibility  data to determine whether the explosive material can already be detected  by deployed screening technologies. If screening technologies can  already detect the material, TSA will not contract with technology  manufacturers to develop a new software algorithm or screening  technology. But regardless of whether a new software algorithm or new  technology is needed, TSA will draft a new detection standard for the  material that, generally, will specify the minimum threat mass and density  range to be detected, the acceptable probability of detection, and  probability of false alarm. The draft standard is reviewed by TSA senior  management before being approved.\nWe found that the work S&T and other stakeholders performed to  characterize explosive threat materials was consistent across the threat  materials. Specifically, we found that S&T consistently followed the  process described to us (as outlined above) for characterizing a threat  material in the seven material threat assessments we reviewed. We  also reviewed documentation regarding additional testing and analysis  S&T performed on select threat materials, and found the additional testing  and analyses were performed consistently.\n\n\t\tTSA Has Not Updated Its Guidance for Developing Detection Standards to Reflect Required Procedures, Key Stakeholder Roles, and New Organizational Structure\n\nTSA has not updated its 2015 guidance for developing new detection  standards to reflect key changes in their procedures. In December 2015,  TSA issued the Detection Requirements Update Standard Operating  Procedure, which a senior official told us served as the agency\u2019s  approved guidance for developing detection standards. Our review of  the document found that, as of August 2019, it did not accurately reflect  (1) designated procedures for developing detection standards, (2) the  roles and responsibilities of key stakeholders such as S&T, and (3) TSA\u2019s  organizational structure. For example, one way in which the 2015  guidance has not been updated is in the designated procedures it  describes for reviewing available intelligence information. Specifically, the  guidance calls for an annual assessment of emerging threats, which a  senior TSA official told us TSA no longer conducts because relevant  emerging threats are now occurring more frequently and intelligence  information is processed on an ongoing basis.\nIn another example, the guidance specifies that TSA will form working  groups composed of agency officials and stakeholders to assess potential  threat materials and develop an analysis plan, and that each working  group will define the roles and responsibilities of its members. According  to a senior TSA official, the agency does not convene working groups to  assess intelligence or develop an analysis plan, although officials  regularly meet with stakeholders to discuss the steps needed to  characterize new threat materials and document the minutes from these  meetings.\nFinally, while the guidance discusses in detail which TSA offices and  management positions are responsible for implementing and overseeing  the process, the agency has since reorganized and these offices and  positions no longer exist. Therefore, the 2015 guidance is no longer  relevant in terms of which offices and positions are responsible for  implementing and overseeing the approval of detection standards.\nOfficials told us that, as of August 2019, they had begun revising the  guidance to reflect existing standard operating procedures for developing  detection standards, but had yet to finalize a draft of the new guidance or  document plans or timeframes for completing and approving it. Further, it  is not clear to what extent the revised guidance will address designated  procedures for developing detection standards, the key roles and  responsibilities of stakeholders, and TSA\u2019s new organizational structure.  Officials said they had not updated the guidance earlier because both  TSA and S&T had been undergoing agency reorganizations.\nStandards for Internal Control in the Federal Government provides that  agencies should identify, on a timely basis, significant changes to internal  conditions that have already occurred, such as changes in programs or  activities, oversight structure, and organizational structure. Additionally,  agencies are to develop and maintain documentation of internal controls,  such as policies and procedures necessary to achieve objectives and  address related risks. By documenting the processes and procedures  TSA uses to develop detection standards, clarifying the roles and  responsibilities of stakeholders, and documenting organizational changes,  TSA could have better assurance that detection standards are developed  in accordance with established policies and practices.\n\n\t\tTSA and S&T Did Not Document All Key Decisions Regarding the Development of Detection Standards\n\nOur review of TSA\u2019s steps to develop detection standards from fiscal  years 2014 through 2018 found that TSA and S&T did not document all  key decisions\u2014those that could potentially affect outcomes\u2014regarding  the testing and analyses (characterization) of explosive threat materials  and the development of explosives detection standards. We found that  TSA and S&T produced a series of detailed material threat assessments  to document the characterization of threat materials and consistently  developed action memos to justify proposed detection standards.  However, we also found that in five of the seven material threat  assessments we reviewed TSA and S&T did not consistently document  key steps in the testing and analyses of materials, such as how selected  samples were prepared for testing. For example, one S&T material threat  assessment we reviewed did not document the method used to  synthesize (chemically produce) material samples used for testing. Not  documenting the method could prevent officials from fully understanding  the results of the analysis. Specifically, the assessment noted that there  are multiple methods of synthesis, and that the chosen method could  affect the makeup of the resulting material and therefore the ability of the  screening technologies to detect it. Additionally, while two of the seven  material threat assessments cited standard operating procedures for  sample preparation for all participating laboratories, three did not cite  standard operating procedures for at least one laboratory and two stated  that sample preparation information had not been provided by one or  more of the participating laboratories. Without documentation, TSA might  not have all the necessary information to address future issues involving  detection of these materials.\nWe also found four instances in which TSA did not clearly document why  select materials were sent for additional testing or did not document key  decisions regarding the development and consideration of detection  standards. For example, S&T performed additional testing and analysis  on select threat materials after the material threat assessment was  finalized. However, the documentation of this additional testing left out  key elements regarding how and why the additional testing was needed  and conducted. The action memo documenting new standards based on  the results of the additional testing did not include a justification for why  specific threat materials were selected for additional data collection.  While a test plan for equivalency testing of one material stated that the  additional testing was conducted because data reported in the literature  were not considered representative of current threat configurations,  similar justification was not included in the action memo justifying  changes to the new standard based on the additional testing. Finally, a  senior TSA official told us he requested the additional equivalency testing  because the values in the previous detection standards appeared to be  more conservative than expected and there was no documentation  explaining how TSA had arrived at those numbers. According to the  official, the previous detection standard was approved before his tenure  and the determining officials were no longer with TSA. He also stated that  he did not know whether TSA required documentation of testing and  analysis when the previous detection standard was being developed.\nWe found that TSA did not document key decisions regarding the  development and consideration of detection standards. For example,  officials could not provide documentation of conclusions reached on  specific key decisions, such as the consideration and decision not to  approve a proposed explosives trace detection standard. A senior TSA  official said he did not know why the decision had not been documented  because the officials involved were no longer with the agency.\nAccording to Standards for Internal Control in the Federal Government,  documentation is required for the effective design, implementation, and  operating effectiveness of an agency. 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. By  documenting key decisions regarding the development of detection  standards, including instances in which draft standards are not approved,  TSA could better ensure that effective decisions are made and that  organizational knowledge is retained regardless of changes in personnel.\n\n\tTSA Operationalizes Detection Standards by Updating its Screening Technologies, Which Can Take Years to Complete\n\nTSA officials said one way to operationalize detection standards\u2014acquire  and deploy technologies to update detection capabilities and meet the  detection standard\u2014is to update existing screening systems with new  technology, such as software or firmware. When possible, the agency  installs software as part of routine maintenance. TSA can also deploy  new hardware or replace screening systems to update detection  capabilities. According to officials, the agency applies an incremental  approach to updating existing screening technologies\u2014it updates  technologies when manufacturers are able to develop the requisite  capabilities and as resources allow\u2014which can take years to complete.\nAccording to officials, all fully deployed TSA screening technologies had  detection capabilities that met detection standards approved from 2006  through 2012. That is, as of August 2019, TSA\u2019s fleet of screening  technologies met detection standards that were approved in 2012 or  earlier. For example:\nBottled liquid scanner units met a detection standard that was\nAdvanced technology x-ray units met two detection standards,  depending on their manufacturer, that were both approved in 2010;  and\nExplosives trace detection units met a detection standard that was  approved in 2012.\nFurther, for each screening technology, the agency has approved two to  three new detection standards that have not been operationalized, as of  August 2019. For example, in addition to the 2006 detection standard for  bottled liquid scanner, TSA approved standards for bottled liquid scanner  in 2012 and in 2017 that have not been operationalized.\nTSA officials said they were working to operationalize some of the  detection standards approved since 2012. Officials said they were  working with manufacturers to develop new technologies to operationalize  some of these standards. In other cases they were in the process of  deploying new technologies that meet these standards.  For example, as  of August 2019, TSA was in the process of updating and replacing  explosives detection systems to meet a detection standard that was  approved in 2014. Officials said they expected to have the entire fleet  updated by September 2023. TSA officials said they were also in the  process of updating deployed advanced technology x-ray units for one of  its two manufacturers to meet a standard that was approved in 2014. For  more information about the detection standards TSA had approved for  each technology as of August 2019, and the status of TSA\u2019s progress in  operationalizing them, see appendix I.\nTSA shares information about the capabilities it needs with manufacturers  through requests for proposal, requests for information, and broad agency  announcements. The agency places approved technologies on a qualified  products list\u2014a list of technologies that have been tested and certified as  meeting requirements by TSA and DHS\u2014and the agency can then award  a contract to one of the manufacturers to purchase and deploy the  technology. Before deploying technologies to airports, TSA conducts  testing to ensure consistency in the manufacturing process, system  configuration, and functionality following production, and then again after  the technology is installed at airports.\nOur analysis of the acquisition information TSA provided found it took  from 2 to 7 years to fully develop, certify, test, and deploy screening  technologies to airports. For example, when operationalizing explosives  trace detection standard 5.0, it took one manufacturer 4 years and a  second manufacturer 7 years to develop, and for TSA to deploy, the  software needed to update the capability of existing explosives trace  detection units to meet the new standard.\nFigure 3 provides our analysis of TSA\u2019s timeline for operationalizing  advanced imaging technology detection standards approved from 2010  through 2016. TSA officials said they approved detection standard 3.3 for  advanced imaging technology in October 2010 and began deploying  technology that met that standard to airports in August 2011. Officials  said they approved a subsequent standard, 4.1, in January 2012, began  deploying technology to meet it in October 2014, and completed the  deployment in September 2017. Officials said it took 3 years to complete  deployment because the demand for advanced imaging technology  increased over time as airports experienced an increase in passenger  volumes, among other reasons. Since 2012, TSA approved two additional  detection standards for advanced imaging technology\u20144.3 in February  2016 and 4.3.1 in August 2016. TSA officials said they have not  operationalized these two standards because the manufacturer has not  been able to develop the requisite technology. As such, deployed  advanced imaging technology units meet standards approved in 2010  and 2012.\nTSA officials stated that they do not always, or immediately,  operationalize detection standards after they are approved. They said  they make these decisions on a case-by-case basis, depending on many  factors. These include whether: (1) manufacturers have the technological  ability, (2) a new technology is in development, and (3) screening  technologies already have the capability.\nManufacturers do not have the technological ability. TSA officials said  manufacturers do not always have the technical ability to meet detection  standards. According to officials, it can be challenging for manufacturers  to develop the technology necessary to detect new threats as presented  in a detection standard, and in some cases impossible without further  research and development. For example, TSA officials said that  manufacturers have been unable to develop the requisite technology to  meet the most recent detection standards (4.3 and 4.3.1) for advanced  imaging technology. However, TSA officials said they have expanded  their research and development efforts to try to develop the technology.  TSA officials told us they plan to continue developing detection standards  irrespective of the capabilities of currently deployed technologies so that  they can focus on identifying emerging threats. The new detection  standards then serve to set expectations for manufacturers about the  capability to which they should aspire and justify research and  development necessary to realize that capability. To better manage the  difference between the capabilities of deployed technologies and the  capabilities described in detection standards, TSA officials said they are  in the process of developing a new position of Capability Manager, who  would be responsible for managing the development of mission-essential  capabilities\u2014such as carry-on baggage screening\u2014from start to finish.  Officials said they expect this position will help bridge the gap between  approved detection standards and the detection capabilities of deployed  screening technologies over time, because the managers will have cross- cutting oversight of the process.\nA new technology is in development. Officials said that they may not  operationalize a detection standard if they expect a new type of screening  technology will replace an existing one. For example, officials said that  TSA is exploring new alarm resolution technologies\u2014that is, screening  technologies that are used to determine whether alarms are false  positives. Officials said new alarm resolution technologies may replace  the bottled liquid scanner in the future, and therefore they have not  pursued operationalizing detection standard 2.3.\nScreening technologies already have the capability. According to TSA  officials, new detection standards do not always add significant detection  capabilities. For example, officials decided not to operationalize bottled  liquid scanner detection standard 3.0 when it was approved in 2017  because the deployed units already had most of the capabilities called for  in the detection standard; TSA developed the new standard to better align  with standards for other technologies.\n\n\tTSA Deployment Decisions are Generally Based on Logistical Factors, and the Extent to Which TSA Considers Risk Is Unclear Because Decision- Making Lacks Documentation\n\n\t\tTSA Assesses Risks and Capability Gaps When Determining Acquisition Needs\n\nOur review of TSA acquisition documents found that TSA considers risk  at the beginning of the screening technologies acquisition process..  Specifically, the agency considers risk in two phases\u2014(1) a risk  assessment developed from intelligence information and modeling tools,  and (2) an annual capability analysis that analyzes and prioritizes  capability gaps and determines mitigation options. Figure 4 provides an  overview of TSA\u2019s acquisition process for new screening technologies.\nRisk assessment. TSA uses intelligence information and modeling tools,  such as the Risk and Trade Space Portfolio Analysis, to assess risk to the  aviation system. The Risk and Trade Space Portfolio Analysis was  developed in 2014 to analyze the security effectiveness of alternate  combinations of some aviation security countermeasures. Officials said a  recent example of a risk-informed deployment decision influenced by the  Risk and Trade Space Portfolio Analysis was TSA\u2019s 2017 deployment of  141 advanced imaging technology units to category III and IV airports.  Officials said that around 2014, TSA received intelligence about a  potential terrorist threat to airports, as well as the results of covert testing  at airports that identified screening vulnerabilities. Officials said a 2014  Risk and Trade Space Portfolio Analysis also identified disparities in  screening capabilities at smaller airports. In part because of the  vulnerability identified by these three factors, as well as ongoing  conversations between TSA senior leadership, the DHS Inspector  General, and members of Congress, officials said TSA procured and  deployed additional advanced imaging technology units to some category  III and IV airports that did not have them.\nCapability analysis. TSA uses the Transportation Security Capability  Analysis Process, a structured decision-making tool, to identify and  prioritize capability gaps and help direct agency resources towards  closing critical gaps to an acceptable level. When existing screening  capabilities do not fully meet TSA\u2019s mission needs, the associated  capability gap presents a security risk. As part of the Transportation  Security Capability Analysis Process, TSA produces Capability Analysis  Reports that identify and recommend solutions to closing capability gaps.  Recommendations have included procedural changes, such as new  training for TSOs, and investments in new technology. TSA\u2019s investment  in computed tomography technology for checkpoint screening of carry-on  baggage is an example of TSA\u2019s implementation of the Transportation  Security Capability Analysis Process to validate capability gaps and  identify recommended courses of action. Officials said that in some cases  the agency may identify a capability gap that cannot be resolved to an  acceptable level with commercially available screening technology, in  which case it will pursue additional research and development.\n\n\t\tTSA\u2019s Approach to How Risk Informs Deployment Decisions Lacks Documentation\n\nTSA officials told us that they operate under the assumption that every  airport is a possible entry point into the aviation system for a terrorist, and  they do not consider there to be a significant difference in vulnerability  among airports when deploying screening technologies. However,  officials did not provide analysis or documentation that supported this  conclusion. Officials noted the exception to this assumption is a handful of  airports that are consistently considered to be the highest risk because of  known threats and a high volume of international travelers.\nFurther, officials said that if they had information about a threat to a  specific airport that would be mitigated by deploying a screening  technology, they would modify their plans for deployment accordingly.\nHowever, TSA\u2019s process for how it would change its deployment plans to  specific airports based on risk lacks transparency. For example, officials  said that as part of the acquisition process they have ongoing discussions  with stakeholders about their deployment strategies, including security  and intelligence officials who would inform them of any relevant risk  information. Officials said these discussions are generally informal and  not documented\u2014it was unclear how these discussions have  incorporated information about risk in the past, and officials could not  provide an example of when risk information at specific airports had  directly influenced deployment of technologies to airports in the recent  past.\nIn 2018, the agency released its Transportation Security Administration  Systems Acquisition Manual, which called for deployment plans to be  written documents, and officials said they began documenting their plans  for deploying screening technologies in the last two years. TSA officials  provided us with one deployment plan\u2014for their 2018 deployment of  explosives trace detection units\u2014but we found that it was not transparent  about how risk was a factor in officials\u2019 methodology for determining the  order of airports to receive the technology. The explosives trace  detection plan documented TSA\u2019s schedule of deployment and the roles  and responsibilities of relevant stakeholders, among other things.  However, while the plan indicated that officials would coordinate with  relevant offices within the agency for information about risks that might  impact their deployment strategy, we found that the plan did not  document how risk had informed their decisions about where and how to  deploy the technology, including the assumptions, methodology, and  uncertainties considered.\nAdditionally, TSA officials did not document, and could not fully explain,  how risk analyses contributed to and factored into the following specific  deployment decisions.\nDeployment of advanced imaging technology to smaller airports.  Officials said many factors influenced their decision to deploy advanced  imaging technology units to category III and IV airports, including  information about threats and a related 2014 risk analysis. However,  officials did not document their decisions and could not fully explain their  risk analysis, including their process for analyzing and weighing relevant  factors. According to officials, the decision was made during discussions  with senior leadership, which were risk-informed and supported by  whiteboard analyses and classified documents. Additionally, officials told  us that, for practical reasons, they deployed units to those category III  and IV airports that had the space to accommodate them, but did not  further assess the priority of deployment among the smaller airports  because they had determined that the risk was uniform and because they  planned to deploy the units within a short timeframe. Officials did not  document the risk assessment that led to this determination, and could  not explain how the three elements of risk\u2014threat, vulnerability, and  consequence\u2014were used or assessed.\nDeployment of targeted threat algorithm. In 2016, TSA deployed a  targeted threat algorithm\u2014software to improve detection capabilities\u2014to  a limited number of advanced imaging technology units in response to a  specific threat. After testing the operational impacts of the software  algorithm, the agency decided to stop further deployment. The  documentation TSA provided did not explain how officials had analyzed  the risk-mitigation benefits of the algorithm, including the underlying  assumptions and uncertainty, or how they had weighed those benefits  against the operational impacts and costs when they made their decision  not to fully deploy the algorithm.\nTSA officials said they follow the DHS acquisition process to acquire and  deploy technologies and their deployment decisions are based on, and  informed by, their initial assessments of capability gaps, as well as their  understanding that every airport offers equal entry into the aviation  system. However, officials had not documented the rationale for these  decisions and could not fully explain how risk had informed their decisions  about where and in what order to deploy screening technologies.\nDHS\u2019s Risk Management Fundamentals states that components should  consistently and comprehensively incorporate risk management into all  aspects of the planning and execution of their organizational missions.  Additionally, it says transparency is vitally important in homeland security  risk management, and documentation should include transparent  disclosure of the rationale behind decisions, including the assumptions,  methodology, and the uncertainty considered. By fully disclosing what risk  factors are weighed and how decisions are made, TSA officials can better  ensure that their deployment of screening technologies matches potential  risks (threats, vulnerabilities, and consequences). This is of particular  importance given the agency\u2019s limited resources and the fact that  screening technologies are not easily relocated.\n\n\t\tTSA Generally Deploys Screening Technologies Based on Logistical Factors\n\nTSA officials said that absent a specific risk to an airport or category of  airports that would be mitigated by deploying a screening technology,  they consider a number of logistical factors that are aimed at maximizing  the operational efficiency of the screening process. These factors  influence the number of units of a technology the agency deploys to  airports, the order in which they deploy them, and where they are  deployed.\nOfficials said they use modeling software to determine the most efficient  number of units to allocate to an airport for each type of screening  system. This analysis takes into account variables such as the number  of flights at an airport, airport passenger volumes, items per passenger,  and secondary search rates. Additionally, agency officials said the layout  of an airport is a significant determining factor for the number of units it  receives. For example, an airport that has centralized checked baggage  screening areas will need fewer explosives detection systems than an  airport that has checked baggage screening areas dispersed in different  locations.\nAdditionally, TSA officials said that logistical and funding factors can  influence the order of deployment, including the manufacturer\u2019s ability and  resources to develop and deliver technologies. For example, as of June  2019, officials said the agency was in the process of updating the  detection capabilities of 62 percent of its advanced technology x-ray fleet  because one of its two manufacturers had completed testing and  certification of the new technology, but the second manufacturer\u2019s  technology had yet to be certified. Officials said they also try to plan  their deployment schedule around minimizing disruptions to airport  operations, so if an airport could not absorb a full deployment of a  technology because it would affect too many passengers, TSA would  schedule the deployment in phases to minimize disruptions.\nFurther, TSA officials said that, as a result of these many logistical  considerations, they generally fully deploy new screening technologies to  category X airports first\u2014generally, airports with the highest passenger  volumes\u2014and then proceed in order down to the airport with the lowest  passenger volume. Officials said larger airports generally have the  infrastructure in place to incorporate new technology without extensive  disruption to operations, and they will screen the most passengers by  deploying screening technologies to the largest airports first.\n\n\tTSA Does Not Ensure That Screening Technologies Continue to Meet Detection Requirements after Deployment to Airports\n\nTSA practices do not ensure that screening technologies continue to  meet detection requirements after they have been deployed to airports.  According to agency officials, the agency uses certification to confirm that  technologies meet detection requirements before they are deployed to  airports, and calibration to confirm that technologies are at least minimally  operational while in use at airports. Officials stated these processes are  sufficient to assure TSA that screening technologies are operating as  intended. However, while certification and calibration serve important  purposes in the acquisition and operation of screening technologies, they  have not ensured that TSA screening technologies continue to meet  detection requirements after they have been deployed.\nCertification occurs prior to deployment. TSA\u2019s certification process is  designed to ensure screening technologies meet detection requirements  during the acquisition process, prior to the procurement and deployment  of the technologies, but it does not ensure screening technologies  continue to meet detection requirements after deployment. As previously  described, manufacturers provide an initial submission of the screening  technology to TSA for certification testing as part of the acquisition  process. During the certification process, S&T\u2019s Transportation Security  Laboratory tests the technology under controlled conditions to determine  whether it meets TSA\u2019s detection requirements. After TSA certifies that a  screening technology meets detection requirements and it undergoes  additional testing to determine whether it meets other TSA requirements  in controlled testing facilities, TSA may deploy it to select airports for  operational testing and evaluation to determine how it performs in an  airport setting. Certification testing demonstrates that a manufacturer\u2019s  screening technology meets detection requirements during the acquisition  process, which allows TSA to determine whether it should continue to  consider the technology for acquisition.\nCertification does not ensure that deployed technologies continue to meet  detection requirements because it does not account for the possibility that  performance of technologies can degrade over time throughout the  technologies\u2019 lifecycles after deployment. For example, in 2015 and 2016,  DHS removed a sample of deployed explosives trace detection and  bottled liquid scanner units from airports for testing in the Transportation  Security Laboratory. The laboratory concluded that some deployed units  for each technology it tested no longer met detection requirements\u2014 either the required probability of detection for certain explosives or the  required rate for false alarm, or both. One explosives trace detection unit  that was tested was found to have a probability of detection much lower  than required. According to TSA officials, the units did not meet detection  requirements because they were not adequately maintained, which  affected their performance. In light of this, officials stated that they  introduced better controls to ensure that routine preventative  maintenance is performed as required. However, because TSA does not  test the units after they are deployed to airports, it cannot determine the  extent to which these controls ensure technologies continue to meet  detection requirements. Officials noted that TSA uses a layered security  approach at airports, so if one layer should fail\u2014such as a deployed  technology\u2014the agency can still rely on other security measures among  the various layers of security to detect threats. We have previously  reported on the importance that TSA ensure each measure is effective to  make the best use of its limited resources, in order to serve its aviation  security mission.\nCalibration does not test whether technologies meet detection  requirements. TSA officials stated that daily calibration also helps ensure  that screening technologies continue to meet detection requirements after  deployment. However, while calibration demonstrates that the screening  technology is at least minimally operational, it is not designed to test  whether the screening technology meets detection requirements. For  example, each explosives detection system is calibrated with an  operational test kit that contains items of various densities. To calibrate  explosives detection systems, a TSO must run the operational test kit  through the unit and verify that the item is correctly displayed on the  monitor (see figure 5 below). This process demonstrates whether the  system can identify the known items\u2019 densities, but it does not ensure that  the system meets detection requirements. As a result, calibration could  indicate that the unit is functioning even when its detection capabilities  have degraded\u2014that is, calibration determines that the technology is  functional, but it does not ensure that the technology is meeting detection  requirements.\nTSA officials stated that they plan to develop a process to review  screening technologies on an annual basis to analyze their performance,  including detection over time. TSA officials stated that, as of August 2019,  they were actively working on developing a review process for the  explosives detection system but did not have a date for when they  planned to complete it. TSA officials for the passenger and carry-on  screening technologies stated that they had not yet started developing a  review process for those technologies and the timeline for developing a  review process will depend on funding.\nTSA officials also noted that there are challenges in designing a process  to ensure that screening technologies continue to meet detection  requirements after deployment. For example, TSA and S&T officials  stated that it is not feasible to conduct live explosives testing in airports.  Further, according to TSA officials, while it is relatively easy to temporarily  transfer smaller screening technologies, such as explosives trace  detection and bottled liquid scanner units, to a controlled setting for live  explosives testing, it would not be feasible to transfer larger installed  units, such as advanced imaging technology. Although testing with live  explosives in an airport poses undue risks and transferring larger  machines for testing may be costly, TSA could develop other measures.\nTSA officials stated that there is no requirement to ensure that its  screening technologies continue to meet detection requirements after  deployment to airports. However, Standards for Internal Control in the  Federal Government calls for agencies to establish and operate a system  to continuously monitor the quality of performance over time. Without  taking additional steps to ensure screening technologies are meeting  detection requirements, TSA may run the risk that its deployed screening  technologies are not detecting explosives and other prohibited items.  Developing and implementing a process to monitor screening  technologies\u2019 detection performance over time would help provide TSA  assurance that screening technologies continue to meet detection  requirements, as appropriate, after deployment. In doing so, TSA would  also be better positioned to take any necessary corrective actions if or  when screening technologies no longer operate as required.\n\n\tTSA Spent an Estimated $3.1 Billion to Purchase, Deploy, Install, and Maintain its Fiscal Year 2018 Inventory of Screening Technologies\n\nWe estimate that TSA spent $3.1 billion to purchase, deploy, install, and  maintain its inventory of screening technologies as of the end of fiscal  year 2018, based on agency estimates of costs. Of this $3.1 billion, we  estimate that TSA spent 71 percent to purchase screening technologies,  9 percent to deploy, about 12 percent to install, and, for fiscal year 2018,  about 9 percent to maintain them for 1 year. The highest estimated total  expenditures on a per-technology basis were for explosives detection  systems ($2.1 billion, or 68 percent), advanced technology x-ray ($443  million, or 14 percent), explosives trace detection ($227 million, or 7  percent), and advanced imaging technology ($197 million, or 6 percent).  Table 1 provides information on estimated expenditures for TSA\u2019s  September 2018 inventory of screening technologies, by screening  technology and life-cycle phase (i.e., purchase, deploy, install, and  maintain). Appendix III provides additional information on estimated TSA  expenditures, such as prices per unit of technology and estimated  expenditures by airport category.\nTSA has also incurred costs, or has plans to incur costs, for additional  actions related to screening technologies. Specifically, it has also incurred  costs for modifications to commercial airport facilities to accommodate  screening technologies. Further, TSA estimates additional life-cycle costs  of $804 million to acquire, deploy, and maintain computed tomography  systems through fiscal year 2026. The following provides more  information on these estimated expenditures.\nAirport modifications. TSA incurs costs related to modifying commercial  airports to accommodate certain screening technologies, such as  checked baggage screening systems (e.g., explosives detection  systems). In December 2017, we reported that TSA had 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 screening technology. For example, TSA may  enter into agreements to reimburse airport operators for a percentage of  the allowable design and construction costs associated with facility  modifications needed for installing, updating, or replacing in-line  explosives detection systems. In-line screening systems use conveyor  belts to route checked luggage through explosives detection systems,  which capture images of the checked baggage to determine if a bag  contains threat items not permitted for transport, including explosives.  From fiscal years 2012 through 2016, agreements for TSA  reimbursements to airports for checked baggage screening systems  generally ranged in value from $50,000 to $150 million. As we reported  in December 2017, in general, depending on the airport\u2019s size, TSA will  reimburse 90 or 95 percent of the allowable, allocable, and reasonable  cost of certain projects. For other projects, TSA may provide 100 percent  reimbursement\u2014for example, where existing systems require the  correction of security or safety deficiencies.\nComputed tomography. In addition to its fiscal year 2018 inventory, TSA  is currently in the process of deploying computed tomography to  commercial airports to replace advanced technology x-ray systems.  Computed tomography technology applies sophisticated algorithms to  detect explosives and other prohibited items and creates a 3D image of  carry-on baggage that a TSO can view and rotate 360 degrees. In fiscal  year 2018, TSA determined that computed tomography is the best  technology available to address rapidly evolving threats in the  transportation sector, and plans to eventually deploy it to all checkpoints  and replace advanced technology x-ray technology. As recorded in  TSA\u2019s Deployed Locations Report, TSA had deployed 11 computed  tomography systems to category X and I airports as of September 24,  2018. According to TSA\u2019s September 2018 life-cycle cost estimates, the  agency plans to field 883 units by fiscal year 2026. As shown in table 2,  TSA also planned to spend $805 million to purchase, deploy, and  maintain this new technology through fiscal year 2026. However, in  August 2019, TSA officials told us that they expect this estimated total  procurement cost of $805 million to likely decrease as the per unit cost  had decreased from $400,000 to $233,000 in the initial fiscal year 2019  contract for computed tomography.\n\n\tConclusions\n\nTSA has invested billions of dollars in screening technologies as it  responds to terrorists\u2019 attempts to use homemade explosives to disrupt  and damage civil aviation. Forecasted increases in passenger volumes  and ongoing terrorist threats make it imperative that TSA employ  recommended management and internal control practices. TSA could  help ensure that critical detection standards are developed in accordance  with approved practices, and that agency goals are effectively met by  updating its guidance for developing standards. Additionally, by  documenting key decisions in the development of detection standards,  TSA could better assure the effectiveness of decision-making and the  retention of organizational knowledge in the face of inevitable changes in  personnel.\nSimilarly, when making technology deployment decisions, incorporating  DHS-recommended practices for risk management would improve TSA\u2019s  ability to effectively fulfill its mission to secure the nation\u2019s civil aviation  system. While TSA assesses risk when deciding whether to invest in a  new technology to address an identified capability gap, it is unclear the  extent to which it considers risk when determining where and in what  order to deploy approved screening technologies to airports. DHS  guidance for homeland security risk management calls for risk to be  considered consistently and comprehensively in all aspects of an  agency\u2019s work. Additionally, risk management includes transparent  disclosure of the rationale behind decision-making so that stakeholders  can understand how key factors were weighed. Incorporating these risk  management principles into its decision-making for deploying screening  technologies to airports would allow TSA to align its deployment  strategies with potential threats, vulnerabilities, and consequences.\nLastly, TSA cannot ensure that its screening technologies continue to  meet detection requirements after they have been deployed to airports.  Developing and implementing a policy to ensure that TSA\u2019s screening  technologies continue to meet their respective detection requirements  after deployment may assure the agency that its deployed screening  technologies are effectively detecting explosives and other prohibited  items that they are designed to identify, which is a critical part of TSA\u2019s  mission.\n\n\tRecommendations for Executive Action\n\nWe are making the following five recommendations to TSA:  The TSA Administrator should update TSA guidance for developing and  approving screening technology explosives detection standards to reflect  designated procedures, the roles and responsibilities of stakeholders, and  changes in the agency\u2019s organizational structure. (Recommendation 1)\nThe TSA Administrator should require and ensure that TSA officials  document key decisions, including testing and analysis decisions, used to  support the development and consideration of new screening technology  explosives detection standards. (Recommendation 2)\nThe TSA Administrator should require and ensure that TSA officials  document their assessments of risk and the rationale\u2014including the  assumptions, methodology, and uncertainty considered\u2014behind  decisions to deploy screening technologies. (Recommendation 3)\nThe TSA Administrator should develop a process to ensure that  screening technologies continue to meet detection requirements after  deployment to commercial airports. (Recommendation 4)\nThe TSA Administrator should implement the process it develops to  ensure that screening technologies continue to meet detection  requirements after deployment to commercial airports. (Recommendation  5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to DHS for comment. We provided a  draft of this report to DHS for review and comment. DHS provided written  comments, which are reproduced in full in appendix IV. DHS concurred  with our five recommendations and described actions undertaken or  planned to address them. TSA also provided technical comments, which  we incorporated as appropriate.\nWith regard to our first recommendation that TSA update guidance for  developing and approving screening technology explosives detection  standards, DHS concurred and stated that TSA has included updated  guidance in its Requirements Engineering Integrated Process Manual,  which was completed in September 2019. According to DHS, the  update provides TSA\u2019s process for developing and approving explosives  detection standards, including designated procedures and roles and  responsibilities of stakeholders, and reflects organizational changes to  TSA. TSA provided us with the Requirements Engineering Integrated  Process Manual in November 2019, concurrent with DHS comments. We  will review the update and the extent to which it addresses the  recommendation. This action, if fully implemented, should address the  intent of the recommendation.\nDHS concurred with our second recommendation that TSA ensure that  officials document key decisions supporting the development of screening  technology explosives detection standards. DHS stated that the updated  Requirements Engineering Integrated Process Manual describes the  process for documenting key decisions, including testing and analysis  decisions, in the development of new detection standards. We will review  the update and the extent to which it addresses the recommendation.  This action, if fully implemented, should address the intent of the  recommendation.\nDHS also concurred with our third recommendation that TSA document  its assessments of risk and the rationale behind its decisions to deploy  screening technologies. According to DHS, TSA has instituted an  improved process for documenting elements that contribute to  deployment decisions\u2014TSA\u2019s August 2019 deployment plan for  computed tomography is an example of the process. DHS stated that  TSA will continue to include a comparable level of documentation in  future deployment plans for screening technologies. We agree the  computed tomography deployment site selection strategy is an example  of how TSA can document the rationale governing the deployment of a  screening technology. Future plans can further benefit by explaining the  risk analysis itself along with the role that risk considerations played in the  selection of airports for deployment. Formalizing guidance that directs  TSA officials to document risk assessments and the rationale behind  deployment decisions would help TSA ensure that its deployment of  screening technologies matches potential risks.\nDHS concurred with our fourth and fifth recommendations that TSA,  respectively, develop and implement a process to ensure that screening  technologies continue to meet all detection requirements after  deployment to commercial airports. DHS stated that TSA will develop  recurring individual post implementation reviews (PIR) for all screening  technologies in accordance with DHS Directive 102-01, to assess multiple  aspects of system performance, including detection over time. DHS also  stated that TSA intends to examine the component performance of the  detection chain rather than a direct measure of detection requirements,  due to the limitations of using live explosives and simulants. DHS stated  that because the detection chain for each technology is unique and will  require individual reviews, TSA is developing a policy on the PIR  development process, which it estimates will be completed by March 31,  2020. We appreciate the limitations live explosives and simulants present  in testing and the need for reviews that are tailored to meet the unique  characteristics of each screening technology. TSA plans to implement the  review process on the first screening technology by December 31, 2020.  These actions, if implemented across all applicable screening  technologies, should address the intent of the recommendations.\nWe are sending copies of this report to the appropriate congressional  committees and to the Acting Secretary of Homeland Security. In  addition, this report is available at no charge on the GAO website at  http:\/\/gao.gov.\nIf 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 V.\n\nAppendix I: Transportation Security Administration (TSA) Screening Technologies\n\nThis appendix presents additional details on the TSA screening  technologies we reviewed, including their function and the number of  units deployed.\n\nAppendix II: Objectives, Scope, and Methodology\n\nThis report addresses Transportation Security Administration\u2019s (TSA)  processes for developing and deploying screening technologies to  airports regulated by TSA (i.e., \u201ccommercial\u201d airports). Specifically, we  examined  1. the extent to which TSA has a process for developing explosives  detection standards for screening technologies in response to identified  emerging threats;  2. how TSA operationalizes detection standards to update detection  capabilities;  3. the extent to which TSA has considered risk when deploying screening  technologies to commercial airports;  4. the extent to which TSA ensures screening technologies meet the  requirements for detection standards after deployment; and  5. TSA estimated expenditures to purchase, deploy, install, and maintain  its inventory of screening technologies as of the end of fiscal year 2018.\nTo address all of our objectives, we identified 11 screening technologies  TSA used to screen passengers\u2019 identification documents, person, carry- on bags, and checked baggage at commercial airports as of September  24, 2018, as recorded in TSA\u2019s Government Property Management  database. The seven screening technologies in use at commercial  airport passenger checkpoints were advanced imaging technology,  advanced technology x-ray machine, bottled liquid scanner, boarding  pass scanner, chemical analysis device, threat image projection x-ray,  and walk-through metal detector. The credential authentication  technology and computed tomography, also used at checkpoint  screening, were deployed and in use at select airports as TSA pilot  projects. The two TSA screening technologies in use at commercial  airports for checked baggage were explosives detection systems and  explosives trace detection (TSA also uses explosives trace detection for  checkpoint screening).\nWe assessed the reliability of TSA\u2019s inventory data by interviewing  agency officials and reviewing related documentation, such as the  database user manual, among other things. We determined the data were  sufficiently reliable to determine the type and number of TSA screening  technologies deployed as of September 2018. To better understand how  TSA screening technologies have been used, we reviewed reports from  the U.S. Department of Homeland Security (DHS) Office of the Inspector  General, the Congressional Research Service, past GAO reports, and  relevant DHS and TSA documentation, such as DHS and TSA strategic  documents and acquisition plans. To observe TSA screening procedures  and the operation of screening technologies in the airport setting, we  conducted site visits to seven commercial airports. During these visits we  discussed screening technology issues with TSA federal security  directors or their representatives. We selected these airports to reflect a  range of airport categories, technologies, and geographic diversity.  The  results of these site visits and interviews cannot be generalized to all  commercial airports, but they provided us with important context about  the installation, use, and maintenance of TSA screening technologies  across the different types of airports that TSA secures. We also  conducted a site visit to the TSA Systems Integration Facility to better  understand how screening technologies are tested and evaluated prior to  deployment. Further, we interviewed officials from two industry  associations and one screening technology manufacturers association  based on input from TSA and DHS Science and Technology Directorate  (S&T) officials.\nTo determine the extent to which TSA has a process for developing  explosives detection standards, we examined TSA documents such as  approved detection standards, action memos summarizing support for  proposed detection standards, the Detection Requirements Update  Standard Operating Procedure, and briefing slides describing TSA\u2019s  process, as of August 2019, for assessing threat materials and  developing detection standards. We also evaluated Material Threat  Assessment reports that summarized the testing and analyses performed  by S&T\u2019s Homemade Explosives Characterization Program, in  coordination with S&T laboratories, to characterize (identify the physical  density and mass of) explosive materials for detection standards  developed from fiscal years 2014 through 2018. We evaluated S&T\u2019s  testing and analyses in accordance with TSA and S&T guidance to  determine the extent to which these steps were consistent across  materials; we did not analyze the sufficiency of the testing and analyses.  We also assessed TSA and S&T processes and the extent to which they  were documented in accordance with Standards for Internal Control in the  Federal Government, and discussed the details of steps taken to develop  standards with relevant TSA and S&T officials. In addition, we conducted  a site visit to S&T\u2019s Commercial Aircraft Vulnerability and Mitigation  Program testing site at the U.S. Army Aberdeen Test Center, Maryland, to  better understand how S&T tests the vulnerability of commercial aircraft  to explosive materials.\nTo understand TSA\u2019s process and timelines for operationalizing\u2014putting  into effect\u2014detection standards, we requested information from TSA  about screening technologies subject to explosives detection standards,  deployed as of September 24, 2018: advanced imaging technology,  advanced technology x-ray, bottled liquid scanner, explosives detection  systems, and explosives trace detection. We requested information about  the detection standards that deployed screening technologies met, as of  August 2019, as well as subsequently approved detection standards,  including the date the standards were approved, the dates when TSA  achieved certain acquisition milestones when developing and deploying  the associated technologies, and the status of ongoing and upcoming  efforts to update detection capabilities to meet new standards. We  identified the acquisition milestones by reviewing a past GAO report on  TSA\u2019s acquisition process and in consultation with GAO acquisition  experts. We also reviewed a classified TSA report that evaluated the  performance of a particular algorithm in order to understand TSA\u2019s  process for developing new screening technologies to meet detection  standards. In addition, we reviewed relevant acquisition documents, such  as DHS\u2019s Acquisition Management Instruction 102, the 2018  Transportation Security Administration Systems Acquisition Manual,  acquisition decision memos, acquisition plans, and Operations  Requirements Documents. To understand TSA\u2019s process for deciding  whether to operationalize detection standards, we requested and  reviewed available documentation for the standards that TSA had not  operationalized, such as an operational status transition memo for bottled  liquid scanner, and interviewed TSA officials about those decisions.\nTo understand how TSA had considered risk in its approach to deploying  screening technologies at airports, we reviewed available documentation  related to TSA\u2019s deployment decisions. These included decision memos  from acquisition review board meetings and action memos to TSA  leadership; risk registers for checked baggage and checkpoint acquisition  programs; available deployment plans, such as the agency\u2019s Action Plan  for deploying explosives trace detection units to airports in 2018; and  acquisition guidance. To understand how TSA assesses capability  needs and gaps, we interviewed agency officials about TSA\u2019s  Transportation Security Capability Analysis Process and reviewed  capability analysis reports from 2018 and 2019, as well as TSA\u2019s  prioritized list of capability gaps and needs. We also interviewed  acquisition officials, including TSA\u2019s Component Acquisition Executive,  about the role of risk in deployment decisions and requested written  responses to specific questions. We assessed TSA\u2019s decision-making  process for deploying and updating screening technologies, generally,  against DHS risk management criteria, such as DHS\u2019s Risk Management  Fundamentals. We also reviewed related areas of risk management and  decision-making to understand the context in which TSA makes  deployment decisions. Specifically, we reviewed the 2017 Transportation  Sector Security Risk Assessment and the Cities and Airports Threat  Assessment reports to understand the risks facing the nation\u2019s aviation  system. We also reviewed TSA\u2019s enterprise risk management  framework, such as the Enterprise Risk Management Policy Manual, to  understand the role it played in TSA\u2019s deployment decisions. We also  interviewed an official from TSA\u2019s Enterprise Performance and Risk office  and the Executive Risk Steering Committee. To understand how TSA  categorizes airports, we reviewed a 2017 Nationwide Airport  Categorization Review memo from TSA\u2019s Security Operations office and  interviewed Security Operations officials.\nTo understand how TSA deploys screening technologies across airports  and categories of airports, we analyzed TSA\u2019s Deployed Locations  Report, which reported on technologies that were in use or available for  use at commercial airports from September 24 through September 30,  2018. We also reviewed TSA\u2019s standardized methodology for determining  the most efficient number of screening technologies at an airport.  Additionally, we reviewed TSA\u2019s Strategic Five-Year Technology  Investment Plan from 2015 and the 2017 Biennial Refresh to understand  TSA\u2019s plans for ongoing investment in screening technologies. We  reviewed various throughput data, such as annual passenger throughput  for all commercial airports for fiscal year 2018 and enplanements data for  calendar year 2017, to understand and compare TSA\u2019s allocation of  screening technologies with throughput data across airports and airport  categories. We used this analysis to identify airports that had an  unusually large or small number of screening technologies within a  category, and interviewed TSA officials to understand the decisions that  led to the allocation of screening technologies across airports and airport  categories.\nIn addition, we reviewed the status of TSA\u2019s limited deployment of  computed tomography units to checkpoints. Specifically, we reviewed  TSA\u2019s 2018 Deployment Site Selection Strategy, which described the  airports to which TSA would deploy computed tomography units and the  methodology it used to select them, slides from recent conferences TSA  held with industry representatives where it shared its plans for  transitioning to computed tomography, and relevant Operational  Requirements Documents. We also interviewed agency officials about  their plans for the limited deployment and TSA\u2019s transition from advanced  technology x-ray to computed tomography for checkpoint screening.\nTo determine the extent to which TSA ensures its screening technologies  continue meeting detection requirements after deploying them to airports,  we reviewed TSA acquisition detection requirements for each screening  technology as well as TSA guidance related to the testing and evaluation  of screening technologies identified by TSA officials in interviews. We  also interviewed TSA and S&T Transportation Security Laboratory  officials about TSA requirements to test screening technologies, both  prior to and after deployment, to determine the extent to which they meet  detection requirements. We also observed transportation security  officers and a transportation security specialist for explosives conduct  verification and calibration procedures on screening technologies at the  airports we visited. We reviewed TSA guidance to determine the extent  to which its procedures ensure that screening technologies continued to  meet detection requirements in airports. We then evaluated the  procedures against Standards for Internal Control in the Federal  Government for monitoring.\nTo identify TSA\u2019s estimated expenditures to purchase, deploy, install, and  maintain its inventory of screening technologies as of the end of fiscal  year 2018, we reviewed TSA programs\u2019 life-cycle cost estimates, which,  for the purposes of acquisition planning, provide per unit estimates of the  cost to purchase, deploy, install, and maintain passenger and checked  baggage screening technologies. We chose this methodology in  consultation with TSA officials and after determining that historical  records of obligations and expenditures do not provided consistent and  sufficient detail for the purposes of our analysis.\nThe life-cycle cost estimates include relevant phases for each screening  technology (i.e., purchase, deploy, install, and maintain), although not all  technologies have cost estimates for each phase of the life cycle. For  example, some screening technologies may not specify deployment costs  because such costs are included in the initial purchase price of the unit. In  other cases, the technology does not have a deployment cost because  the unit is small and portable, and placement of the unit is therefore  handled by TSA airport staff at no charge. Estimated expenditures for  installation also include costs associated with site acceptance testing,  which is performed when a system is installed at its operational location.  Unlike the purchase, deploy, and install unit prices, the maintenance unit price is the yearly cost of maintenance for one unit, and therefore recurs  every year.\nWe assessed the reliability of the life-cycle cost estimates by reviewing  documentation on the development of the estimates and interviewing TSA  officials, among other things, and determined the estimates were  sufficiently reliable for the purpose of estimating the amount of funds  spent on acquiring, deploying, installing, and maintaining TSA\u2019s inventory  of screening technologies as of the end of fiscal year 2018. Because the  life-cycle cost estimates were developed in different years, we used TSA  guidelines to adjust costs for inflation and convert our estimates to 2018  dollars. We multiplied these estimates against the number of screening  technologies deployed to commercial airports as of September 24, 2018,  using data from TSA\u2019s Government Property Management database. For  computed tomography, we also obtained information on price and  quantity from the technology\u2019s life-cycle cost estimate and TSA officials.  We also reviewed prior GAO work on TSA cost sharing programs for  airport facility modification related to installation of some of the  technologies in our review.\nWe conducted this performance audit from April 2018 to December 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.\n\nAppendix III: Transportation Security Administration (TSA) Estimated Expenditures for Screening Technologies\n\nWe estimate that TSA spent $3.1 billion to purchase, deploy, install, and  maintain its inventory of screening technologies, as of the end of fiscal  year 2018, based on agency estimates of costs. Tables 3 through 5  provide information on estimated TSA expenditures by screening  technology, life-cycle phase, and airport category. To analyze TSA\u2019s  estimated spending to purchase, deploy, install, and maintain its inventory  of screening technologies as of the end of fiscal year 2018, we reviewed  TSA life-cycle cost estimates, which, for the purposes of acquisition  planning, provide per-unit estimates of the cost to purchase, deploy,  install, and maintain passenger and checked baggage screening  technologies at TSA-regulated airports (i.e., \u201ccommercial\u201d airports).  Because the life-cycle cost estimates were developed in different years,  we used the same guidelines used by TSA to adjust costs for inflation to  convert our estimates to 2018 dollars. We multiplied these estimates  against the number of screening technologies deployed to commercial  airports as of September 24, 2018.\n\nAppendix IV: Comments from the Department of Homeland Security\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Kevin Heinz (Assistant Director),  Barbara Guffy (Analyst in Charge), Kelsey Burdick, Jonathan Felbinger,  Tyler Kent, Thomas Lombardi, Erin O\u2019Brien, Kya Palomaki, Rebecca  Parkhurst, and Dina Shorafa made key contributions to this report. In  addition, key support was provided by Chuck Bausell, Richard  Cederholm, Dominick Dale, Aryn Ehlow, Michele Fejfar, Eric Hauswirth,  Richard Hung, and Alexis Olson.","output":null}
{"id":"gao_GAO-20-494","pid":"gao_GAO-20-494_0","input":"\tBackground K-12 Public School Facilities Funding\n\nLocal educational agencies (referred to in this report as school districts or  districts) receive funding for education primarily from state and local  sources. School districts can typically use this funding for a wide range of  purposes, including school maintenance and operations. Maintenance  may include routine replacement of lighting, filters, or building system  parts, as well as emergency repairs to building systems. According to  Education, maintenance and operations may also cover care and upkeep  of grounds and equipment, vehicles (other than student transportation),  and security.\nWhen school districts need to construct, renovate, replace, or make major  repairs to building systems or features, such as roofing or plumbing, they typically use capital funding, which is separate from funding used for  maintenance and operations.\nSchool districts use various mechanisms to fund capital projects. The  specific funding mechanisms available to a given school district may differ  based on state laws or regulations, and may require approval from state  or local voters. A common funding mechanism for capital projects is to  issue bonds. Bonds are debt securities issued by states, school districts,  and other governmental entities and are repaid with interest, often  through local property taxes or other types of local revenue. In some  states, school districts might also use funding mechanisms called capital  reserves and sinking funds to raise funds for school facilities projects.  Capital reserves allow districts to hold end-of-year surpluses of general  education funding in a capital reserve fund, which typically grows over  time and can be used for large-scale projects. Sinking funds are usually  generated from local property taxes and allow districts to set aside a  percentage of property taxes each year to be used for capital projects.  Districts do not pay interest because the funds are not borrowed;  however, the funds generated may not be sufficient for large-scale  projects.\nIn specific circumstances, some federal funding is available for school  facilities. For example, Education administers the Impact Aid program,  which compensates local school districts that, among other things, have  lost property tax revenue due to federal activities. This may include the  presence of tax-exempt federal property, such as a military installation,  children in public schools whose parents work and live on federal  property, or children living on Indian lands. In fiscal year 2019, Education  provided $17.4 million in Impact Aid grants to school districts, specifically  for construction, renovation, or repair of school facilities. Additionally,  the Federal Emergency Management Agency (FEMA) provides funding  for school districts affected by some natural disasters, partly to repair and  replace damaged buildings. For example, in 2019, following Hurricane  Harvey, FEMA awarded grants to two school districts in Texas to set up a  temporary middle school and replace books, equipment, and furniture,  among other things.\n\n\tFacilities Condition Assessments\n\nA facilities condition assessment is a systematic inspection of building  systems and features using a standardized method for recording  observations about condition. For example, one might walk through a  building, record the condition of building systems and features, and  identify deficiencies. Individuals conducting these assessments may  also review documentation on the building systems, conduct interviews  with administrators or other stakeholders, and develop cost estimates of  physical deficiencies. Facilities condition assessments help districts  identify deferred maintenance needs in schools, which can help them  plan and budget for facilities.\nSchool districts can use data gathered from these assessments to  develop a facility condition index (FCI). FCIs provide a point-in-time  comparison of the cost of repairing deficiencies in a building with the cost  of replacing the building, and can help school districts compare conditions  across their facilities. FCIs may also help school districts budget for  targeted replacements or improvements of building systems.\n\nSchool Districts Frequently Identified Multiple Building Systems Needing Attention, Typically Through Formal Facilities Assessments\n\n\tWe Estimate About Half of School Districts Need to Update or Replace Multiple Building Systems and Features, Such as HVAC Systems\n\nBased on our nationally representative survey of school districts, we  estimate that about half (54 percent) of districts need to update or replace  at least two building systems in many of their schools. Further, we  estimate about a quarter of districts (26 percent) need to update or  replace at least six systems in many of their schools. In terms of specific  building systems and features, we estimate that 41 percent of school  districts need to update or replace HVAC systems in at least half their  schools (about 36,000 schools nationwide). We also estimate about a  quarter of districts need to update or replace other building systems,  including interior lighting, roofing, safety and security systems, or  plumbing in at least half their schools (see fig. 2).\nWe saw similar results among the 55 schools we visited. Of those, 28 had  HVAC issues, such as older systems that frequently malfunction or leak  and damage flooring or ceiling tiles, according to our observations and  discussions with district and school officials. For example, one school we  visited in Rhode Island had parts or components of their operating HVAC  systems that were nearly 100 years old, according to district officials (see  fig. 3). In Michigan, we visited one school that district officials said used  an original boiler from the 1920s to heat the building. According to district  officials, older boilers are labor-intensive to maintain because city code  requires an engineer to be on site when each boiler is operating; without  constant monitoring when in operation, the boilers could build up too  much pressure and explode. Officials in a New Mexico district said their  mechanical systems experience issues because hard water (i.e., water  with a high concentration of minerals) damages the systems and causes  them to malfunction. Because of the hard water, the district spent  $150,000 to replace an 8-year-old boiler that, according to district  officials, should have lasted 20 years. District officials said they would like  to purchase filtration and water softening systems to address the issue,  but that the district cannot afford to do so.\nIf not addressed, HVAC issues can result in health and safety problems.  Officials in several school districts we visited said there are serious  consequences to not maintaining or updating HVAC systems, including  lost educational time due to school closings and the potential for mold  and air quality issues (see fig. 4). For example, officials in a Michigan  district said about 60 percent of their schools do not have air conditioning,  and in 2019, some temporarily adjusted schedules due to extreme heat.  Without air conditioning, schools relied on open windows and fans, which  were not always effective at cooling buildings to safe temperatures for  students and staff, according to district officials. Officials in a Maryland  district said the district retrofitted some schools with air conditioning, but  did not update pipes and insulation serving the HVAC systems, which has  caused moisture and condensation problems in these buildings. Officials  were concerned the moisture and condensation could lead to air quality  and mold problems, but said that to remedy these issues could cost over  $1 million for each building.\nSchool districts also reported needing to update or replace other key  building systems and features. Based on our school district survey, we  estimate that about 30,000 schools need to update or replace interior  lighting and about 28,000 schools need to update or replace roofing. Of  the 55 schools we visited, some had recently updated or replaced these  systems, while others continued to face challenges. For example, 15  schools had installed light emitting diode (LED) systems or incorporated  other energy efficient features, such as motion sensors to turn off lights in  unused rooms or automatic dimmers that adjust based on the amount of  daylight in a given space (see fig. 5). Six schools had not recently  updated their interior lighting, but officials expressed a desire to do so in  the near future, such as by switching to LED systems. Some district  officials said LED systems can reduce energy consumption and utility  costs.\nOf the 55 schools we visited, 18 had problems with their roofing,  according to district and school officials. Roofing problems ranged from  small leaks to larger issues requiring a costly replacement (see fig. 6). For  example, officials in a Rhode Island district said that replacing the roofing  at one school would likely cost about $3 million. These officials said,  because the district did not have the funds to replace it, they instead  planned to spend $20,000 on temporary fixes, with the hope that these  fixes would last until funding was available for a full replacement.\n\n\tMajority of School Districts Evaluated Facilities to Determine Conditions\n\nBased on our survey of school districts, we estimate that 65 percent of  districts had conducted a facilities condition assessment of their schools  at least once in the last 10 years and about 35 percent had not or did not  know if their district had (see fig. 7). Of the districts that had conducted  these assessments, almost all did so to evaluate safety and hazards  (99.6 percent) and support capital planning, including prioritizing large- scale projects (96.6 percent). Additionally, of these districts, an estimated:\n86.2 percent assessed facilities at every school in their district;\n68.6 percent evaluated their facilities at least every 5 years; and\n39.5 percent hired contractors or professional firms to conduct the  assessment.\nWe estimate that at least 53 percent of all students in the nation attended  a school that had a facilities condition assessment in the last 5 years.\nWe estimate that 16 percent of districts had not conducted a facilities  condition assessment in the last 10 years. In our survey, several  districts provided reasons why they had not done so, including a lack of  available funding or because they assessed school conditions through  other mechanisms, such as informal walkthroughs.\nIn addition to district-level facilities condition assessments, 11 states  conducted a state-level facilities condition assessment in the last 10  years, according to our state survey (see fig. 8). Common reasons  provided by these states for evaluating school facilities included to assess  safety and hazards (9 states) and provide facilities information to the  public (9 states). However, most states (38 of 49) either had not  conducted or did not know if their state had conducted a state-level  facilities condition assessment. Of these 38 states:\n15 states reported they required school districts to conduct\n21 states reported that they neither conduct statewide assessments  nor require school districts to do so; and,\nTwo states did not know if their state had conducted such an  assessment.\nStates that had not conducted a statewide facilities condition assessment  or required districts to do so frequently said they do not assess school  conditions because school districts are primarily responsible for  addressing deficiencies with school facilities.\nMost of the districts we visited said they had conducted a facilities  condition assessment. Specifically, of the 16 school districts we visited in  six states, officials in 12 districts said they had recently conducted a  facilities condition assessment for a variety of reasons, such as to  develop facilities master plans or raise support for a bond. For example,  officials in one urban California district said they conducted an extensive  facilities condition assessment for planning purposes and developed a  master plan of issues identified in schools 20 years or older. During the  assessment, the district assigned barcodes to certain systems, such as  HVAC and water fountains, to track conditions across schools (see fig. 9).\nDistrict officials said they update facilities data as they complete projects.  Officials in a rural Michigan district said they conducted an assessment  before asking voters to approve a sinking fund. District staff identified the  value, age, cost for repairs, and expected lifecycle of all major systems,  which helped them estimate funding needs for the next 10 years. Officials  in one Florida district said they do not conduct facilities condition  assessments because the district is small and the facilities manager  knows the condition of their schools and when facilities\u2019 issues arise.\nOf the six states we visited, officials from Rhode Island and New Mexico  said their states had conducted statewide facilities condition assessments  and Florida officials reported requiring school districts to conduct these  assessments. Officials in Rhode Island and New Mexico said data from  these assessments help determine state funding for districts. For  example, according to officials, Rhode Island hired a consulting firm to  assess school facilities in order to develop an independent estimate of the  statewide funding need; in 2017, that estimate was about $3 billion.\nOfficials in three of the states we visited\u2014Michigan, California, and  Maryland\u2014said their states had neither conducted a facilities condition  assessment nor reported requiring school districts to do so. Officials in  Michigan said their state provides no funding for school facilities nor  requires districts to conduct facilities condition assessments because  districts are responsible for planning and prioritizing school facilities\u2019  needs. Michigan officials said districts often assess facility conditions  before seeking bonds or other local funding to show local voters the level  of need. Officials in California similarly said that school districts are  primarily responsible for evaluating school conditions and noted that it  would be cost-prohibitive for the state to conduct a statewide assessment,  given the number of schools in the state. Maryland officials said the state  has not had funding to conduct a statewide assessment since 2003, but  they are currently planning a future statewide assessment. After this initial  assessment, the state plans to assess each school facility every 3 to 4  years, according to these officials.\n\nSchool Districts Prioritized Safety and Technology Updates and Primarily Used Local Funding for School Facilities\n\n\tSchool Districts Prioritized Safety and Technology while Also Addressing Repairs and Modernization Projects\n\nIn addition to key building systems such as HVAC, lighting, and roofing,  school districts considered the need to ensure schools are free from  health hazards, as well as update schools with modern educational  spaces and features. Specifically, based on our survey, we estimate that  school districts\u2019 high priorities when updating or renovating school  facilities are as follows: security (estimated 92 percent), student access to  technology (87 percent), monitoring hazards to student and staff health  (78 percent), and improving telecommunication features such as wireless  internet (74 percent). In comparison, the 100 largest school districts,  which serve approximately 10.4 million students, identified security  (estimated 99 percent), monitoring health hazards (94 percent), and  completing projects to increase physical accessibility for students with  disabilities (86 percent) as their high priorities.\nOverall, in response to our survey, districts ranked the level of priority of  each building system or feature on a categorical scale of five levels,  which we assigned numerical rankings of 1 (not a priority) to 5 (top  priority). Average priority ratings ranged from approximately 4.5 for safety  and security to approximately 2.9 for access to natural light (see fig. 10).\nSimilarly, officials in nearly all of the 16 school districts we visited told us  that some combination of addressing urgent health hazards, improving  security, and upgrading technology were among their top priorities. In  addition, district staff told us they were undertaking projects to modernize  spaces and improve the learning environment, when possible. Districts  implemented these priorities differently based on their needs and  resources.\n\n\t\tHealth Hazards\n\nMany school district officials said they address facility issues that affect  staff and student health with more urgency than many other issues. At  schools we visited around the country, officials reported initiatives to  address health concerns that ranged from total renovations to temporary  mitigation programs (see fig. 11). For example, officials in a district in  California told us that in two schools we visited they removed all materials  containing lead, as well as replaced all roofs that contained asbestos, in  accordance with health and safety regulations. These officials also said  staff tests the water quality in all schools per recommended guidelines. In  a different district, officials said they had concerns about water quality, but  that they did not have the funding to remediate the issue in all schools.  Therefore, the district provides bottled water to students in nearly all of its  schools, and installs water filtration systems when it constructs or  renovates schools. In several schools in five states we visited, officials  said there is asbestos in floor or ceiling tiles or other materials that would  require abatement during any renovation. Because abatement increases  costs, schools may prioritize other projects or find workarounds. For  example, at one high school in Florida, the district installed interactive  white boards on top of old chalkboards rather than risk disturbing  asbestos in the walls by removing the chalkboards. Officials in two  districts also told us about addressing potential health hazards related to  climate. For example, at a school in Florida, officials said they have to  address mold and mildew issues due to frequent flooding and high  humidity. During heavy storms, school personnel work to clear drains and  place sandbags in an attempt to mitigate water intrusion and flooding.\n\n\t\tSecurity\n\nIn 13 of the 16 districts we visited, officials told us that security has  become a top priority, though the specific measures they took to update  their security features varied considerably (see fig. 12). One high school  we visited recently experienced a school shooting. District officials said  they were implementing a variety of new security initiatives, first at the  high school, and then at all other schools in the district. In the high school,  officials applied a specialized film to exterior windows to make them bullet  resistant. The school has a new security vestibule where visitors wait  before entering the school, and staff placed comment boxes throughout  the school encouraging students to submit safety tips. In Michigan, we  visited a middle school that installed additional barricades on classroom  doors, and trained students on how to use them during lockdown drills. In  California, we visited an elementary school that added exterior windows  to the front office so staff could see visitors approaching, and installed a  lockdown alarm button.\nOfficials from some districts we visited said they prioritized security over  failing building systems. For example, one district in Rhode Island where  we observed problems with key building systems, including ceiling  damage from a leaking roof, broken windows, and holes in the walls and  foundation of a school building, installed new security features throughout  their schools. These included equipping classroom doors with electronic  lockdown mechanisms that staff can activate remotely. The district  updated the main entrance with heavy, reinforced doors and bulletproof  glass. In a district in Florida, we visited an elementary school that updated  security systems, including installing new cameras. This was despite the  school having major challenges with its HVAC system that require  maintenance staff to go up to the roof every day to adjust the air  conditioning. In addition, we observed multiple buckets throughout the  school to collect water leaking through the roof, and the principal  described how it frequently \u201crained\u201d in her office. District officials said they  are seeking state funding to renovate the entire school, but decided to  first address security updates because all classrooms have exterior  doors, making it difficult to control access to the school. In this same  district, officials told us they had recently renovated the middle-high  school and ensured that all classrooms had \u201chard corners\u201d\u2014spaces  where students could congregate and not be visible to an active shooter  in the hallway.\n\n\t\tTechnology\n\nOfficials in many school districts we visited said that ensuring adequate  access to technology was necessary for students to be successful  academically (see fig. 13). All schools we visited had WiFi access, though  officials in one rural district in New Mexico described access as spotty.  The majority of schools we visited provided a laptop or tablet to all or  almost all students or had a goal to do so. Officials in a district in  California said their most important project of the past decade was to  update their fiber optic capability to have a robust WiFi network. All  students in this district receive a laptop or tablet beginning in second  grade, and officials said these updates allowed students to easily use  devices in school. In some school districts that did not provide individual  devices, schools had portable technology carts to store and charge  devices, so students could access them as needed.\nOfficials in districts we visited also said they use technology to enhance  educational offerings. For example, a high school in Maryland equipped a  classroom with cameras and a microphone so students could attend  community college classes remotely. When renovating schools, some  officials told us they incorporate and anticipate technology needs. For  example, a newly renovated school in Florida installed electrical outlets  on table surfaces in the media center and microphones in all classrooms  so students could hear teachers better. At a newly renovated school in  Maryland, officials installed a projector and sound system in the cafeteria  for students to watch movies and listen to music during lunch, which they  said created calmer lunch breaks.\n\n\t\tOther Modernization Projects\n\nOfficials in districts we visited said they chose among other competing  facility priorities based on available funding as well as conditions at  individual schools, such as the age and condition of buildings, timeframe  constraints, public opinion, space constraints, and enrollment projections.  In school districts we visited that reported having local taxes or bond  funds available for facility projects, officials described both the need to  address the condition of basic building systems and the need to renovate  schools with modern educational spaces and features. For example,  officials in a Rhode Island district said they are using most of the  approximately $300 million in their 5-year capital plan to ensure schools  are safe, warm, and dry. These district officials estimated their school  facilities need over $1 billion in updates and replacements to key building  systems, based on a recent assessment. However, they said they are  using 25 percent of available capital funds to modernize educational  spaces, such as collaborative workspaces, student common areas, and  outdoor classrooms (see fig. 14 for examples of school modernizations in  districts we visited). Officials said that participants in public forums  preferred educational enhancements over facility repairs. In this same  district, officials said they prioritized system repairs they can complete  over the summer because the district does not have designated swing  spaces to accommodate students during the school year.\nIn a district in Florida, officials similarly described using the funding from a  $1 billion bond for school facilities to address health and safety concerns,  HVAC issues, and roofing. They balanced these building system repairs  with projects to modernize buildings, including increasing natural light by  replacing the windows, upgrading technology to support engineering and  robotics programs, and creating open and collaborative spaces. See  textbox for examples of how school officials told us school renovations  improved student experiences.\nAdditionally, several districts we visited considered enrollment and  building capacity to help prioritize projects, but they faced different  challenges. Specifically, some districts experienced space constraints  and needed to ensure sufficient space for all students, while others had  the opposite challenge of maintaining schools that were under-enrolled  (see text box). In a district in California, officials said they built nine  schools in the past decade because of the increasing student population.  At a high school in Maryland, the principal said his priority was ensuring  sufficient space because the school was at capacity and he was  struggling to find additional classrooms and furniture. Due to population  fluctuations at a nearby military installation, he said he often turns offices  and workspaces into classrooms and vice versa. Conversely, in a district  we visited in Michigan, officials said they struggled with the inefficiencies  of maintaining school facilities with low enrollment because closing  schools can be difficult, given how it can affect currently enrolled students  and neighborhoods.\n\n\tAbout Half of Districts Primarily Relied on Local Funding for School Facilities\n\nBased on our survey of school districts, funding for school facilities  primarily came from local sources for about half of school districts.  Specifically, an estimated 55 percent of districts used local funding as  their primary source for school facilities, compared to state (36 percent)  and federal (1 percent) funding. Based on our survey analysis, we found  significant differences in the primary funding sources for school facilities  for high-poverty and low-poverty districts. Specifically, high-poverty  districts more commonly relied on state funding to address facility needs  than low-poverty districts, whereas low-poverty districts more commonly  relied on local funding (see fig. 15).\nSchool districts reported using several funding mechanisms to access  local funding for school facilities projects. The most common was property  taxes, which an estimated 77 percent of all school districts used for  school facilities. Other local funding came from grants, bonds, other  taxes, and public-private partnerships (see fig. 16).\nSimilar to our findings on the sources of school facilities funding, based  on our survey analysis we found significant differences in the local  funding mechanisms used by high-poverty and low-poverty districts.  Specifically, high-poverty districts used property taxes less commonly  than low-poverty districts. As noted above, high-poverty districts instead  more commonly relied on state funding to address facility needs. We also  analyzed federal data on school district expenditures for school facilities  and found differences by poverty level (see text box).\nSpotlight: Federal Data on School District Expenditures for Capital Construction  Each year, Education collects data on school district expenditures for capital  construction. In school year 2015-16, this spending totaled $44.6 billion. We analyzed  these data by school district characteristics:  Poverty: Capital construction expenditures, on average, were about $300 less per  student in high-poverty districts ($719 per student) compared to low-poverty  districts ($1,016).  About 1.5 million more students attended school in high-poverty  districts than low-poverty districts in 2015-16. Low-poverty districts spent about $1  billion more on capital construction than high-poverty districts that year.  Size: Capital construction expenditures per student were similar in the largest (by  number of students enrolled) 100 districts compared to smaller districts. Both  groups of districts, on average, spent $837 per student on capital construction in  school year 2015-16.  Locale: Capital construction expenditures per student were similar, on average, for  urban ($838 per student) and rural districts ($834).\nOfficials in school districts we visited described various challenges they  faced in securing funding for school facilities and how they have managed  with limited funding. For example, officials in a Michigan district said the  district had $1.5 billion in outstanding bond repayments and state  borrowing related to bond repayments. As a result, the district is unable to  issue an additional secured bond to fund new school facilities projects.  According to officials, Michigan does not provide state-level funding for  school facilities, so the district funded some recent school facilities  projects using general education surpluses resulting from staff vacancies.  However, as the district hired teachers and other staff, funding for  facilities will decline, further limiting the district\u2019s ability to address issues  with school facilities. That district has also deferred maintenance in order  to handle emergency repairs, according to officials. Officials in a high- poverty district in one state we visited said their tax base generates  minimal local revenue for school facilities. According to officials, the  district is mostly dependent on state funding. In the past decade, the state  established a partnership between various public entities, which provided  $1 billion to the district to address school facility needs, according to  district officials. Officials said the funding through this partnership was  enough to renovate about 25 schools. However, officials estimated the  district has about $5 billion in unmet needs, and its 2012 facilities  condition assessment recommended it consider replacing 50 schools.\nWe also visited districts that have consistently had access to funding for  school facilities. For example, officials in one low-poverty California  district said their district is generally able to obtain funds needed for  school facilities projects, primarily through local taxes and passing  general obligation bonds. Officials said there are currently few challenges  with the condition of the district\u2019s school facilities because of routine and  preventive maintenance.\n\n\tState Support for School Facilities Varied Within and Across States\n\nThough school districts most commonly used local funding to address  school facility needs, 36 states provided some level of capital funding to  school districts for school construction or renovations, based on our state  survey (see fig. 17). In addition, states reported using various criteria to  determine funding for capital projects, including the condition of a district\u2019s  schools (23 states), type of project, such as HVAC or fire safety (22), and  size of the student population (18). Fewer states (17) reported providing  districts with funding for maintenance and operations\u2014used for routine  upkeep and replacement of building system parts\u2014separate from general  education funding.\nState support for school facilities similarly varied within and among the six  states that we visited. Five of the six states we visited reported providing  state-level capital funding for school facilities, although the amount and  mechanisms differed. For example, according to state officials, New  Mexico has a capital fund for schools supported through taxes on the oil  and gas industry and bases its state funding on a school\u2019s condition.  These officials described how New Mexico assesses and ranks all  schools based on the condition of their facilities, and funds projects  starting with the highest priority school on the list, until each year\u2019s funds  are depleted. The state uses capital funds to match local dollars. The  percentage of a project\u2019s cost covered by the state depends on the  district\u2019s ability to raise local funds. In one district we visited, the state  pays 100 percent.\nFlorida targets funding for school facilities to rural districts and charter  schools, both of which have limited access to local funding sources such  as property taxes, according to officials. These officials said the state has  a specific program to support capital projects in rural districts, and other  funding\u2014generated from taxes on landlines and utilities\u2014has in recent  years gone to charter schools. In California, districts receive state  funding based on the order the state receives eligible applications, until  funds are depleted, according to state officials. Michigan officials said the  state does not fund school facilities projects at the state level, although  the state has a program to review school districts\u2019 local bond measures.  The state does not require school districts to submit their bonds for state  approval, but doing so allows the district to access the state\u2019s credit  rating, which usually lowers the district\u2019s interest rate, among other  benefits, according to these officials.\nIn three states we visited, state officials we interviewed told us that  financial support for capital projects may fluctuate each year depending  on availability of state funding. For example, Rhode Island officials said  that after the 2007-2009 recession, the state legislature stopped funding  school facilities until 2015. This resulted in deferred maintenance in  Rhode Island\u2019s schools that the state and school districts now need to  address in addition to any new capital projects, according to officials.\nBased on our state survey, five states require districts to use a portion of  their general education funding for maintenance and operations. Three of  these states reported requiring districts to use 3 percent or less of their  general education funding for this purpose, one state reported requiring  districts to use 6 percent, and one state did not know what percent was  required. Officials in Rhode Island said they have a new policy to require  districts to set aside a portion of the state funds they receive for  maintenance and operations to protect the state\u2019s increasing investment  in school facilities, and that the state is phasing in the requirement over 5  years. Officials in New Mexico said that while they do not require this type  of set aside, they evaluate how well districts maintain their facilities, and  districts that inadequately maintain them may be ineligible for some types  of state facilities funding.\nMany states also reported that they considered state-level priorities for  school facilities when providing funding and guidance to school districts.  Based on our survey, more than half of states provided financial support,  as well as standards and guidance, for specific building systems and  features of school facilities (see fig. 18).\nState funding and guidance related to state-level priorities can affect  school district decisions on facilities. For example, Rhode Island  approved a $250 million state bond for school facilities in 2018, and will  provide higher reimbursements for district expenditures on projects  reflecting state priorities, such as health and safety and decreasing  overcrowding, according to state officials. In two rural districts within two  states, district officials told us they cannot afford to undertake capital  projects without state funding, and therefore have to balance state  requirements with local needs and preferences for their facilities. For  example, one district in New Mexico opted to renovate an existing gym  using state matching funds, rather than fully replace it, because this  allowed the district to maintain existing square footage. According to  officials in that district, the state developed standards for how large a gym  can be and still receive state funding for a full replacement, and the  district prioritized renovating and maintaining the larger existing space  instead.\n\nAgency Comments and Third Party Views\n\nWe provided a draft of this report to the Department of Education  (Education) for review and comment. We also provided selected draft  excerpts to relevant officials we interviewed in state agencies and school  districts. Education as well as several state and district officials provided  technical comments, which we incorporated as appropriate.\nWe 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  https:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nIn this report, we examined: (1) the common facility condition issues  school districts identify in public schools and how they have done so and  (2) school districts\u2019 highest priorities for their school facility renovations  and updates, and how districts and states fund them. To address these  objectives, we used the following methodologies, which we describe in  detail below:\nSurveyed all 50 states and the District of Columbia.\nSurveyed a nationally representative sample of K-12 public school  districts.\nVisited 16 school districts in six states and interviewed state, district,  and school staff.\nConducted building walkthroughs at 55 schools (including five charter  schools) and observed a standard set of building systems and  features in each school.\nAnalyzed federal data on district expenditures for capital construction  projects.\nWe took several steps to inform each of our methodologies and provide  background for our objectives. To better understand the federal role in  school facilities, we interviewed officials from the Department of  Education\u2019s (Education) National Center for Education Statistics (NCES),  as well as Education\u2019s Office of Impact Aid Programs and the Office for  Civil Rights. During these interviews, we asked officials about their role in  collecting information on the condition of school facilities, as well as  providing funding and guidance on school facilities, among other topics.  We also interviewed officials from the National Association of Federally  Impacted Schools and the National Indian Impacted Schools Association  to learn about facility concerns in public school districts that receive  federal Impact Aid. We reviewed federal documentation including NCES\u2019s  2014 report, Condition of America\u2019s Public School Facilities: 2012-13 and  the Congressional Research Service\u2019s 2015 report on federal programs  related to school facilities. In addition, we reviewed guidance from the  Environmental Protection Agency on creating and maintaining healthy  and environmentally friendly school facilities.\nTo better understand assessments of building conditions, as well as to  obtain information on school building systems and features, we reviewed  the Standard Guide for Property Condition Assessments: Baseline  Property Condition Assessment Process, an international standard for  assessing the condition of a building. Additionally, we interviewed officials  at the 21st Century School Fund, the American Society of Civil Engineers,  the Association for Learning Environments, the Center for Cities and  Schools at the University of California, Berkeley, the Center for Green  Schools, the Council of Chief State School Officers, and the Education  Commission of the States.\nWe used this information to create two lists of building systems and  features, which we asked about in our surveys and asked to observe in  the schools we visited. Specifically:\nThe first list focused on key systems and features that may be  necessary to a school building\u2019s day to day operations;  the second list focused on additional or emerging priorities for  systems and features that school districts may consider when  modernizing school facilities.\nWe validated these lists of systems and features through survey pretests  with facilities personnel in six states. Because some modernization  priorities are also key to a school building\u2019s day-to-day operations, there  are systems and features that appear on both lists (see app. II for a full  list of our survey questions, including all systems and features about  which we asked school districts). We modified and combined the above  lists for our state survey to ask states about their priorities and support for  school building systems and features.\n\n\tWeb-based Survey of State Educational and School Facility Agencies\n\nTo address both research questions, we designed and administered a  web-based survey to all 50 states and the District of Columbia. We sent  the survey to the relevant state agency that oversees school facilities, or  to the state superintendent of education to be forwarded to the state  official best equipped to answer questions related to the condition of  school facilities. We conducted the survey between September and  December 2019. To obtain the maximum number of responses to our  survey, we contacted nonrespondents via email and phone throughout  the period the survey was open. In total, 49 states responded to the  survey; Mississippi and Illinois did not respond. Data in this report are  based on the 49 states that responded, unless otherwise noted.\nTo ensure the quality and reliability of the survey, we pretested the  questionnaire with three states that vary in their level of involvement in  school facilities, among other factors. We conducted the pretests to check  (1) the clarity and flow of the questions, (2) the appropriateness of the  terminology used, (3) if the information could be easily obtained and  whether there were concerns about the reliability of data that would be  collected, and (4) if the survey was comprehensive and unbiased. We  revised the questionnaire based on the pretests. We reviewed responses  to assess if they were consistent and contained all of the relevant  information.\nThe survey included open-ended and closed-ended questions about:\nThe state\u2019s role in assessing the condition of school facilities and the  level of information the state has about the condition of school  facilities.\nThe state\u2019s role in providing funding to school districts for school  facilities and the factors it considers in determining funding levels.\nThe extent to which the state provides standards, guidance and other  non-financial resources to school districts about their facilities.\nWhether the state collects information or provides additional  assistance to school districts that receive federal Impact Aid funds.\n\n\tWeb-based Survey of School Districts\n\nTo address both research questions, we designed and administered a  generalizable survey of a stratified random sample of local educational  agencies, which we refer to as school districts throughout this report. We  sent the survey to school district superintendents to be forwarded to the  district official best equipped to answer questions related to the condition  of school facilities. The survey included questions about:\nSchool districts\u2019 policies and practices regarding whether they conduct  facilities condition assessments.\nHow often school districts conduct or update these assessments.\nHow school districts use the information from assessments to make  decisions regarding school repairs, renovations, and replacements.\nThe extent to which the school districts were facing issues with the  condition of building systems and features within their schools.\nThe funding mechanisms that school districts use to address issues  with the physical condition of public schools.\nWe 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  Local Education Agency Universe database from Education\u2019s Common  Core of Data (CCD) for the 2016-2017 school year as our sampling  frame. For the purpose of our survey, we limited the sampling frame to  school districts that: were located in the 50 states or the District of Columbia; had one or more schools and one or more students; and were not closed according to the 2016-2017 School Year or  preliminary 2017-18 School Year CCD data available just prior to  survey deployment.\nThe resulting sample frame included 17,248 school districts and we  selected a stratified random sample of 664 school districts. We stratified  the sampling frame into 19 mutually exclusive strata based on urban  classification and poverty classification (see table 1). We selected the  largest 100 school districts, based on student enrollment, with certainty.  To determine the appropriate sample size for the survey, we first  determined the minimum sample size needed to achieve precision levels  of percentage estimates within plus or minus 10 percentage points, at the  95 percent confidence level, within each of three sub-groups: low,  medium, and high-poverty districts. Within each of these poverty sub- groups, we proportionately allocated the sample across the race and  urban classification groups. We then increased the sample size within  each non-certainty stratum for an expected response rate of 55 percent in  order to achieve the necessary number of completed surveys for our  desired precision level.\nWe defined the three locale classifications (i.e., city, suburban, and rural)  based on the NCES urban-centric locale codes. The rural classification  included school districts classified as either rural or town. 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:\nHigh-poverty: more than 75 percent of students in the school district  were eligible for FRPL;\nMid-poverty: Between 25.1 and 75.0 percent of students in the school  district were eligible for FRPL; and\nLow-poverty: 25 percent or fewer students in the school district were  eligible for FRPL.\nWe 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 purposes of our reporting objectives.\nWe administered the survey from August to October 2019. We identified  that 11 of the 664 sampled school districts were closed or had no physical  school buildings, so these were removed from the universe and sample.  Six of these out of scope sample districts were discovered soon after  survey deployment, thus, we were able to replace these six sample  districts with the next randomly selected district within the same strata.  This resulted in a final in scope population of 17,237 districts and 659 in  scope sample districts. We received 378 valid survey responses from this  in scope sample resulting in an unweighted response rate of 57 percent  and a weighted response rate of 53 percent.\nWe analyzed the response status to our survey to identify potential  sources of nonresponse bias in accordance with best practices in survey  research and echoed in Office of Management and Budget, Standards  and Guidelines for Statistical Surveys (September 2006). We examined  the response propensity of the sampled school districts using both  bivariate and multivariate logistic regression models, including several  demographic characteristics available for respondents and  nonrespondents: urban classification, race, poverty, district size (number  of schools and number of students in a district), and the stratification  variable that combines these characteristics. We detected a significant  association between both strata and number of students within a district  and the propensity to respond to our survey. We did not detect a  significant association between urban classification, race, or poverty and  the response propensity.\nWe adjusted for the characteristics significantly associated with response  propensity using weighting class adjustments. Specifically, we grouped  the predicted response propensity derived from our logistic regression  model that includes strata and the number of students using quintiles of  the predicted response propensity distribution to form five weighting  adjustment groups. We applied nonresponse adjustments to the sampling  weights within these groups to form nonresponse adjusted analysis  weights used in our survey analyses. Based on the nonresponse bias  analysis and resulting nonresponse adjusted analysis weights, we  determined that estimates using these weights are generalizable to the  population of eligible school districts and are sufficiently reliable for the  purposes of our reporting objectives.\nWe took steps to minimize non-sampling errors, including pretesting draft  instruments and using a web-based administration system. We pretested  the draft instrument from June to July 2019 with officials in five school  districts in different states and with varying characteristics such as size of  the student population. In the pretests, we asked about the clarity of the  questions and the flow and layout of the survey. Based on feedback from  the pretests, we revised the survey instrument. To obtain the maximum  number of responses to our survey, and to minimize non-sampling error  caused by nonresponse, we sent reminder emails to nonrespondents and  contacted some nonrespondents over the telephone.\nWe express the precision of our particular sample\u2019s results as a 95  percent confidence interval (for example, plus or minus 10 percentage  points). This interval 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.\nWe compared\u2014as appropriate\u2014weighted survey estimates generated for  school districts by the school district strata described above. 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.\n\n\tSchool District Visits and School Observations\n\nTo address both research questions, we visited six states\u2014California,  Florida, Maryland, Michigan, New Mexico, and Rhode Island\u2014from June  to September 2019. We selected these states because they varied in the  amount and type of funding they provided to school districts for school  facilities, the level of information they collected on the condition of school  facilities, and for geographic variation. Within these states, we visited 16  school districts, which we selected based on variation in the size and  population density of the district, poverty level, racial and ethnic  composition, and the receipt of federal Impact Aid funding (see table 2).\nWithin each district, we visited between two and five schools, depending  on the size of the district and logistical considerations. We also visited five  charter schools across four states, chosen based on their proximity to a  selected school district. In total, we visited 55 schools that varied in grade  level, enrollment, physical size, age, and condition.\nFor resource efficiency, we generally interviewed state and district  officials via phone in advance of the site visit, and toured schools with  district and school officials.\nStates: We interviewed state officials who were knowledgeable about  their state\u2019s role in funding, assessing, or providing other resources to  school districts for school facilities. We discussed the agency\u2019s roles  and responsibilities related to statewide school facilities condition  assessments or data collection initiatives, state-level priorities for  school facilities, and funding mechanisms within the state for school  facilities.\nSchool districts: We interviewed school district officials in each district  we visited. Similar to our school district survey, we discussed their  policies and practices on facilities condition assessments, how often  they conduct or update these assessments, and how they make  decisions regarding school repairs, renovations, and replacements.  We also asked questions about how the districts prioritize upgrades  and repairs to school facilities and the funding mechanisms they use  to address issues with the physical condition of public schools.\nSchool Observations: To select schools in each district, we used CCD  data to randomize the list of all schools in the district and selected the  first two to four schools with consideration for different grade levels.  We then asked district officials to verify that our random selections  showed sufficient variety in the age and overall condition of the  building. We substituted recommended schools when appropriate to  ensure we had appropriate variety in seeing schools of different ages  and conditions. When logistically feasible, we visited a nearby charter  school as well. We toured schools with a combination of district and  school officials. During these visits, we used a data collection  instrument to ask officials about school building systems and features  that school personnel identified as particularly in need of repair or  replacement, as well as new or upgraded systems. We photographed  these as appropriate.\nInformation we gathered from these interviews and observations, while  not generalizable, provides insight into the conditions present in the  states and school districts we visited at the time of our interviews, and  may be illustrative of efforts in other states and school districts.\n\n\tFederal Data Analysis\n\nTo examine expenditures for capital construction by school district  characteristics, we analyzed federal data from Education\u2019s Local  Education Agency Finance Survey for school year 2015-16, the most  recent available at the time of our analysis. Education collects these data  annually as part of the CCD. State educational agencies provide these  data on behalf of their school districts to NCES and the U.S. Census  Bureau\u2019s Economic Reimbursable Surveys Division. In school year 2015- 16, states reported finance data for 96.7 percent of school districts,  according to Education\u2019s survey documentation.\nWe analyzed school district data on capital construction expenditures by  poverty level, locale, district size, racial demographics, and receipt of  federal funding through Impact Aid or Indian education grants. We  normalized data across school districts that fell into these different  categories by calculating capital construction expenditures per student  and per school.\nWe determined these data were sufficiently reliable for the purposes of  our reporting objectives by reviewing relevant documentation,  interviewing knowledgeable Education officials, and testing for missing  data, outliers, and other potential errors. Through discussions with NCES  officials, we determined it was necessary to exclude some school districts  from our analysis to develop accurate per pupil and per school  calculations. Specifically, we excluded school districts for which the state  did not report finance data and school districts where the number of  students and schools was zero or missing.\nWe conducted this performance audit from February 2019 to June 2020  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Surveys of School Districts and States on School Facilities\n\nThis appendix contains the closed- and open-ended questions from our  surveys of (1) local educational agencies (referred to in this report as  school districts or districts) and (2) state educational and school facility  agencies. In some cases, respondents received different questions  based on their response to a prior question. For example, school districts  that conducted a facilities condition assessment in the last 10 years  received additional questions about those assessments, however school  districts that had not conducted such an assessment received questions  to explain the reasons why. For a detailed discussion of our survey  methodologies, see appendix I.\n\nAppendix III: School Facilities in Districts that Received Federal Impact Aid\n\nThis appendix summarizes key information on the condition of and  funding for school facilities in districts that received Impact Aid.\nThe Department of Education (Education) administers the Impact Aid  program to assist school districts that experience a financial burden as a  result of certain federal activities being carried out there. For example,  federal Indian lands and military installations are exempt from property  taxes\u2014a key funding source that school districts use to offer a free public  education. Impact Aid is intended to compensate school districts, in part,  for the lost tax revenue.\nAs noted in this report, property tax revenue was the most common  source of funding school districts used for school facilities\u2014an estimated  77 percent of all districts used property taxes for this purpose, based on  our nationally representative survey. Districts with reduced property tax  revenue, due to tax-exempt federal property or other reasons, may  struggle to raise the funds needed for repairs and renovations to their  school facilities.\nSchool districts that are eligible to receive Impact Aid might qualify for  several types of payments under the program. About 90 percent of all  Impact Aid funding falls under the category of Basic Support payments.  According to the Congressional Research Service (CRS), school districts  generally use these funds for current expenditures, such as  administration, instruction, and transportation. However, because Impact  Aid Basic Support payments are not limited to specific uses, school  districts may also use them for capital expenditures.\nAccording to Education\u2019s data, approximately 1,040 school districts (of a  total of about 14,000 school districts nationwide) received Basic Support  payments in fiscal year 2018 totaling $1.26 billion. The amount of these  payments varied considerably by district\u2014ranging from a high of about  $55 million to a low of $540. Differences in the payments districts  received resulted from several factors, including the number and types of  federally-connected students the district served, according to CRS. In  fiscal year 2018, there were 28 \u201cheavily-impacted\u201d school districts,  meaning they were substantially affected by the presence of federally- connected children. Heavily-impacted districts receive increased Basic  Support payments.\nIn addition to Basic Support payments, some school districts are eligible  for Impact Aid Construction grants for construction and emergency facility  repair and renovation. From fiscal year 2014 to 2019, appropriations for  Impact Aid Construction funds have consistently been about $17.4 million  each year. According to CRS, appropriations language in recent years  has determined whether Impact Aid Construction funds are distributed  through formula grants to eligible school districts or competitive grants to  a limited number of school districts, and from fiscal year 2013 to 2018,  distribution alternated between these two types of grants. Approximately  150 school districts are eligible to receive Impact Aid Construction grants,  according to Education officials. In fiscal year 2018, these funds were  distributed through competitive grants and eight school districts received  grants, ranging from $143,000 to $5.3 million.\nSixty-seven school districts that received Impact Aid responded to our  survey of school districts. In addition, eight of the 16 districts we visited  received Impact Aid Basic Support payments in fiscal year 2018. These  districts varied based on their proximity to different tax-exempt federal  properties (i.e., military installations and Indian lands), as well as the  number and percentage of federally-connected students they educated.  Two districts we visited received Impact Aid Construction grants.\n\n\tConditions of School Facilities\n\nOverall, on our survey of school districts, responses from the  nongeneralizable group of districts that received Impact Aid were similar  to the generalizable results for all districts nationwide both in terms of the  key school building systems and features districts needed to update or  replace and district priorities when updating or renovating school facilities.\nTable 3 shows the number of school districts receiving Impact Aid  payments that reported that at least half of their schools needed updates  or replacements to each building system or feature listed. As shown,  districts most commonly indicated needing to update or replace heating,  ventilation, and air conditioning systems (32); followed by safety and  security (27), roofing (25), interior light fixtures (23), and plumbing (23).\nBased on our school district survey, 51 of 66 districts that received Impact  Aid had conducted a facilities condition assessment of their schools at  least once in the last 10 years. Of those 51 school districts, 34 reported  assessing schools at least every 5 years. Nearly all districts (50 of 51)  reported conducting the assessment for capital planning purposes and to  assess safety and hazards.\nSimilar to generalizable estimates from our nationally representative  survey of school districts, districts that received Impact Aid placed a high  priority on safety and security (59 of 66 districts), monitoring  environmental conditions (55 of 64), and student access to technology  (54 of 65).\n\n\tFunding for School Facilities\n\nOverall, more than half of districts that received Impact Aid and  responded to our survey (36 of 66) reported that local funding was their  primary source for funding school facilities projects. In comparison, 19  districts reported state funding as their primary source, eight districts  reported federal funding, and three districts selected the \u201cOther\u201d option or  did not know.\nSimilar to generalizable estimates from our survey of school districts,  about three-quarters of districts that received Impact Aid and responded  to our survey (49 of 66) reported using property tax revenue for school  facilities. In addition, about two-thirds of them reported using local bonds  and local grants for this purpose. Fewer districts reported using public- private partnerships, sales tax revenue, or other tax revenue for school  facilities.\nAs noted above, districts may receive Impact Aid because they have lost  property tax revenue due to certain federal activities, including being on  or near federal property that is exempt from property taxes. Districts that  serve a large proportion of federally-connected students, such as those  located on or near federal Indian lands or military installations, may look  similar to high-poverty districts in their lack of access to local funding  mechanisms for school facilities. However, there is wide variety in the  amount of Impact Aid payments districts received. This variety was  similarly reflected in the eight school districts we visited that received  Impact Aid. For example, the Basic Support payments the districts we  visited received in fiscal year 2018 ranged from about $16,000 to about  $8.6 million, and the percentage of federally-connected students in the  districts we visited ranged from 1 to 100 percent.\nOfficials in one of the districts we visited that received Impact Aid  explained that, because the district is located on an Indian reservation,  there is no property tax base to levy or bond against. In the absence of  these local funding options, officials said the district relied on state  funding and some federal Impact Aid funding to address facility needs,  and noted that the lack of local funding made it difficult for them to reach  their goals for their school facilities. For example, officials said the state  does not provide funding for designated classrooms for bilingual  education. Because the district does not have the local property tax base  to fund these spaces, officials said they must be creative with classes and  teacher schedules to provide bilingual education. The location of these  classes moves to different parts of the school at different times, meaning  that teachers cannot set up a stable classroom that is properly equipped  to teach bilingual education to students in the district, according to district  officials.\nNone of the officials we interviewed in the eight districts that received  Impact Aid said their district used Basic Support payments to address  issues with the conditions of school facilities. Officials in two districts we  visited described receiving Impact Aid construction grants. Officials in one  of these districts explained that when these funds are distributed via  formula grant, the amounts are not large enough to support a major  capital project. An official in the district that had received a competitive  grant in recent years said the district used the funds to build a new  combined middle and high school.\nIn addition, representatives from the National Association of Federally  Impacted Schools and the National Indian Impacted Schools Association  told us they have heard anecdotally about some school districts using  their Impact Aid funds as the basis for borrowing funds to pay for school  facilities projects. They described this as particularly risky because Impact  Aid appropriations levels are not guaranteed to remain consistent each  year. The representatives said if funding levels for Impact Aid are reduced  in the future, the districts would still have to pay back the borrowed funds  before allocating funding for other purposes such as general operations,  teacher salaries, educational materials, and other essentials for educating  students in the school district.\nOn our state survey, eight states reported providing additional school  facilities funding or other assistance to districts in the state that receive  Impact Aid. For example, an official in New Mexico told us the state has  two programs targeted to school districts that get Impact Aid. One  program awarded $10 million to districts in 2019 to help them provide  teacher housing, according to state officials. State officials said a second  state program in New Mexico awarded $24 million in 2019 to districts that  received Impact Aid to assist them with projects that were ineligible for  funding through New Mexico\u2019s other programs. For example, these  officials said this funding could help schools in need of athletic fields,  performing arts centers, or administrative buildings.\n\nAppendix IV: School Facilities in Charter School Districts\n\nCharter schools comprise a small but growing group of public schools.  We previously reported that, in contrast to most traditional public schools,  many charter schools are responsible for financing their own buildings  and other facilities, i.e., charter school districts may not have access to  the same local funding mechanisms as traditional school districts. As a  result, charter 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 that 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. We previously reported that in some states, charter schools  function as their own school district, while in other states, charter schools  have the option to choose between being their own school district or part  of a larger school district.\nThe data presented in this appendix are limited to the nongeneralizable  responses of the 52 charter school districts that responded to our survey  of school districts, unless otherwise noted. In addition, we visited five  charter schools across four states (California, Florida, Maryland, and  Rhode Island) as part of our school district site visits. This appendix  summarizes key information on the condition of and funding for school  facilities in these charter school districts and schools. Responses from  the nongeneralizable group of charter school districts were similar to the  generalizable results for all districts in the nation for key building updates,  as well as priorities for modernizing school facilities, but different for how  these districts access funding for school facilities.\n\n\tConditions of School Facilities\n\nThe highest number of charter school districts (20 of 51) indicated  needing to update or replace heating, ventilation, and air conditioning  systems in the majority of their schools, followed by windows (16), roofing  (15), and interior light fixtures (15).\nSchool officials at a charter school we visited told us they were having  ongoing issues with several key building features, such as doors and  windows. The charter school rents their facility from the traditional school  district and has a lease that specifies who is responsible for certain  maintenance and repair projects. School officials told us the school has a  \u201cutilities-only\u201d lease, meaning they should not be responsible for any  repairs, but officials told us they had to take on several projects to make  the facility usable. Although the traditional school district\u2014of which this  charter school is a part\u2014is responsible for many of these projects, district  officials said they have not had the funding to address this. For example,  before the school opened, school officials said they had to install door  handles on interior doors and re-key the building so that they were able to  lock and unlock doors. In addition, school officials told us that teachers  have complained that windows are nailed shut and cannot be opened.\nBased on our school district survey, 24 of 52 charter school districts had  conducted a facilities condition assessment of their schools at least once  in the last 10 years. Of those 24 school districts, 19 reported assessing  schools at least every 5 years. Twenty-three charter school districts  reported conducting the assessment to assess safety and hazards.  Officials at four of the five charter schools we visited told us they were  responsible for maintaining their own facilities. The other charter school  we visited was part of a larger network of charter schools, and had  regional offices that assisted with facilities and operations.\nWhen updating or renovating school facilities, charter school districts  responding to our survey ranked security and technology as their highest  priorities, similar to the generalizable results for all districts in the nation.  The top reported priorities were student access to technology (44 of 52),  safety and security (43 of 51 districts), and telecommunication systems  such as WiFi (36 of 51). An official at a charter school we visited in  Florida said safety and security was one of their main focuses when  constructing the school. The school and parking lot are gated, and there  is a camera to monitor all cars and people entering the campus. School  officials told us that all classrooms and common areas are equipped with  phones that can broadcast announcements throughout the campus, and  that they have a lightening alert system so that they can move students  indoors if a storm is approaching.\n\n\tFunding for School Facilities\n\nAs previously noted, charter schools may or may not be part of a larger  school district, and may not be able to access local funding sources such  as property tax revenue. As noted in this report, property tax revenue was  the most common source of funding that all school districts reported using  for school facilities\u2014an estimated 77 percent of all districts nationwide  used property taxes for this purpose. Most charter school districts that  responded to our survey indicated that state funding was their primary  method of funding school facilities (32 of 49) and fewer (8 of 49) reported  local funding as their primary method. The most common local funding  mechanism that charter school districts reported using for facilities was  grant funding (20 of 46 districts), followed by public-private partnerships  (12 of 47 districts).\nA charter school we visited told us about several areas in their school that  they had improved with grants from non-profit organizations. For  example, a teacher at the school applied for a grant from a foundation to  replace the basketball hoops and paint in the gym, and a separate  organization had installed a new playground at the school.\nBased on our state survey, 26 states provide funding to charter schools  for facilities\u201422 states provide direct funding to charter schools and four  states provide funding to non-charter school districts, which would  indirectly fund certain charter schools. Of the 26 states, 20 states  reported doing so either through a funding formula, or a combination of  funding formula, charter school requests, and other methods. The most  common factor that states considered when determining levels of facilities  funding for charter schools was the size of the student population (12 of  25 states). Of the 26 states that provide funding to charter schools for  construction or maintenance and operations of charter school facilities, 19  reported using allocated funding from the state legislature to do so.\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nJacqueline M. Nowicki, Director, (617) 788-0580 or nowickij@gao.gov.\nIn addition to the contact named above, Bill MacBlane (Assistant  Director), David Watsula (Analyst-in-Charge), Liz Spurgeon, and  Alexandra Squitieri made key contributions to this report. Mariel Alper,  Michael Armes, Susan Aschoff, John Bauckman, Alex Galuten, Alison  Grantham, Elizabeth Hartjes, Lara Laufer, Sheila R. McCoy, Jean  McSween, John Mingus, Lauren Mosteller, Mimi Nguyen, Jean Recklau,  Almeta Spencer, Manuel Valverde, Sonya Vartivarian, and Paul Wright  provided additional support.","output":null}
{"id":"gao_GAO-19-494","pid":"gao_GAO-19-494_0","input":"\tBackground\n\nThis section provides an overview of (1) the legal framework governing  mixed HLW, (2) the status of EM\u2019s IWTU reengineering project, (3) EM\u2019s  requirements for capital asset projects and operations activities, (4)  DOE\u2019s policy for the review of projects with start-up risks, and (5) our best  practices for assessing cost and schedule estimates.\n\n\t\tLegal Framework Governing Mixed HLW\n\nThe treatment and disposal of mixed HLW at INL is governed by a  number of federal laws that define the roles of federal agencies and  states in managing mixed HLW, as well as cleanup agreements among  DOE, the state of Idaho, and other parties. DOE primarily regulates  radioactive components of HLW under the Atomic Energy Act of 1954, as  amended, and the Nuclear Waste Policy Act of 1982, as amended.  These acts define HLW as (1) the highly radioactive waste material  resulting from the reprocessing of spent nuclear fuel, including liquid  waste produced directly in reprocessing and any solid material derived  from such liquid waste that contains fission products in sufficient  concentrations, and (2) other highly radioactive material that the Nuclear  Regulatory Commission determines by rule, consistent with existing law,  requires permanent isolation. DOE considers calcine waste HLW  because it is solidified liquid waste produced during the reprocessing of  spent nuclear fuel. EM manages the SBW as mixed HLW because,  according to reports from DOE and National Academies,  (1) the SBW  was produced in the later stages of spent nuclear fuel reprocessing, (2)  the tanks in which the SBW is stored previously held HLW, (3) the SBW is  stored in a location at INL where waste is managed as HLW, and (4) the  waste contains hazardous chemicals subject to RCRA and EPA\u2019s  implementing regulations or authorized state programs that operate in lieu  of the federal program. HLW must be disposed of in a geologic repository  unless the Nuclear Regulatory Commission approves an alternative  disposal site.\nDOE Order 435.1 and Manual 435.1-1 describe the department\u2019s policy  and requirements for managing DOE\u2019s radioactive waste, including HLW,  to ensure that it is managed in a manner that is protective of worker and  public health and safety and the environment. Manual 435.1-1 also  established processes to determine whether waste resulting from  reprocessing spent nuclear fuel can be managed as transuranic waste or  low-level waste if certain criteria are met, which is referred to as a  determination that the waste is incidental to reprocessing. According to  the manual, HLW is waste incidental to reprocessing if, among other  things, the waste has been processed, or will be processed, to remove  key radionuclides to the maximum extent technically and economically  practicable.\nHazardous components of mixed HLW are regulated by EPA or  authorized states under RCRA. EPA\u2019s regulations require hazardous  waste to meet certain treatment standards before land disposal of the  waste unless a variance is granted. The regulations specify that the  treatment standard (i.e., the required method for treatment) for Idaho\u2019s  mixed HLW is vitrification\u2014the immobilization of waste in glass. Where  EPA has authorized states to implement hazardous waste management  programs, those state programs operate instead of the federal program.  EPA, under RCRA, has authorized the state of Idaho to administer its  own hazardous waste management program. EPA has also authorized  New Mexico to administer its own hazardous waste management  program. Pursuant to such authorization, New Mexico\u2019s Environment  Department issues the permit for hazardous waste storage and disposal  at WIPP under the New Mexico Hazardous Waste Act.\n\n\t\tStatus of IWTU Reengineering Project\n\nAs of March 2019, EM\u2019s IWTU reengineering project was in phase two of  the four-phased approach to get the facility operational, according to EM  Idaho Cleanup Project officials. According to project reports, phase one  focused on identifying fixes to resolve problems with the facility\u2019s  equipment and waste treatment process, for example, by performing  engineering analyses and chemistry studies. Phase two has focused on  implementing these fixes, for example, by modifying a piece of equipment  that separates solidified waste before it is moved to storage canisters,  according to the contractor\u2019s project plan. Figure 1 summarizes the four- phased approach for the IWTU reengineering project.\nAccording to EM documents, as of February 2019 total expenditures on  phases one and two were approximately $150 million, about $64 million  more than original costs estimated for those two phases combined, and  the project was over 1 year behind schedule. Phase two has taken longer  and cost more than initially estimated because of additional problems and  required modifications to the facility as the work has progressed,  according to EM Idaho Cleanup Project officials. Appendix II provides  information on the actual costs of phases one and two compared to  estimated costs. As previously noted, EM officials with the Idaho Cleanup  Project estimated in March 2019 that phase three may begin in summer  2019. Further, these officials stated that phase three will involve a 6- month outage to continue implementing changes to the facility prior to the  start of a 60-day performance test using a simulated waste form. EM  Idaho Cleanup Project officials stated that phase four could begin in early  2020 and that EM and Fluor Idaho had yet to determine whether an  outage would need to occur before starting testing with a small amount of  the SBW.\n\n\t\tEM\u2019s Requirements for Capital Asset Projects and Operations Activities\n\nEM divides its cleanup work into capital asset projects and operations  activities, two types of activities governed by different applicable project  management policies:\nCapital asset projects. DOE Order 413.3B governs EM\u2019s program  and project management activities for the acquisition of capital assets,  with the stated goal of delivering fully capable projects within the  planned cost, schedule, and performance baseline. The order  establishes five critical decision points of project development that  each end with a major approval milestone that cover the life of a  project. The order specifies requirements that must be met, including  developing and managing project cost and schedule estimates to  move a project past each critical decision milestone. EM capital asset  projects include construction projects and cleanup projects, such as  soil and water remediation and facility decommissioning and  demolition.\nOperations activities. Operations activities are recurring facility or  environmental operations, as well as activities that are project-like,  with defined start and end dates, according to EM policy. EM  operations activities include operating waste processing facilities and  the stabilization, packaging, transportation, and disposition of nuclear  waste. EM manages operations activities based on requirements  listed in a cleanup policy that it issued in July 2017. In February  2019, we found that EM cleanup site managers have discretion in how  to classify cleanup work because DOE and EM have not established  requirements on what work should be managed as an operations  activity under EM\u2019s cleanup policy or as a capital asset project under  DOE Order 413.3B. Further, we found that operations activities have  less stringent management requirements than capital asset projects.  We recommended that EM establish requirements for classifying work  as an operations activity and revise its cleanup policy to follow  program and project management leading practices. DOE generally  agreed with our recommendations.\nBeginning in January 2005, EM managed the development and  construction of the IWTU facility as a capital asset project. Once EM  determined that construction on the facility was complete in April 2012,  the project exited the capital asset oversight process established in DOE  Order 413.3B and has since been managed as an operations activity,  according to EM Idaho Cleanup Project officials. DOE officials also told us  that the IWTU reengineering project has been managed as an operations  activity because the facility has been constructed and is now in a period  of maintenance and repair. Figure 2 shows a picture of the exterior of  the IWTU facility.\n\n\t\tDOE\u2019s Policy for the Monitoring of Projects with Start-up Risks\n\nIn August 2016, DOE\u2019s Deputy Secretary of Energy issued a  memorandum establishing a new oversight requirement for selected  projects for which an extended period of transition to operations is likely\u2014 the phase after construction is complete but before full operational  capability is attained\u2014called the operational release milestone.  According to the memorandum, DOE created the operational release  milestone in the department\u2019s project life cycle to provide additional  oversight after the completion of the project under DOE\u2019s Order 413.3B.  DOE officials from the Office of Project Management stated that the  operational release milestone was largely created in response to EM\u2019s  experience with the IWTU facility not operating as expected. Under these  new requirements, program offices are to provide DOE\u2019s Project  Management Risk Committee (PMRC) with regular updates on selected  projects until full operational capability of each facility is attained.  Specifically, program offices are required to (1) develop and execute a  plan that describes how the program will reach operational capability,  which is referred to as an operational release plan, and (2) provide  progress updates to the PMRC on the project, as described below.\nOperational release plan. Officials from DOE\u2019s Office of Project  Management\u2014which serves as the secretariat for the PMRC\u2014stated  that the purpose of the operational release plan is for the program  office to describe what steps are required for the project to reach its  operational capability. According to EM\u2019s guidance, the operational  release plan should present the key processes, activities,  interrelationships, risks, management and oversight, decision  milestones and approvals, and overall schedule to achieve  operational release.\nProgress updates. According to the memorandum and the PMRC\u2019s  standard operating procedures, program offices are to provide the  PMRC with quarterly progress updates on selected projects, including  lessons learned, until full operational capability is attained.\n\n\t\tGAO\u2019s Best Practices for Developing Cost and Schedule Estimates\n\nThe GAO\u2019s cost guide and schedule guide compiled best practices  corresponding to the characteristics of high-quality and reliable cost and  schedule estimates. According to the cost guide, a high-quality, reliable  cost estimate has four characteristics: comprehensive, well-documented,  accurate, and credible. A comprehensive cost estimate has enough detail  to ensure that cost elements are neither omitted nor double-counted. If a  cost estimate is not comprehensive (that is, complete), then it cannot fully  meet the other characteristics (i.e., well-documented, accurate, or  credible). In addition, according to the schedule guide, a high-quality,  reliable schedule has four characteristics: comprehensive, well- constructed, controlled, and credible. A comprehensive schedule  captures all government and contractor activities necessary to accomplish  a project\u2019s objectives, and a well-constructed schedule sequences all  activities using the most straightforward logic possible. If a schedule is not  comprehensive, with all activities accounted for, it is uncertain whether all  activities are scheduled in the correct order, resources are properly  allocated, missing activities will appear on the critical path, or a schedule  risk analysis can account for all risk. If a schedule is not well-constructed,  it will not be able to properly calculate dates and predict changes in the  future, among other things.\n\n\tEM Has Not Fully Followed Selected Best Practices for Cost and Schedule Estimates, and Unreliable Data May Limit EM\u2019s Ability to Measure Performance\n\nEM has not fully followed selected project management best practices for  cost and schedule estimates for the IWTU reengineering project. EM  generally followed best practices for a reliable EVM system to measure  the performance of the reengineering project. However, in analyzing  IWTU reengineering project data from March 2017 through February  2018, we found that the system is producing unreliable data, which may  limit EM\u2019s ability to measure the project\u2019s performance. Further, EM has  taken some steps toward meeting requirements under DOE\u2019s process for  monitoring projects with start-up risks.\n\n\t\tEM Has Not Fully Followed Selected Best Practices for Cost and Schedule Estimates for the IWTU Reengineering Project\n\nEM has not fully followed (i.e., has partially met) selected best practices in  developing the cost and schedule estimates we reviewed for phases one  and two of the IWTU reengineering project and future planned IWTU  operations. We made the following observations based on our analysis  of these cost estimating documents and a March 2018 project schedule:\nComprehensive cost estimate (partially met): EM partially met best  practices for a comprehensive cost estimate. According to our cost  guide, a comprehensive cost estimate should reflect the project\u2019s  technical requirements and current schedule and account for all  possible costs. While the cost estimate was based on documented  technical information, it was not based on a standardized work  breakdown structure. Without a standard, product-oriented work  breakdown structure to facilitate the tracking of resource allocations  and expenditures, EM may not be able to reliably estimate the cost of  future similar programs. While assumptions are listed in EM\u2019s  documents describing the cost estimates, no document discusses  whether the assumptions came from inputs from technical subject  matter experts or whether the assumptions are associated with  specific risks. Since assumptions are best guesses, best practices  state that the risk associated with any of these assumptions changing  need to be identified and assessed.\nFurther, the IWTU reengineering project\u2019s cost estimate was not  complete because it did not account for all possible costs. According  to our cost guide, a life cycle cost estimate provides an exhaustive  and structured accounting of all resources and associated cost  elements required to develop, produce, deploy, and sustain a  particular program. The project\u2019s cost estimate did not reflect all life  cycle costs, in part because estimates for phases three and four of the  project had not been developed at the time of our review. Best  practices state that all costs be included in an estimate, even in early  stages, such as at a rough order of magnitude. EM officials from the  Idaho Cleanup Project said that a cost estimate was not developed for  the total cost of the IWTU reengineering project because of the  approach for negotiating the cost and schedule baseline prior to the  start of each phase. Without developing a cost estimate for the IWTU  reengineering project that is comprehensive (e.g., accounts for all  possible costs), EM will not have reasonable assurance that it can  successfully plan program resource requirements.\nWell-constructed schedule estimate (partially met): EM partially  met best practices for a well-constructed schedule. According to our  schedule guide, a well-constructed schedule includes activities that  are logically sequenced; a valid critical path; and a reasonable  amount of total float, meaning an accurate reflection of the schedule\u2019s  flexibility. EM\u2019s March 2018 schedule had minimal sequencing  issues and a continuous critical path, with the exception of an external  dependency, and the critical path was free of lags and constraints.  However, there were long duration activities on the critical path that  should be reevaluated to determine if they can be broken into more  manageable pieces. Without a valid critical path, management cannot  focus on activities that will detrimentally affect the key program  milestones and deliveries if they slip. Additionally, the schedule  estimate included unreasonably large values of positive and negative  float. According to best practices, a schedule should identify  reasonable values of float so that the schedule\u2019s flexibility can be  determined to help accommodate for delays. EM officials from the  Idaho Cleanup Project explained that the amount of total float was a  result of the methods they used to structure the logic of the schedule  estimate, which according to our best practices may have caused the  schedule to be overly optimistic. According to scheduling best  practices, without accurate values of total float, the schedule cannot  be used to identify activities that could be permitted to slip and thus  release and reallocate resources to activities that require more  resources to be completed on time. Inaccurate values of total float  also falsely depict true program status, which could lead to decisions  that may jeopardize the program. In addition, the March 2018  schedule contained 14 activities with large amounts of negative float,  meaning that these activities were behind schedule. Without fully  developing a well-constructed schedule estimate for the IWTU  reengineering project, EM will not have reasonable assurance that it  can successfully achieve its plans to reengineer the IWTU and begin  treatment of the SBW without further delays.\nComprehensive schedule estimate (substantially met): EM  substantially met best practices for a comprehensive schedule.  According to our schedule guide, a comprehensive schedule includes  all activities for both the government and its contractors to accomplish  their objective, assigns resources (e.g., labor and materials) to all  activities, and establishes how long each activity will take. EM\u2019s March  2018 schedule substantially captured all activities, but it may not have  been planned to the level of detail for the work necessary to  accomplish a program\u2019s objectives as defined in the program\u2019s work  breakdown structure. For example, the schedule had activities that  were described as level of effort but were not assigned the level of  effort activity type. Level of effort activities represent effort that has no  measurable output and, according to best practices, should be clearly  marked so they do not interfere with the critical path. Further, the  schedule substantially met the best practice of assigning resources to  all activities. For example, the schedule assigned resources to  specific materials and equipment as well as to travel, training, and  labor.\nAppendix II contains the full results of our analysis of selected best  practices for the cost and schedule of the IWTU reengineering project.\nAs previously noted, EM is managing the IWTU reengineering project as  an operations activity. We reported in February 2019 that EM manages  operations activities using less stringent requirements than those used for  capital asset projects, posing cost and schedule risks. For example,  under EM\u2019s 2017 cleanup policy, there is no requirement for operations  activities to follow best practices for cost estimates developed during  contract execution. We recommended that EM review and revise its 2017  cleanup policy to include project management leading practices related to  scope, cost, schedule performance, and independent reviews. DOE  concurred with our recommendation and stated that EM was already in  the process of reviewing its policy for necessary updates, revisions, and  modifications, and that EM would consider our recommendation, as  appropriate, during this process.\nEM officials with the Idaho Cleanup Project acknowledged that they do  not have an estimate for the total cost or a completion date for the IWTU  reengineering project or a schedule for when waste treatment operations  will begin and be completed. An EM Idaho Cleanup Project official told us  that Fluor Idaho submitted cost and schedule estimates for phases three  and four of the reengineering project in January 2019 and that EM  requested an independent cost estimate for this work from the Defense  Contract Audit Agency, with contract negotiations between EM and Fluor  Idaho for these phases estimated to begin in spring 2019. In addition,  EM officials from the Idaho Cleanup Project acknowledged that a  schedule for waste treatment operations at the project has not been  developed. Further, these officials noted that design modifications to the  IWTU are expected to reduce its operating capability, lengthening the  time needed to treat the SBW. As a result, EM and Fluor Idaho plan to  renegotiate the cost of their contract related to the treatment of the waste  in the project, according to EM Idaho Cleanup Project officials.  Specifically, because of the modifications to the project, the rate at which  the SBW is treated will be slower than initially estimated, according to EM  officials from the Idaho Cleanup Project. Treatment of all 900,000 gallons  of the SBW was originally estimated to be completed in 10 months, but  agency officials now estimate that treatment may take from 3 to 7 years\u2014 as much as eight times longer than originally planned. As previously  noted, EM has already experienced approximately $64 million in added  costs and, as of February 2019, a delay of over 1 year. Without fully  following best practices for a comprehensive cost estimate and well- constructed schedule estimate for SBW waste treatment operations, EM  cannot be assured that it has reliable cost and schedule estimates for  decision-making, placing it at risk of continued cost overruns and delays  in achieving its plans to reengineer the IWTU and begin treatment of the  SBW.\n\n\t\tEM Generally Followed Best Practices for Measuring Project Performance and Has Taken Some Steps toward Meeting Requirements for Monitoring the IWTU Reengineering Project\n\n\t\t\tEM\u2019s EVM System for the IWTU Reengineering Project Generally Followed Best Practices, but Unreliable Data May Limit EM\u2019s Ability to Measure Performance\n\nWe analyzed IWTU reengineering project data for March 2017 through  February 2018 from EM\u2019s EVM system and found that while EM has  followed (i.e., fully met or substantially met) some best practices for a  reliable EVM system, the system is producing unreliable data. These  unreliable data may limit EM\u2019s ability to measure the project\u2019s  performance. 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, and EVM\u2019s use as a  management tool is considered a best practice for conducting cost and  schedule performance analysis for projects, according to our cost guide.  EM requires the use of an EVM system under its contract with Fluor Idaho  for the Idaho Cleanup Project.\nOverall, we found that EM followed best practices to ensure that its EVM  data for the IWTU reengineering project were (1) comprehensive and (2)  used by leadership for decision-making. However, EM did not follow (i.e.,  partially met) best practices to ensure that the data resulting from the  EVM system are reliable. Specifically:\nEM substantially met best practices for a comprehensive EVM  system by, for example, requiring the contractor\u2019s EVM system to  comply with the guidelines established by the Earned Value  Management Systems EIA-748-D Intent Guide; EM conducted a  compliance review of Fluor Idaho\u2019s EVM system in March 2017 and  found some areas in need of improvement. In addition, EM has an  EVM surveillance system in place under its contract with Fluor Idaho,  and EM officials from the Idaho Cleanup Project stated that they  review data from the EVM system each month.\nEM substantially met best practices ensuring that leadership uses  the EVM data for decision-making. For example, Fluor Idaho updated  data in its EVM system monthly during the period we reviewed, and  EM reported issues in a monthly review briefing between EM and the  contractor, according to EM Idaho Cleanup Project officials. Agency  management also tracked the causes of cost and schedule variances  in the data. However, the monthly reports did not contain all the  information that best practices recommended. Specifically, the  performance measurement baseline was not included in the  contractor performance reports provided, so we could not determine  how the performance measurement baseline changed as the project  evolved.\nEM partially met best practices ensuring that the EVM system  provides reliable data because, for instance, the system contained  numerous anomalies, leading the system to produce unreliable data.  Specifically, we found one or more anomalies present in all months of  data reviewed, such as missing or negative values. While EM was  able to explain the causes for most of these anomalies, negative  values should occur rarely, if ever, in EVM reporting because they  imply the undoing of previously scheduled or performed work.  According to best practices, all anomalies should also be identified  and the reason for each should be fully explained in EM\u2019s monthly  EVM reports. However, EM did not document the reasons for these  anomalies in its monthly reports. EM officials from the Idaho Cleanup  Project said that most of the anomalies in the data were due to the  phase two estimate including authorized unpriced work\u2014that is,  additional work that EM agreed to let the contractor perform without  first negotiating or independently verifying the costs. If errors in EVM  reports are not detected, then EVM data will be skewed, resulting in  bad decision-making and limiting EM\u2019s ability to use the EVM system  to measure project performance.\nAppendix III provides detailed information on EM\u2019s performance on each  EVM best practice. An EVM system that produces unreliable data may  contribute to EM\u2019s challenges in measuring the performance of its  operations activities. Our findings in this regard are consistent with our  prior reports examining EM\u2019s use of EVM systems in other contracts. For  example, in February 2019 we reviewed the use of EVM systems in the  21 contracts EM uses to execute its operations activities, including Fluor  Idaho\u2019s contract for the cleanup at INL, and found that EM has not  followed best practices to ensure that these systems (1) are  comprehensive, (2) provide reliable data, and (3) are used by EM  leadership for decision-making. We recommended that EM update its  cleanup policy to require that EVM systems be maintained and used in a  way that follows EVM best practices, such as ensuring the reliability of the  data in the system. Without following best practices for ensuring EVM  data reliability for the IWTU reengineering project\u2019s EVM system, EM  leadership may not have access to reliable performance data with which  to make informed decisions as it manages billions of dollars\u2019 worth of  cleanup work and provides information to Congress and other  stakeholders on the cleanup work every year.\n\n\t\t\tEM Has Taken Some Steps toward Meeting Requirements for Monitoring the IWTU Reengineering Project under DOE\u2019s Process for Projects with Start-up Risks\n\nIn 2016, DOE instituted independent review requirements to monitor  facilities with commissioning or start-up risks, and EM has taken some  steps toward meeting those requirements for the IWTU reengineering  project. As previously noted, DOE\u2019s policy requires program offices to  (1) develop and execute an operational release plan and (2) provide  progress updates to the PMRC on the project each quarter. We made the  following observations on EM\u2019s actions to meet these requirements for  the reengineering of the IWTU project:\nEM developed an operational release plan for the IWTU project in  December 2016, which preceded EM\u2019s developing guidance for these  plans. We found that the operational release plan included the  majority of elements that EM\u2019s guidance later required.\nEM has provided five progress update briefings to the PMRC on the  IWTU reengineering project, according to DOE documents, but these  briefings have not occurred each quarter as required by DOE\u2019s policy.  Officials from DOE\u2019s Office of Project Management told us that  briefings generally occur when progress has been made on a project.  EM\u2019s guidance for operational release plans also states, with regard  to progress update briefings, that an alternate reporting schedule may  be proposed for PMRC approval. The PMRC made recommendations  in three of these five briefings. For example, the PMRC recommended  that EM revisit and review documents to ensure that the delegated  authority is clear, current, and appropriate prior to facility start-up and  the introduction of radioactive materials. According to documentation  prepared following EM\u2019s most recent briefing to the PMRC in February  2019, the PMRC recommended an update on the project in July 2019.\n\n\tEM Faces Three Main Challenges to Its Plans for SBW Disposal but Does Not Have a Strategy or a Timeline to Manage Those Challenges\n\nBased on our review of EM documentation and plans, the agency does  not have a strategy or timeline to address its three main challenges for  disposing of the SBW or for identifying an alternative disposal pathway.  EM identified WIPP as its preferred disposal site for the SBW in a 2005  Record of Decision document, but in March 2019 EM officials told us  that a final decision on the disposal path for the SBW had not been made.  The three main challenges EM faces in its plan to dispose of the SBW at  its preferred disposal site are: (1) the permit for WIPP prohibits the SBW  from being disposed of at WIPP, (2) federal law prohibits HLW from being  disposed of at WIPP, and (3) there are existing capacity limitations to  disposal at the WIPP facility. EM has taken some steps to address these  challenges, as discussed further below.\nWIPP permit\u2019s prohibition of the disposal of certain tank waste. New  Mexico amended its permit for WIPP in 2004 to prohibit waste that has  ever been managed as HLW, including the SBW at INL, from being  disposed at WIPP unless the disposal of such waste is specifically  approved through a permit modification. In 2013, DOE and its contractor  responsible for operating and managing the facility filed a request with the  state of New Mexico to modify the WIPP permit to remove this prohibition,  which could allow the SBW to be disposed of at WIPP if EM determined  that the SBW is waste incidental to reprocessing. However, the process  was put on hold following the suspension of operations at WIPP in 2014,  according to officials from DOE\u2019s Carlsbad Field Office and New Mexico\u2019s  Environment Department. In April 2019, officials from New Mexico\u2019s  Environment Department said that they anticipated holding discussions  with DOE and its contractor for the facility regarding the prohibition after  the renewal of the WIPP permit in July 2020. However, a representative  from a New Mexico environmental organization said that this proposed  modification would likely face strong public opposition. This  representative noted that previous DOE attempts to expand the types of  waste that could be disposed of at WIPP caused significant public concern in New Mexico. Further, New Mexico Environment Department  officials told us that processing permit modifications of this nature would  likely require public hearings and opportunities for input and may take as  long as 2 years or more to complete.\nFederal statutory prohibition on HLW disposal at WIPP. The Waste  Isolation Pilot Plant Land Withdrawal Act prohibits disposal of HLW at  WIPP. Therefore, to enable EM to dispose of the SBW at WIPP, the  SBW would need to be classified as non-HLW, or the act would need to  be amended to remove the prohibition. DOE has a process for  determining that certain waste resulting from reprocessing spent nuclear  fuel, such as the SBW and calcine waste, could be managed as either  transuranic waste or low-level waste, which are not HLW. Under DOE  Order 435.1 and Manual 435.1-1, DOE may determine that waste is  incidental to reprocessing and therefore manage the waste as transuranic  waste or low-level waste if it meets certain criteria. EM began  developing documentation supporting a waste incidental to reprocessing  determination for the SBW in 2001. For example, in September 2001, EM  requested consultation from the Nuclear Regulatory Commission, which  oversees the nuclear power industry, on a draft waste incidental to  reprocessing determination so that the SBW could be managed as  transuranic waste and disposed of at WIPP rather than in an HLW  repository.\nDOE\u2019s Authority to Determine That Certain  Waste Is Not HLW  In 2002, while litigation over the Department  of Energy\u2019s (DOE) authority to use DOE Order  435.1 and Manual 435.1-1 was pending, DOE  sought enactment of legislation clarifying its  authority to manage portions of tank waste  that have low levels of radioactivity as low- level waste. In response, Congress enacted  section 3116 of the Ronald W. Reagan  National Defense Authorization Act for Fiscal  Year 2005 in October 2004. Under section  3116, radioactive waste resulting from the  reprocessing of spent nuclear fuel is not high- level waste (HLW) if the Secretary of Energy,  in consultation with the Nuclear Regulatory  Commission, determines that it meets  specified conditions. These conditions include  that the waste does not require disposal in a  deep geologic repository and has had highly  radioactive radionuclides removed to the  maximum extent practical. However, section  3116 only applies to waste stored at DOE  sites in Idaho and South Carolina that is not  transported from those states. Therefore,  DOE cannot use section 3116 to classify the  sodium-bearing waste (SBW) as transuranic  waste for disposal as DOE\u2019s agreements with  Idaho require the SBW to be removed from  the state.\nHowever, DOE\u2019s authority to use Order 435.1 and Manual 435.1-1 to  classify the SBW and other waste from reprocessing as non-HLW was  challenged in a federal lawsuit in 2001, resulting in EM suspending its  development of the waste incidental to reprocessing determination.  Following the dismissal of the lawsuit on procedural grounds, EM  restarted the internal process for developing the waste incidental to  reprocessing determination for the SBW, according to EM officials and  documents. For example, EM identified the waste incidental to  reprocessing determination for the SBW as a priority item for executive  decision-making in a 2017 EM study on mission operations. Internal  discussions about this determination continued between EM and DOE  into 2018, but the waste incidental to reprocessing determination was not  finalized, according to EM officials.\nIn October 2018, EM published a notice in the Federal Register seeking  public comment on its proposed interpretation of the statutory definition of  HLW, which EM officials said could help the agency make a decision  about the classification of the SBW. EM also published a supplemental  notice in June 2019 to modify the interpretation and provide additional  information to the public, such as on the role of the Nuclear Regulatory  Commission and states. Table 1 presents the statutory definition, the  proposed interpretation from the October 2018 Federal Register notice,  and the modified interpretation from the June 2019 Federal Register  notice. EM officials told us that under the new interpretation, waste  would be disposed of in accordance with its characteristics (which  determines risk) instead of solely based on the source of the waste  (which does not determine risk).\nStakeholders, including members of the public, state and local  governments, tribes, and the Nuclear Regulatory Commission, expressed  a range of perspectives about EM\u2019s proposed interpretation in public  comments. For example, some stakeholders submitted comments  expressing concern about the Nuclear Regulatory Commission being  excluded from the determination of what is HLW under the interpretation.  These comments also stated that the interpretation is contrary to federal  law and that the interpretation will elicit legal challenges. Other  stakeholders expressed support for the interpretation in comments  submitted to EM stating, for example, that the proposed interpretation  could accelerate the cleanup of tank waste at DOE sites and result in cost  savings.\nAccording to an EM document, potential benefits of the interpretation, if  implemented, include a more risk-based approach to waste classification,  which could provide a more cost-effective and timely approach to DOE\u2019s  cleanup mission. However, EM officials stated that it was premature to  discuss the administrative actions, such as revising orders or regulations  that would be required to implement the new interpretation. The June  2019 Federal Register notice states that DOE will consider what actions  may be needed and appropriate to update applicable DOE directives,  such as Order 435.1 and Manual 435.1-1, in light of this interpretation and  address any revisions in future actions. EM officials also told us that they  did not have a timeline for implementing the new interpretation. Further,  EM officials stated that if the HLW interpretation is implemented,  alternative disposal options could also be considered for the SBW, but  they declined to specify what those options could be.\nLimitations on disposal at WIPP. Further, existing limitations in the  disposal space at WIPP could affect the disposal of the SBW at the  facility. We reported in September 2017 that DOE does not currently have  sufficient disposal space at WIPP for the waste identified in its 2016  annual inventory report\u2014a document that tracks waste intended to be  disposed of at the facility. Specifically, DOE will need to expand the  repository to accommodate this waste as well as other potential waste,  such as the SBW, for which DOE has yet to determine if it meets all of  WIPP\u2019s waste acceptance criteria. In March 2019, DOE officials stated  that WIPP could be expanded within the current Waste Isolation Pilot  Plant Land Withdrawal Act boundary for the site to accommodate the  current planned waste and additional waste inventories. Specifically,  DOE officials said that mining for a new disposal panel and design work  for additional disposal panels was under way, and mining of the additional  panel was scheduled to commence in 2021. Further, in September 2017  we also reported that additional potential waste beyond what is captured  in the inventory could exceed WIPP\u2019s statutory capacity. However, in  December 2018, New Mexico\u2019s Environment Department approved a  modification to the WIPP permit\u2014which was requested by DOE and its  contractor that operates and manages WIPP\u2014that will change the way  waste volume is calculated to exclude empty space inside waste packing.  According to DOE officials, this means that additional waste can be  disposed of at WIPP under the existing statutory limit. Further, DOE  officials stated that the revised counting methodology will reduce an  overstatement in the volume of record for emplaced waste by about 30  percent. However, in January 2019 three environmental organizations  filed lawsuits challenging the modification, which the court consolidated  and, in May 2019, stayed pending mediation.\nEM officials said that if the office is not able to dispose of the SBW at  WIPP, its plan is to dispose of the SBW\u2014once it is treated to a solid form  in the IWTU\u2014with the calcine waste in an HLW geologic repository.  However, there is still no HLW disposal site in the United States. In 2008,  DOE submitted a license application to the Nuclear Regulatory  Commission for an HLW repository at Yucca Mountain, Nevada, about  100 miles northwest of Las Vegas. In 2010, however, DOE terminated its  efforts to obtain a license for the Yucca Mountain repository.\nUnder the 1995 settlement agreement with the state of Idaho, DOE is  required to treat the SBW so that it is ready for disposal outside of the  state by a target date of 2035. An EM official responsible for the  disposition of the SBW at INL told us that EM has not developed a  strategy, including a timeline, for addressing challenges, including the  WIPP permit prohibition, the federal law prohibition, and existing capacity  limitations, that could affect EM\u2019s ability to meet this target date.  According to standards for internal control, federal agency management  should identify, analyze, and respond to risks related to achieving a  defined objective. Until it develops such a strategy, including a timeline,  to implement the actions required to achieve its preferred disposal  pathway, or an alternative, for the SBW, EM will not have reasonable  assurance that it can achieve its preferred plan for disposal or begin  identifying an alternative. Moreover, if EM implements its new  interpretation of HLW and uses this definition to classify the SBW as non- HLW, there is significant risk for extended litigation, which may delay to  EM\u2019s plans to dispose of the SBW at its preferred disposal site.\n\n\tBecause of Technological and Disposal Path Challenges, EM Has Suspended Its Plans to Treat Calcine Waste but Has Not Formally Identified an Alternative Approach EM Is Suspending Development of Its Selected Treatment Technology for Calcine Waste Because of Technological and Disposal Path Challenges\n\nEM faces challenges implementing its selected treatment technology for  calcine waste and faces uncertainties with a waste disposal pathway. As  a result, the agency is suspending further development of its plan to treat  calcine waste for land disposal, according to EM documents and officials.  EM Idaho Cleanup Project officials told us that the agency is continuing to  make progress toward its milestones for calcine waste disposal by  considering alternatives for processing the waste for land disposal and  conducting a pilot project to remove it from the oldest storage vessel.  However, EM does not have a strategy or timeline for determining its next  steps for the ultimate treatment and disposal of calcine waste.\nBecause of challenges with implementing its chosen treatment  technology as well as selecting a potential waste disposal pathway, EM is  suspending further development of its plan to treat calcine waste for land  disposal, according to EM documents and officials. In December 2009  EM identified hot isostatic pressing as its preferred treatment technology  for preparing the calcine waste for land disposal outside of Idaho. Hot  isostatic pressing is a manufacturing process that applies elevated  temperatures and pressurized gas to materials in a containment vessel,  resulting in a ceramic waste form. EM officials from the Idaho Cleanup  Project told us that while hot isostatic pressing is a technology used in  other industries, such as in industrial manufacturing, it has not been used  before to treat HLW. Further, hot isostatic pressing would require a  variance or an EPA regulation establishing a new treatment standard  prior to land disposal. According to EM Idaho Cleanup Project officials  and agency documents, EM selected hot isostatic pressing as the  treatment technology because EM\u2019s analyses assumed it would result in  significant cost savings for disposal at Yucca Mountain compared to other  methods.\nIn February 2011, an independent DOE review team issued a preliminary  technology readiness assessment for using hot isostatic pressing for  calcine waste treatment as part of DOE\u2019s process for managing capital  asset projects. The review team identified several concerns, such as  whether components of the technology would be mature enough to meet  EM\u2019s planned milestones and challenges with EM\u2019s decision to retrofit  and reuse the IWTU for the calcine waste treatment mission. EM officials  from the Idaho Cleanup Project said that the decision to retrofit and reuse  the IWTU for the calcine waste after treating the SBW resulted from  reluctance within DOE to build another \u201cfirst-of-a-kind\u201d treatment facility.  However, the review team\u2019s report stated that the decision to retrofit the  facility may result in logistical and physical maintenance challenges  because of space limitations and height requirements.\nBased on the results of an independent analysis of alternatives for calcine  waste disposition, published in April 2016, EM decided to suspend  developing the hot isostatic pressing technology, according to EM officials  from the Idaho Cleanup Project. DOE initiated this analysis of  alternatives in response to a new requirement from the Secretary of  Energy and because hot isostatic pressing is not a mature technology for  HLW, according to EM\u2019s summary report for the analysis. The report  identified uncertainties and challenges with the use of hot isostatic  pressing when compared to other potential treatment options given,  including that hot isostatic pressing is significantly different than vitrification and  would require the development and acceptance of testing protocols to  validate that it produces a robust waste form, hot isostatic pressing had the second greatest estimated cost (more  than $2 billion) of the options assessed in the analysis of alternatives, hot isostatic pressing represented the highest operational safety risk  of all of the options assessed given its use of high pressures and  temperatures, and other treatment options may perform better for managing the waste  because of significant advances in technology since the selection of  hot isostatic pressing in 2009.\nThe independent team performing this analysis also concluded that  uncertainties regarding plans for an HLW geologic repository also affect  EM\u2019s ability to move forward with selecting a treatment technology.  According to EM officials from the Idaho Cleanup Project and documents,  EM\u2019s selection of hot isostatic pressing was based on assumptions  developed based on sending the waste to the Yucca Mountain disposal  facility. Specifically, an important factor in the selection of hot isostatic  pressing as the treatment technology was its ability to provide the lowest  volume of final waste, while producing a robust waste form, which would  reduce disposal costs at Yucca Mountain. As previously noted, the  licensing for developing the Yucca Mountain facility was terminated in  2010. The team performing the analysis of alternatives concluded that  because selecting an appropriate treatment technology greatly depends  on the calcine waste\u2019s disposal path and associated waste form  performance requirements, EM should defer making a final decision on  the treatment technology until the performance objectives of the disposal  path are better defined.\n\n\t\tEM Is Focusing on Interim Activities for Calcine Waste Treatment and Disposal but Does Not Have a Strategy, Including a Timeline, for Addressing Challenges\n\nWhile further decisions regarding a treatment technology for the calcine  waste are suspended, EM officials from the Idaho Cleanup Project said  that they are taking steps to demonstrate to regulators from Idaho\u2019s  Department of Environmental Quality that they are making progress to  prepare the calcine waste for disposal outside the state. Under DOE\u2019s  1995 settlement agreement with Idaho, treatment of all calcine waste is to  be completed by a target date of December 31, 2035. Further, DOE is  required to meet interim milestones for the cleanup of the waste under a  site treatment plan that DOE developed for the Idaho Department of  Environmental Quality. EM officials from the Idaho Cleanup Project told  us that they planned to work with the Idaho Department of Environmental  Quality to make changes to milestones specific to calcine waste in the  site treatment plan, and Idaho Department of Environmental Quality  officials stated in December 2018 that preliminary discussions on this  topic occurred in September 2018. Further, EM Idaho Cleanup Project  officials identified actions that EM is taking at the site to study alternatives  to treatment and aspects of the disposal process.\nEM officials from the Idaho Cleanup Project stated that with the  suspension of developing hot isostatic pressing, they are studying the  potential packaging of the calcine waste for disposal without additional  treatment, or \u201cdirect disposal.\u201d The analysis of alternatives report  identified direct disposal as having significant cost savings over other  technologies. However, the team performing the analysis of  alternatives also found that this method has a high degree of  regulatory uncertainty and it is not clear whether it would be accepted  by stakeholders, such as state regulators and the public. EPA  officials told us that if EM wanted to proceed with plans for the direct  disposal of the calcine waste in a geologic repository, EM would need,  among other things, to seek a no-migration variance from EPA. A  petition for a no-migration variance must demonstrate, to a  reasonable degree of certainty, that the hazardous components would  not leak or escape once the HLW is buried underground for as long as  the waste remains hazardous. EPA officials added that there is a very  high bar for such variances; only one such request has been  approved since 1984, and it was later rescinded. In February 2019, an  EM Idaho Cleanup Project official told us that EM has met with  officials from the Idaho Department of Environmental Quality and EPA  to receive their preliminary input on this approach.\nEM Idaho Cleanup Project officials said that they are focusing in the  near term on developing and testing a system to retrieve the calcine  waste from its storage vessels, called bin sets. According to EM  documents, retrieval of the calcine waste from the bin sets is a  precursor to treating or packaging the waste for disposal, and there  are several challenges to address in developing an effective retrieval  system. As a result, EM directed its contractor to conduct a project  to retrieve calcine waste from the oldest bin set and move it to a  partially empty bin set under EM\u2019s contract for hazardous waste  cleanup at INL. The project serves to both test different forms of  technologies and also to cease use of the older bin set, which does  not have the same structural integrity as the other bin set because of  its design, according to EM officials from the Idaho Cleanup Project  and documents. The project is estimated to cost $50 million over 5  years, according to these officials. Fluor Idaho\u2019s plan for the calcine  waste retrieval project involves developing a full-scale mock-up of the  retrieval process for testing in fiscal years 2019 and 2020, with the  commissioning and start-up of the full-scale system and transfer of the  waste to occur in fiscal year 2021. In February 2019, an EM official  told us that $6 million was obligated to the pilot project in fiscal year  2019 in part because of increased costs for the IWTU reengineering  project and cleanup of transuranic waste at INL.\nDespite these efforts, EM officials from the Idaho Cleanup Project  acknowledged that the agency has no plan to issue a new Record of  Decision or amend the 2010 Record of Decision selecting the treatment  option for calcine waste. Although EM identified challenges with using hot  isostatic pressing for the treatment of the calcine waste in its technical  readiness assessment in 2011 and analysis of alternatives in 2016, an  EM official told us that the agency does not have a strategy for  determining its next steps in treating this waste for land disposal.  According to standards for internal control, federal agency management  should identify, analyze, and respond to risks related to achieving a  defined objective. Without developing a strategy, including a timeline, to identify and develop a treatment approach for the calcine waste, EM does  not have reasonable assurance that it will meet milestones for the  completion of treatment of all calcine by a target date of December 31,  2035.\n\n\tConclusions\n\nEM has been working since 2005 to construct and operate the IWTU to  treat the SBW and calcine waste at INL. Despite declaring construction  complete in 2012 at a cost of $571 million, EM is still working to repair  and reengineer the IWTU following the discovery of facility problems  during testing, with expenditures surpassing $416 million. EM has made  progress in identifying the engineering problems plaguing the facility and  implementing technical changes and expects to complete the second of  the four phases of the reengineering project in mid-2019, with its next  series of system testing to begin in early 2020. However, EM has  experienced significant cost increases and schedule delays in phase two  of the IWTU project, and additional engineering and testing remains to be  completed before beginning a multiyear effort to treat the SBW. EM\u2019s  ability to achieve the project\u2019s estimated cost and schedule in phase two  may have been hampered because EM has not fully followed best  practices for ensuring that the cost estimate is complete and the schedule  estimate is well-constructed. By ensuring that the cost estimate for future  phases of the IWTU reengineering project and the SBW treatment  operations is comprehensive (e.g., account for all possible costs), EM will  have greater assurance that it can successfully plan program resource  requirements. Moreover, by developing a well-constructed schedule  estimate for the IWTU reengineering project and the SBW treatment  operations, EM will have greater assurance that it can successfully  achieve its plans to reengineer the IWTU and begin treatment of the SBW  without further delays. Further, while EM is using an EVM system to  measure the performance of the project and generally followed best  practices for EVM systems, the system produces unreliable data. By  following best practices for ensuring EVM data reliability for the IWTU  reengineering project\u2019s EVM system, EM leadership will have better  access to reliable performance data as it manages billions of dollars\u2019  worth of cleanup work and provides information to Congress and other  stakeholders on the cleanup work every year.\nEM faces long-standing challenges to implementing its preferred  alternative for disposing of the treated SBW at WIPP. Key among these  challenges are provisions in federal law and the WIPP permit that prevent  EM from disposing of the SBW at WIPP. EM has taken some steps  toward addressing these challenges, such as seeking public comment on  its new interpretation of the statutory definition of HLW that according to  EM could allow the waste to be disposed of at WIPP or an alternative to  an HLW geologic repository. However, EM has no strategy or timeline for  making any changes to DOE policies and regulations that may be  required to implement its new interpretation or for making decisions  regarding disposing of the SBW. Until it develops such a strategy,  including a timeline, to implement the actions required to achieve its  preferred disposal pathway, or an alternative, for the SBW, EM will not  have reasonable assurance that it can achieve its preferred plan for  disposal or begin the process of identifying an alternative. Further, if EM  implements its new interpretation of HLW and uses this definition to  classify the SBW as non-HLW, there is significant risk for extended  litigation, which may delay EM\u2019s plans to dispose of the SBW at its  preferred disposal site.\nMoreover, EM faces challenges in completing treatment of the calcine  waste by a target date of December 31, 2035, in light of its decision to  suspend development of the selected treatment technology, hot isostatic  pressing, and the absence of an HLW geologic repository. Even though  EM is studying alternatives to using hot isostatic pressing to prepare the  calcine waste for disposal, it has not developed a strategy or a timeline  for determining its plans for treating this waste for disposal. Without  developing such a strategy, including a timeline, for the treatment and  disposal of the calcine waste to ensure that EM meets the milestone for  completing the treatment of the waste by December 31, 2035, EM does  not have reasonable assurance that it can meet its milestones.\n\n\tRecommendations for Executive Action\n\nWe are making five recommendations to DOE:\nThe Secretary of Energy should direct the Assistant Secretary of EM  to develop cost estimates for the IWTU reengineering project and the  SBW treatment operations that meet best practices for being  comprehensive (e.g., account for all costs). (Recommendation 1)\nThe Secretary of Energy should direct the Assistant Secretary of EM  to develop schedule estimates for the IWTU reengineering project and  the SBW treatment operations that meet best practices for being well- constructed. (Recommendation 2)\nThe Secretary of Energy should direct the Assistant Secretary of EM  to follow best practices for ensuring the reliability for the IWTU  reengineering project\u2019s EVM system. (Recommendation 3)\nThe Secretary of Energy should direct the Assistant Secretary of EM  to develop a strategy, including a timeline, for implementing the  actions required to achieve its preferred disposal pathway, or an  alternative, for the SBW. (Recommendation 4)\nThe Secretary of Energy should direct the Assistant Secretary of EM  to develop a strategy, including a timeline, to identify and develop a  treatment approach for the disposal of the calcine waste to ensure  that EM meets the milestone for completing the treatment of this  waste by the target date of December 31, 2035. (Recommendation 5)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report for review and comment to the  Secretary of Energy and the Administrator of the EPA. DOE provided  written comments on the draft report, which are presented in appendix IV.  EPA did not provide written comments. DOE and EPA both provided  technical comments that we incorporated in the report as appropriate.\nDOE agreed with our recommendations related to the management of the  IWTU reengineering project, including developing cost and schedule  estimates that meet best practices and ensuring the reliability of the EVM  system for the project. Regarding the cost estimate, DOE committed to  developing cost estimates that meet best practices and stated that cost  estimates for phases three and four of the IWTU reengineering project  have been developed and reviewed by the Defense Contract Audit  Agency. For the schedule estimate, DOE stated that the schedules for  phases three and four have been developed and that the inclusion of  these phases in the schedule is in accordance with best practices for the  well-constructed characteristic. With regard to the EVM system, DOE  stated that cost and performance data will be included in the EVM system  in accordance with EVM best practices once contract negotiations are  completed, which the agency estimated would conclude by December 31,  2019.\nDOE also agreed with our recommendations to develop a strategy,  including a timeline, for the disposal of the SBW and calcine waste. DOE  further stated that EM is in the process of developing a site options  analysis for INL and other EM sites to identify opportunities to complete  cleanup work through more efficient and innovative approaches over the  next decade. This analysis is expected to be completed in fiscal year  2020, according to DOE. DOE stated that EM\u2019s HLW interpretation issued  in June 2019 could potentially open new disposal pathways for some  reprocessing waste, such as SBW and calcine, while noting that  decisions about whether and how this interpretation will apply to existing  wastes have yet to be made.\nIn its written comments, DOE disagreed with our recommendation to seek  clarification from Congress on DOE\u2019s authority to classify the SBW as  other than HLW if such clarification is necessary to avoid extended  litigation. DOE stated the agency does not require additional clarification  from Congress to classify reprocessing waste as other than HLW. We are  deleting our recommendation but continue to believe that there is  significant risk for extended litigation if EM implements its new  interpretation of HLW and uses this definition to classify the SBW as non- HLW. Extended litigation may delay EM\u2019s plans to dispose of the SBW at  its preferred disposal site.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, 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.\nIf 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 V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur report examines (1) the extent to which the Department of Energy\u2019s  (DOE) Office of Environmental Management\u2019s (EM) management of the  Integrated Waste Treatment Unit (IWTU) reengineering project follows  selected project management best practices; (2) challenges EM faces in  the disposal of the sodium-bearing waste (SBW); and (3) challenges EM  faces in the treatment and disposal of the calcine waste. To address  these three objectives, we conducted a site visit to DOE\u2019s Idaho National  Laboratory (INL) in December 2017. During the site visit, we obtained  documentation and interviewed officials from EM, which is responsible for  hazardous waste cleanup at INL through its Idaho Cleanup Project. We  also interviewed representatives from Fluor Idaho, LLC, which is the  private contractor that manages hazardous waste cleanup at INL for EM,  including the cleanup of the SBW and calcine waste. In addition, we  conducted a site visit to Hazen Research, Inc., a subcontractor to Fluor  Idaho, to observe pilot testing facilities for the IWTU reengineering project  and discuss the status of the project with an EM official from the Idaho  Cleanup Project and representatives from Hazen Research, Inc., and  Fluor Idaho.\nTo assess the extent to which EM\u2019s management of the IWTU  reengineering project meets selected project management best practices,  we first identified areas deemed to be important to project management  based on our previous work on DOE projects and leading practices from  the Project Management Institute, which are generally recognized as  leading practices for project management. Specifically, we reviewed the  project management leading practices identified in the Project  Management Institute\u2019s A Guide to the Project Management Body of  Knowledge\u2014Sixth Edition. From this review, we selected project  management practices related to developing cost and schedule estimates  and conducting project monitoring through the use of earned value  management (EVM) and independent reviews. We then conducted  assessments of these best practices, as discussed below.\nCost. To determine the extent to which the cost estimate for the IWTU  reengineering project is reliable, we conducted an abridged analysis of  the IWTU reengineering project\u2019s cost estimate, focusing on its  comprehensiveness. Typically, in analyzing a cost estimate against best  practices in GAO\u2019s Cost Estimating and Assessment Guide (cost guide),  we examine four characteristics, each defined by multiple criteria:  credible.\nFor this review, we assessed the cost estimate for the IWTU  reengineering project against the comprehensive characteristic, in part  because EM officials told us that they had yet to develop a cost estimate  for the program beyond phases one and two at the time of our review.  Specifically, we reviewed the cost estimate for the operation of the IWTU  and the IWTU reengineering project, which, at the time of our review, was  only developed for phases one and two of the project. If a cost estimate is  not comprehensive (that is, complete), 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 because of the potential underestimating of  costs and the absence of a full risk and uncertainty analysis. See  appendix II for a summary assessment of the IWTU reengineering  project\u2019s cost estimate compared to selected best practices.\nSchedule. To assess EM\u2019s schedule for the IWTU reengineering project,  we conducted an abridged analysis of the IWTU reengineering project\u2019s  schedule, focusing on comprehensiveness and the degree to which it is  well-constructed. Typically, in analyzing a schedule estimate against best  practices in GAO\u2019s Schedule Assessment Guide (schedule guide), we  examine four characteristics, each defined by multiple criteria:  controlled.\nFor this review, we assessed the IWTU reengineering project schedule  that EM provided in March 2018 against the well-constructed  characteristic, in part because EM officials told us that they had yet to  develop a schedule estimate for the totality of the reengineering project  because of Fluor Idaho\u2019s phased approach. If a schedule estimate is not  well-constructed, it will not be able to properly calculate dates and predict  changes in the future. When activities are missing logic links, the  schedule will not be able to automatically transmit these delays to future  activities that depend on them. When this happens, the schedule will not  allow a sufficient understanding of the program as a whole, and users of  the schedule will not have confidence in the dates and the critical path. In  addition, we evaluated the comprehensive characteristic because it  contributed to our analysis of EM\u2019s EVM system, as described below. See  appendix II for a summary assessment of the IWTU reengineering  project\u2019s schedule estimate compared to selected best practices.\nEVM. In addition, we analyzed EM\u2019s use of EVM as a way to assess its  monitoring of the IWTU reengineering project\u2019s cost and schedule. EVM  measures the value of work accomplished in a given period and  compares it with the planned value of work scheduled for the period and  with the actual cost of the work accomplished. It is an industry standard  and is considered a best practice for conducting cost and schedule  performance analysis for projects. Our EVM analysis focused on Fluor  Idaho\u2019s EVM data for the IWTU reengineering project contained in cost  performance reports from March 2017 to February 2018 and the project  schedule that EM provided in March 2018. Specifically, we compared this  project documentation with EVM best practices as identified in our cost  guide. Our research has identified a number of best practices that are  the basis of effective EVM and should result in reliable and valid data that  can be used for making informed decisions. These best practices have  been collapsed into three high-level characteristics of a reliable EVM  system, which are establish a comprehensive EVM system, ensure that the data resulting from the EVM system are reliable, and ensure that the program management team is using EVM data for  decision-making purposes.\nSee appendix III for our summary assessment of the IWTU reengineering  project\u2019s EVM data compared to best practices. EVM data are considered  reliable if the overall assessment ratings for each of the three  characteristics are substantially or fully met. If any of the characteristics  are not met, minimally met, or partially met, then the EVM data cannot be  considered reliable.\nIndependent reviews. To assess the extent to which DOE has  conducted independent reviews of the IWTU reengineering project, we  examined DOE and EM policies to identify requirements for conducting  reviews of operations activities. Specifically, we reviewed a 2016 DOE  memorandum that established that DOE\u2019s Project Management Risk  Committee (PMRC) would provide independent review of selected  projects in the operational release phase, the PMRC\u2019s standard operating  procedures, and EM\u2019s guidance for projects in the operational release  milestone. We examined documentation from the PMRC\u2019s reviews of the  IWTU reengineering project, including documentation that EM officials  from the Idaho Cleanup Project prepared for these reviews and  recommendations that the PMRC made to EM for the project. In addition,  we spoke with officials from DOE\u2019s Office of Project Management, which  serves as the secretariat of the PMRC; EM\u2019s Office of Acquisition &  Project Management; and EM\u2019s Idaho Cleanup Project about independent  reviews of projects in the operational release phase.\nTo examine challenges EM faces in the disposal of the SBW, we  reviewed federal laws, regulations, and DOE policies on radioactive  waste management, including those described in DOE Order 435.1 on  radioactive waste management and its implementation manual. In  addition, we examined EM\u2019s October 2018 and June 2019 Federal  Register notices, which provide DOE\u2019s new interpretation of the statutory  definition of high-level radioactive waste (HLW). We also reviewed  documentation related to EM\u2019s plans for disposing of the SBW at DOE\u2019s  Waste Isolation Pilot Plant (WIPP) in New Mexico, such as Record of  Decision documents for proposed actions that require development of  environmental impact statements, and the hazardous waste facility permit  for WIPP that the New Mexico Environment Department issued. We  interviewed DOE officials from the Office of the General Counsel; officials  from EM\u2019s Idaho Cleanup Project and Carlsbad Field Office, which is  responsible for DOE\u2019s oversight of WIPP; and officials from EM\u2019s Office of  Regulatory Compliance, Office of Nuclear Materials, and Office of Waste  and Materials Management. We also interviewed officials from Idaho\u2019s  Department of Environmental Quality and New Mexico\u2019s Environment  Department, as well as representatives from two environmental advocacy  groups in Idaho and New Mexico, to obtain their perspectives on the  challenges facing EM\u2019s SBW disposal efforts.\nTo examine challenges EM faces in the treatment and disposal of the  calcine waste, we reviewed federal laws, regulations, and documents that  DOE and EM\u2019s contractors for the Idaho Cleanup Project prepared  related to the calcine waste cleanup mission. For example, we reviewed  documents assessing treatment and disposal alternatives for calcine  waste, including a 2016 analysis of alternatives report that EM prepared  and a 2015 contractor-prepared report assessing the feasibility of the  direct disposal of calcine waste. We interviewed officials from EM\u2019s Idaho  Cleanup Project and Office of Nuclear Materials; EM\u2019s Chief Engineer;  and representatives from EM\u2019s contractor, Fluor Idaho, about plans for  treating and disposing of the calcine waste and the retrieval pilot project.  In addition, we reviewed Environmental Protection Agency (EPA)  Resource Conservation and Recovery Act, as amended (RCRA)  regulations, guidance, and documents concerning land disposal  requirements. We also interviewed officials from EPA\u2019s Office of Land and  Emergency Management and Region 10 about EPA\u2019s responsibilities for  implementing RCRA. Lastly, we interviewed officials from the Idaho  Department of Environmental Quality about how EM\u2019s calcine waste  treatment and disposal efforts address milestones in the Idaho Settlement  Agreement.\nWe conducted this performance audit from September 2017 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.\n\nAppendix II: Cost and Schedule Estimates Compared to Actual Costs and Schedule for the Integrated Waste Treatment Unit Reengineering Project\n\nTable 2 describes the initial cost and schedule estimates for the four  phases of the Integrated Waste Treatment Unit reengineering project  compared to actual expenditures and schedule as of February 2019.\nTable 3 details our assessment of the Office of Environmental  Management\u2019s (EM) cost estimate for phases one and two of the  Integrated Waste Treatment Unit (IWTU) reengineering project compared  to selected best practices for cost estimating published in GAO\u2019s Cost  Estimating and Assessment Guide (cost guide). For this review, we  assessed the cost estimate for the IWTU reengineering project against  the comprehensive characteristic, in part because EM officials told us that  they had yet to develop a cost estimate for the program beyond phases  one and two, at the time of our review of these documents. We assessed  the comprehensive characteristic for the IWTU reengineering cost  estimate because if a cost estimate is not comprehensive\u2014that is,  complete\u2014then it cannot fully meet the other best practice  characteristics. According to our analysis, EM\u2019s cost estimate for the  IWTU reengineering project partially met best practices for a  comprehensive cost estimate.\nTable 4 details our assessment of EM\u2019s schedule for the IWTU  reengineering project compared to selected best practices for project  schedules published in GAO\u2019s Schedule Assessment Guide (schedule  guide). For this review, we assessed the schedule against the well- constructed characteristic, in part because EM officials told us that they  had yet to develop a schedule for the totality of the reengineering project  because of the contractor\u2019s phased approach. We assessed the well- constructed characteristic because, among other reasons, if a schedule is  not well-constructed, it will not be able to properly calculate dates and  predict changes in the future. In addition, we evaluated the  comprehensive characteristic as it is needed to evaluate an earned value  management system. According to our assessment, EM\u2019s schedule for  the reengineering project partially met best practices related to the well- constructed characteristic and substantially met best practices related to  the comprehensive characteristic.\n\nAppendix III: Assessment of EM\u2019s EVM Data for the IWTU Reengineering Project Compared with Best Practices\n\nTable 5 details our assessment of March 2017 to February 2018 data  from the Department of Energy\u2019s (DOE) Office of Environmental  Management\u2019s (EM) earned value management (EVM) system for the  Integrated Waste Treatment Unit (IWTU) reengineering project. EVM  measures the value of work accomplished in a given period and  compares it with the planned value of work scheduled for that period and  with the actual cost of work accomplished. By using the metrics derived  from these values to understand performance status and to estimate cost  and time to complete, EVM can alert program managers to potential  problems sooner than expenditures alone can. Our research has  identified a number of best practices that are the basis of effective EVM  and should result in reliable and valid EVM data that can be used for  making informed decisions. Specifically, EM followed (i.e., substantially  met) best practices to ensure that its EVM system is (1) comprehensive  and (2) used by leadership for decision-making, but did not follow (i.e.,  partially met) best practices to ensure that the data resulting from the  EVM system are reliable.\n\nAppendix IV: Comments from the Department of Energy\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Casey L. Brown (Assistant  Director), Emily Ryan (Analyst in Charge), Juan\u00e1 Collymore, Jennifer  Echard, Richard P. Johnson, Jason Lee, Eli Lewine, Katrina Pekar- Carpenter, Karen Richey, Jeanette Soares, Sheryl Stein, Farrah M.  Stone, Paul Sturm, and Sara Sullivan made key contributions to this  report.","output":null}
{"id":"crs_R45769","pid":"crs_R45769_0","input":"\tIntroduction\n\nThe U.S. Constitution establishes a two-step process for the House and Senate to remove federal officials\u00e2\u0080\u0094including the President, Vice President, judges, and other civil officers\u00e2\u0080\u0094for \"Treason, Bribery, or other high Crimes and Misdemeanors.\" Under the Constitution, the House alone has the power to formally charge\u00e2\u0080\u0094that is, impeach\u00e2\u0080\u0094a federal official. A House majority can accomplish this by adopting articles of impeachment, which are effectively written accusations (similar to an indictment in ordinary criminal proceedings). The Senate alone has the power to try an impeachment and render a verdict regarding whether the individual should be removed from office and possibly barred from holding future office. Two-thirds of Senators voting must agree to convict and remove an official from office. The Senate could also separately decide to disqualify an officer from holding future federal office. Disqualification requires only a majority vote.\nThe procedures the House has developed for accomplishing this constitutional responsibility are described below. The House has used this process mostly to impeach federal judges, although the House has also impeached two Presidents and one Cabinet official. The Senate has voted to remove eight of these officials, and all of them were federal judges.\nThe summary of the rules and procedures the House might use to impeach a federal official presented here is drawn from published sources of congressional rules and precedents, as well as the public record of past impeachment proceedings. It relies as well upon in-depth research conducted by Betsy Palmer and Susan Navarro Smelcer, formerly of CRS, on the practice in both chambers with respect to the impeachment of federal judges. This report provides an overview of the procedures and should not be treated or cited as an authority on congressional proceedings. Consultation with the Parliamentarian of the House is always advised regarding the possible application of rules and precedents.\nFor more information on impeachment, including a discussion of which federal officers are subject to impeachment and possible grounds for impeachment, see CRS Report R44260, Impeachment and Removal , by Jared P. Cole and Todd Garvey.\n\n\tOverview\n\nThe impeachment process may be initiated as the result of various actions and events, including the receipt and referral of information from an outside source, investigations by congressional committees under their general authority, or the introduction of articles of impeachment in the form of a House resolution. \nRegardless of what might instigate an inquiry into whether impeachment is warranted, there are normally three formal stages of congressional action. First, an impeachment inquiry is authorized, and this is most often accomplished through the adoption of a simple resolution (H.Res.___) directing the Judiciary Committee to investigate an official. Second, the committee conducts its investigation, prepares articles of impeachment, and reports them to the House. Third, the full House considers the articles of impeachment and, if they are adopted, appoints managers from the committee to present the articles in the Senate. As discussed in detail below, the House relies upon many of its usual procedures to consider the resolution explicitly initiating an investigation, conduct the investigation, and consider the articles of impeachment.\n\n\tInitiation of the Process\n\n\t\tIntroduction of a Simple Resolution\n\nA Member can initiate an impeachment process by drafting a simple resolution and placing it in the House hopper, the way all simple resolutions are submitted to the House. If the resolution directly calls for an impeachment, it will be referred to the Committee on the Judiciary. If it instead calls for an investigation of an official by a standing committee or proposes the creation of a special committee for that purpose, the resolution will be referred to the Committee on Rules, which has jurisdiction over the authorization of committee investigations. No special procedures restrict when such a resolution can be submitted, although historically they have been submitted relatively infrequently. \n\n\t\tRaising a Question of the Privileges of the House\n\nA resolution calling for an impeachment can also be offered on the floor by any Member as a question of the privileges of the House instead of being submitted through the hopper. To do so, a Member gives notice of his or her intent to call up such a resolution. The Speaker must then schedule a time to consider the resolution within two legislative days. (The majority and the minority leader do not need to give notice; if either leader raises a qualifying question of privileges of the House on the floor, it is considered immediately.) The full House could dispose of an impeachment resolution raised in this fashion in any number of ways, including by referring it to the Judiciary Committee instead of by voting on the resolution directly. The House could also agree to a motion to table the resolution and thereby dispose of it permanently and adversely. \nImpeachment has been attempted using this method in recent years, but none of the attempts has resulted in approval of articles of impeachment. In cases in which an official has been impeached, the House has always chosen to conduct an investigation first. A resolution offered from the floor that proposed a committee investigation, instead of directly impeaching an officer, would not give rise to a proper question of the privileges of the House.\n\n\t\tOutside and Preliminary Investigations\n\nMaterial related to the conduct of a federal official might reach the House and be referred to committee prior to the adoption of a resolution directing a committee to conduct an investigation. Historically, this has included petitions and materials from citizens. In addition, standing committees, under their general investigatory authority, can seek information and research charges against officers prior to the approval of a resolution to authorize an impeachment investigation. \nWith respect to federal judges, the Judicial Conduct and Disability Act of 1980 established a process within the judicial branch for responding to complaints about judges. Findings from those investigations could result in the Judicial Conference of the United States informing the House that the impeachment of a judge may be warranted. A letter reporting that the Judicial Conference had reached such a determination would be referred to the Judiciary Committee. Recent impeachments of federal judges were initiated by resolutions submitted after (or near the time of) the receipt of such a determination from the Judicial Conference. \nIn the last presidential impeachment, a communication from the independent counsel appointed to investigate President Bill Clinton was referred to the Committee on the Judiciary pursuant to an original resolution reported by the Rules Committee. The resolution also directed the Judiciary Committee to review the information from the independent counsel \"to determine whether sufficient grounds exist to recommend to the House that an impeachment inquiry be commenced.\" The House, in this case, later adopted a resolution reported by the Judiciary Committee to authorize an investigation by the committee. \n\n\tAuthorization of Committee Investigation\n\nIf a resolution authorizing an impeachment investigation was introduced through the hopper and referred to the Rules Committee, that committee would then choose whether to report the resolution to the full House for consideration. If reported, the resolution would be privileged, which means a Member could call it up on the floor, though only at the direction of the Rules Committee. The resolution would then be considered under the hour rule, a method of considering legislation in the House that permits Members to speak for up to an hour\u00e2\u0080\u0094but also allows a numerical majority to vote to end debate and limit the opportunity for amendment. Specifically, the Member who called up the resolution would be recognized for one hour. Debate on the resolution would likely last for that hour or even less, because a majority in the House could agree to order the previous question on the resolution. When the House votes to order the previous question, it ends debate and any opportunity for amendment. A motion to recommit the resolution with or without instructions could be offered after the previous question was ordered, but it would not be debatable. The House could also, however, choose to consider the resolution under any of its other regular processes, including suspension of the rules (requiring a two-thirds vote for passage), a rule from the Rules Committee (requiring only a majority vote), or unanimous consent.\nThe two most recent resolutions adopted by the House to authorize an impeachment investigation were taken up by unanimous consent at the request of the Rules Committee chair. Rather than convene a committee meeting to order the resolutions reported with a quorum present, the chair asked unanimous consent that the House discharge the Rules Committee and agree to the resolution. Both of these resolutions concerned federal judges, and they were agreed to without debate. \nIn the three previous instances of judicial impeachments, however, the House did not approve a resolution explicitly authorizing an impeachment inquiry. The Rules of the House since 1975 have granted committees the power to subpoena witnesses and materials, administer oaths, and meet at any time within the United States\u00e2\u0080\u0094powers that were previously granted through resolutions providing blanket investigatory authorities that were agreed to at the start of a Congress or through authorizing resolutions for each impeachment investigation. In two of the three recent cases, the House agreed to separate resolutions to allow committee counsel to take affidavits and depositions. \nIf the House does approve an authorizing resolution, then in addition to the Rules Committee, the Judiciary Committee can report an original resolution authorizing an impeachment investigation if impeachment resolutions have been referred to the committee. In the case of the most recent authorization of a presidential impeachment inquiry, the Judiciary Committee reported such a resolution, and the full House debated it. As mentioned above, pursuant to a resolution agreed to by the House, the Judiciary Committee reviewed material submitted by an independent counsel appointed to investigate President Bill Clinton. The Judiciary Committee then reported a resolution ( H.Res. 581 , 105 th Congress) authorizing an investigation into whether sufficient grounds existed for the impeachment of the President. The resolution was privileged for immediate consideration. The chair of the Judiciary Committee called up the resolution and asked unanimous consent that instead of being recognized for the normal one hour, his time be extended to two hours, half of which he would yield to the ranking member of the Judiciary Committee for purposes of debate only. After debate under the terms of this unanimous consent agreement, the House ordered the previous question on the resolution by voice vote, ending further debate of the resolution. A minority-party Representative offered a motion to recommit, and, pursuant to a unanimous consent agreement, the motion was debated for 10 minutes before being defeated on a roll call vote. As noted, absent this unanimous consent agreement, the motion to recommit would not have been debatable. The resolution was then agreed to by a record vote, 258-176. \nIn the 93 rd Congress (1973-1974), multiple resolutions to impeach President Richard M. Nixon were introduced and referred to the Judiciary Committee. The committee began an examination of the charges against the President under its general investigatory authority. The House also approved a resolution, reported by the House Rules Committee, providing additional investigation authority that did not specifically mention impeachment. In late 1973, the House agreed to another resolution that provided for additional expenses of the committee, and floor debate and the report from the Committee on House Administration indicate that the funds were intended in part for the impeachment inquiry. On February 1, 1974, the Judiciary Committee reported an original resolution ( H.Res. 803 ; H.Rept. 93-774) mandating an investigation to determine whether the House should impeach President Nixon and continuing the availability of funds. On February 6, 1974, the chairman of the Judiciary Committee called up the resolution as a question of privilege. It was debated under the hour rule, with the chairman yielding time to other Members for purposes of debate only. The Judiciary Committee chair moved the previous question before any other Member was recognized to control time under the hour rule, and the House ordered the previous question 342-70. The resolution authorizing the investigation was then agreed to, 410-4. \n\n\tCommittee Action\n\nThe standing rules of the House that affect committee investigations apply as well to impeachment investigations by the Judiciary Committee. A resolution authorizing an impeachment investigation might place additional limitations, or grant additional authorities, to the committee. In addition, the committee itself might adopt rules specific to an impeachment inquiry. It has not been unusual for the Judiciary Committee to authorize subcommittees or to create task forces to conduct impeachment investigations, and in that case the full committee would establish the authority of the subcommittee or task force. \n\n\t\tInvestigation and Hearings\n\nUnder House Rule XI, committees have the authority to subpoena persons or written records, conduct hearings, and incur expenses (including travel expenses) in connection with investigations. Rule XI, clause 2(h)(2), requires two committee members to take testimony or receive evidence. In past impeachment proceedings, the House has agreed to resolutions authorizing committee staff to take depositions without Members present, and the Judiciary Committee has agreed to internal guidelines for the mode and conduct of depositions. In the 116 th Congress, pursuant to H.Res. 6 , the chairs of all standing committees (except the Rules Committee) as well as the Permanent Select Committee on Intelligence may order the taking of depositions by committee counsel. In modern practice, the federal official under investigation is generally allowed certain rights, including the right to be represented by counsel.\nIf a committee were to conduct hearings, these proceedings would generally be governed by House and committee rules (and any specific rules agreed to in the authorizing resolution). Under House Rule XI, notice of hearings must be provided one week in advance, and members of the committee are guaranteed the right to question witnesses under the five-minute rule. \nHearings are generally public, but they could be closed pursuant to regular House rules that allow the committee to agree, by holding a vote in public session with a majority of the committee present, to close a hearing for three specific reasons: the evidence or testimony would endanger national security, compromise sensitive law enforcement information, or would tend to \"defame, degrade, or incriminate the witness.\" Again, the resolution authorizing an impeachment investigation could alter these procedures.\nThe Judiciary Committee conducted multiple public hearings in connection with the impeachment of federal judges in 2009. The committee had created a task force to investigate whether two federal judges should be impeached. The task force conducted hearings during which they heard from a variety of witnesses, including law professors with expertise on impeachable offenses, individuals with information about the crimes the judges were accused of committing, and task force attorneys who reported on the status of the investigation. \nIn 1998, the Judiciary Committee held four hearings in connection with the impeachment of President Clinton. The committee received testimony from 19 experts on the history of impeachment at one hearing and from the independent counsel at another. Various witnessed testified at a third hearing on the consequences of perjury and related crimes. Over two days of hearing in early December 1998, at the request of the Administration, the committee also heard testimony from White House counsel. \nIn recent decades, it has been more common than not that a congressional committee used information provided from another outside investigation. In four of the five judicial impeachment investigations undertaken by the Judiciary Committee since 1980, \"the accused judge had either been subject to a federal criminal trial or pled guilty to a federal criminal charge prior to the initiation of impeachment proceedings in the House.\" In the case of the impeachment of President Bill Clinton, as mentioned above, the results of an independent counsel investigation alleging impeachable offenses were submitted to the House and referred to the Judiciary Committee. \n\n\t\tMarkup of Articles of Impeachment\n\nA committee charged with investigating impeachable offences might, after conducting its investigation and reviewing any evidence submitted from other investigations, meet to consider articles of impeachment, and such a meeting is referred to as a markup. The articles of impeachment are in the form of a simple resolution (H.Res.___). The procedures for considering and reporting out an impeachment resolution are the same as those used for other legislation. Notice must generally be given of the proposed meeting, and the text of the articles of impeachment must generally be available 24 hours in advance of the meeting, although House Rule XI, clause 2 (g)(3)(B), provides some exceptions to these requirements. Members of the committee could expect an opportunity to offer amendments to the articles of impeachment, which would be debated under the five-minute rule. Importantly, a majority of the committee must be physically present at the time of the vote to report. Alternatively, after an investigation, the committee might also choose to report a recommendation that impeachment was not warranted.\nIn the case of the two most recent presidential impeachments, the Judiciary Committee held a public, televised markup of the impeachment articles for several days. A motion to recommend a resolution to impeach President Nixon was considered by the Judiciary Committee for six days at the end of July 1974. The committee agreed to special procedures for the markup, such as a 10-hour period for \"general debate,\" and each article of impeachment was considered separately for amendment. The resolution included two articles of impeachment, which were both agreed to, as amended. A third article of impeachment was proposed as an amendment and agreed to, and two additional articles offered as amendments were rejected. The President resigned before the committee reported an impeachment resolution to the full House.\nIn 1998, the Judiciary Committee considered articles impeaching President Clinton for three days in December under procedures modelled after those used in 1974. A unanimous consent agreement provided that the four articles of impeachment included in the chairman's draft resolution would be debated, amended, and voted on separately. Each member of the committee was allotted 10 minutes for an opening statement. The committee considered and agreed to an amendment to Article I and an amendment to Article IV. All four articles were agreed to, and a resolution ( H.Res. 611 , 105 th Congress) was reported to the House. A written report was prepared and several Members submitted additional, minority, and dissenting views, a right protected under House Rule XI, clause 2(l), if notice of intent is given at the time a committee approves a matter.\n\n\t\tMember Access to Information Prior to Full House Consideration\n\nUnder House Rule XI, clause 2(e), committee records are the property of the House, and all Members can have access to them. The committee may, however, place reasonable restrictions on where, when, and how Members might access the records. In addition, access to committee investigatory material might be limited, at least for a time, while the committee determines if it qualifies as a committee record under House Rule XI, and, if so, if release is prohibited pursuant to other House rules. A committee might also take actions to protect the confidentiality of investigative materials.\nThe primary mechanism by which an investigating committee can and has chosen to limit access to inquiry information is through the use of executive\u00e2\u0080\u0094or closed\u00e2\u0080\u0094session. Under House Rule XI, clause 2(g)(1), a committee can operate in executive session by majority vote, a quorum being present, to restrict attendance at a business session to only committee members or others authorized by the committee. Similarly, a committee can receive evidence or testimony as if in executive session, which, under Rule XI, clause 2(k)(7), may only be released through authorization by the committee. Even when access to information received in executive session is granted to Members, the material may be subject by the committee to further conditions under which it may be viewed. In addition, the copying, releasing, or taking notes on materials received in executive session is strictly prohibited without permission of the committee. Executive sessions were periodically used during the inquiries into Presidents Nixon and Clinton.\nFurther restrictions on access to information can be adopted by the House or the investigating committee. As previously mentioned, the Judiciary Committee adopted special procedures by unanimous consent in 1974 that, among other provisions, limited access to information to select individuals within the committee and laid out rules for staff. As a precursor to the formal impeachment inquiry of President Clinton, the House agreed to H.Res. 525 during the 105 th Congress directing the Judiciary Committee to review the independent counsel's report to Congress to determine if impeachment proceedings were warranted. Section 4 of the resolution limited access to executive session material to the Judiciary Committee and employees designated by the chairman and ranking member\u00e2\u0080\u0094a more strict requirement than called for under House Rule XI. Notably, the resolution also made 445 pages of the independent counsel's report immediately available to the public and set a deadline by which the rest of the report would be released from its executive session status based on recommendations by the committee. Prior to the adoption of H.Res. 525 , House leadership reportedly discussed at length the issue of access to the independent counsel report by the public, the President, and Members of the House.\n\n\tConsideration of Articles of Impeachment on the House Floor\n\nAlthough floor consideration of an impeachment resolution largely resembles floor consideration of legislation, there is one difference regarding disorderly language: Under regular House procedures, it is not in order to use language that is personally offensive toward the President, which would include accusations that the President committed a crime or allusions to unethical behavior. During consideration of an impeachment resolution, however, remarks in debate can refer to the alleged misconduct of the President that is under consideration by the House. Members should still abstain from other language \"personally offensive\" to the President. \n\n\t\tReported by the Judiciary Committee\n\nArticles of impeachment reported by the Judiciary Committee are privileged for immediate consideration on the House floor. The chair of the committee (or a designee) could call up the resolution containing the articles at any time other business is not pending, and the resolution would be considered immediately under the hour rule. Under this procedure, a majority of the House controls the length of debate and can prevent amendment. After some debate, the majority could vote to order the previous question, which, as mentioned above, brings the House to an immediate vote on the main question: whether to agree to the impeachment resolution, in this case. Passage is by simple majority vote.\nA motion to recommit the impeachment resolution, with or without instructions, would be in order after the previous question was ordered but before the vote on the resolution. This motion, however, would not be subject to debate. As is always the case, any instructions in the motion to recommit must be germane to the resolution. \nIn the two most recent instances in which the House considered an impeachment resolution of a federal judge, the resolution was called up as privileged and debated for an hour, and no Member offered a motion to recommit. In both cases, a Member demanded a division of the resolution, which allowed the House to vote separately on each article of impeachment.\nWhen the House considered a resolution ( H.Res. 611 , 105 th Congress) to impeach President Clinton, the reported resolution was called up as a question of privilege. A unanimous consent request propounded by the majority floor manager that provided for four hours of debate on the resolution, equally divided, and 10 minutes of debate on a motion to recommit was objected to. The House then considered the resolution for several hours, as no Member moved the previous question, until another unanimous consent agreement was propounded and agreed to. This agreement allowed debate to continue until 10 p.m. that night and provided for an additional hour of debate the next day, a Saturday. It further provided that if a motion to recommit with instructions was offered, it would be debatable for 10 minutes. \nOn the second day of consideration, after the previous question was ordered, a Member moved to recommit the impeachment resolution with instructions. The instructions proposed an amendment to censure the President. The Speaker, however, ruled that the amendment in the instructions was not germane. The House sustained the ruling of the Speaker by voting to table an appeal. A Member demanded a division of the resolution, and the House agreed to two of the four articles of impeachment under consideration. \nIn the case of the Nixon impeachment proceedings, the full House never acted on a resolution of impeachment. As noted, President Nixon resigned before the Judiciary Committee reported its recommendation that the President be impeached. The House approved a resolution using the suspension of the rules procedure acknowledging that the Judiciary Committee had approved articles of impeachment, commending the members of the Judiciary Committee for their work, and providing for the printing of its report. \nRather than considering an impeachment resolution under the hour rule, the House could also choose to consider an impeachment resolution under the terms of a resolution reported by the Rules Committee (a special rule). This process would operate in the same two-step way it does for major legislation in the House. The House would first debate the Rules Committee-reported resolution setting the terms for consideration of the impeachment resolution. The rule from the Rules Committee could provide for a particular length of debate, structure any amendment process, and potentially structure voting to allow each article to be voted on separately. It could preclude motions that would otherwise be in order under the hour rule, such as a motion to table the resolution. After the House agreed to the rule, it would then consider the impeachment resolution under the terms established by that rule.\nFinally, consideration and debate of an impeachment resolution could be governed by a unanimous consent agreement. The House might take up the resolution by unanimous consent or call it up as a question of privilege and change the terms of its consideration by unanimous consent, such as was described above in the case of the Clinton impeachment resolution. A unanimous consent agreement can structure consideration just like a special rule, but it is agreed to without a vote and usually with little or no floor debate. The major difference is that, procedurally, it is necessary for all Representatives to support a unanimous consent agreement, while only a simple majority is necessary to agree to a special rule. The fact that the same terms for consideration could be established through a rule can influence unanimous consent agreements.\n\n\t\tOffered on the Floor as a Question of the Privileges of the House\n\nAs described in an earlier section of this report, any Member of the House could also offer on the floor a resolution containing articles of impeachment as a \"question of the privileges of the House.\" Taking this action will not necessarily result in a direct vote on the articles of impeachment or even debate of the articles, because the House could choose instead to take a different action on the resolution, such as to refer it to the Judiciary Committee. \nTo raise a question of the privileges of the House, a Member would take the following steps:\nDraft a resolution containing articles of impeachment. Consult with the Office of the House Parliamentarian to ensure that the resolution qualifies as a question of the privileges of the House. On the House floor, rise to give notice of intent to offer a question of the privileges of the House. The Member giving notice reads the draft resolution in full on the floor. (The majority and minority leader do not need to give notice; a question of the privileges of the House raised by either leader would be considered immediately.) The Speaker is required to schedule consideration of the question of the privileges of the House within two legislative days. At a time scheduled by the Speaker, rise to offer the resolution as a question of the privileges of the House. The Speaker will rule as to whether the resolution constitutes a proper question of the privileges of the House. If it does, the resolution will be assigned a number and will be pending before the House for consideration.\nA question of the privileges of the House is considered under the hour rule. Often, the House votes to dispose of such resolutions by referring them to committee or by tabling them. The House could also order the previous question to end debate on the resolution and then vote directly on it. However, the House has never impeached an officer without a committee investigation. \n\n\tAppointment and Role of House Managers in the Senate Trial\n\nAfter the House has agreed to articles of impeachment, it then appoints Members to serve as managers in the Senate trial. In recent practice, the House has appointed managers by agreeing to a House resolution. The House also, by resolution, informs the Senate that it has adopted articles of impeachment and authorizes the managers to conduct the trial in the Senate. The House could agree to separate resolutions or, as has been the case with recent impeachments, to a single resolution accomplishing each of these purposes. Such resolutions are privileged, and sometimes they have been taken up and agreed to by unanimous consent. \nAfter the Senate receives the resolution(s) from the House, the Senate informs the House when the managers can present the articles of impeachment to the Senate. At the appointed time, the House managers read the resolution authorizing their appointment and the resolution containing the articles of impeachment on the Senate floor and then leave until the Senate invites them back for the trial. At the trial, the House managers, who might be assisted by outside counsel, present evidence against the accused and could be expected to respond to the defense presented by the accused (or his or her counsel) or to questions submitted in writing by Senators. \nA full description of Senate procedures in an impeachment trial is beyond the scope of this report. The Senate has a special set of rules\u00e2\u0080\u0094agreed to in the 19 th century\u00e2\u0080\u0094that provide some guidance for impeachment trial proceedings. However, in modern practice the Senate has agreed to alternative or supplemental procedures both for judicial impeachment trials and the impeachment trial of President Clinton. \nThe 19 th -century impeachment trial rules seemingly require a series of actions by the Senate upon the receipt of articles of impeachment from the House. The Senate, however, just like the House, can set aside its rules by, for example, agreeing to a simple resolution. Under the regular rules of the Senate that govern consideration of legislation, such a resolution would not be subject to any debate restrictions. As a result, in that circumstance, a cloture process, requiring the support of three-fifths of the Senate, would be necessary to reach a vote on the resolution. Once the Senate has convened as a Court of Impeachment, however, the impeachment trial rules, not the regular rules of the Senate, will apply. The Senate impeachment trial rules and related precedents restrict debate on many resolutions and motions. The debate restrictions could allow a simple majority to determine some procedures for responding to articles of impeachment sent from the House.","output":null}
{"id":"crs_R46013","pid":"crs_R46013_0","input":"\tIntroduction\n\nThe Constitution grants Congress authority to impeach and remove the President, Vice President, and other federal \"civil Officers\" for treason, bribery, or \"other high Crimes and Misdemeanors.\" Impeachment is one of the various checks and balances created by the Constitution, serving as a crucial tool for holding government officers accountable for abuse of power, corruption, and conduct considered incompatible with the nature of an individual's office. \nAlthough the term impeachment is commonly used to refer to the removal of a government official from office, the impeachment process, as described in the Constitution, entails two distinct proceedings carried out by the separate houses of Congress. First, a simple majority of the House impeaches \u00e2\u0080\u0094or formally approves allegations of wrongdoing amounting to an impeachable offense. The second proceeding is an impeachment trial in the Senate. If the Senate votes to convict with a two-thirds majority, the official is removed from office. Following a conviction, the Senate also may vote to disqualify that official from holding a federal office in the future. The House has impeached nineteen individuals: fifteen federal judges, one Senator, one Cabinet member, and two Presidents. Of these, eight individuals\u00e2\u0080\u0094all federal judges\u00e2\u0080\u0094were convicted by the Senate.\nThe Constitution imposes several requirements on the impeachment process. When conducting an impeachment trial, Senators must be \"on Oath or Affirmation,\" and the right to a jury trial does not extend to impeachment proceedings. If the President is impeached and tried in the Senate, the Chief Justice of the United States presides at the trial. Finally, the Constitution bars the President from using the pardon power to shield individuals from impeachment or removal from office.\nUnderstanding the historical practices of Congress on impeachment is central to fleshing out the meaning of the Constitution's impeachment clauses. While much of constitutional law is developed through jurisprudence analyzing the text of the Constitution and applying prior judicial precedents, the Constitution's meaning is also shaped by institutional practices and political norms. James Madison, for instance, argued that the meaning of certain provisions in the Constitution would be \"liquidated\" over time, or determined through a \"regular course of practice.\" Justice Joseph Story thought this principle applied to impeachment, noting that the Framers understood that the meaning of \"high Crimes and Misdemeanors\" constituting impeachable offenses would develop over time, much like the common law. Indeed, Justice Story believed it would be impossible to define precisely the full scope of political offenses that may constitute impeachable behavior in the future. Moreover, the power of impeachment is largely immune from judicial review, meaning that Congress's choices in this arena are unlikely to be overturned by the courts. For that reason, examining the history of actual impeachments is crucial to determining the meaning of the Constitution's impeachment provisions.\nConsistent with this backdrop, this report begins with an examination of the historical background on impeachment, including the perspective of the Framers as informed by English and colonial practice. It then turns to the unique constitutional roles of the House and Senate in the process, followed by a discussion of impeachment practices throughout the country's history. The report concludes by noting and exploring several recurring questions about impeachment, including legal considerations relevant to a Senate impeachment trial.\n\n\tHistorical Background on Impeachment\n\n\t\tEnglish and Colonial Practice\n\nThe concept of impeachment and the standard of \"high Crimes and Misdemeanors\" in the federal Constitution originate from English, colonial, and early state practice. During the struggle in England by Parliament to impose restraints on the Crown's powers, the House of Commons impeached and tried before the House of Lords ministers of the Crown and influential individuals\u00e2\u0080\u0094but not the Crown itself \u00e2\u0080\u0094who were often considered beyond the reach of the criminal courts. The tool was used by Parliament to police political offenses committed against the \"system of government.\" \nParliament used impeachment as a tool to punish political offenses that damaged the state or subverted the government, although impeachment was not limited to government ministers. At least by the second half of the seventeenth century, impeachment in England represented a remedy for \"misconduct in high places.\" The standard of high crimes and misdemeanors appeared to apply to, among other things, significant abuses of a government office, misapplication of funds, neglect of duty, corruption, abridgement of parliamentary rights, and betrayals of the public trust. Punishment for impeachment was not limited to removal from office, but could include a range of penalties upon conviction by the House of Lords, including imprisonment, fines, or even death. In the English experience, the standard of high crimes and misdemeanors appears to have addressed conduct involving an individual's abuse of power or office that damaged the state. \nInheriting the English practice, the American colonies adopted their own distinctive impeachment practices. These traditions extended into state constitutions established during the early years of the Republic. The colonies largely limited impeachment to officeholders based on misconduct committed in office, and the available punishment for impeachment was limited to removal from office. Likewise, many state constitutions adopted after the Declaration of Independence in 1776, but before the federal Constitution was ratified, incorporated impeachment provisions limiting impeachment to government officials and restricting the punishment for impeachment to removal from office with the possibility of future disqualification from office. At the state level, the body charged with trying an impeachment varied.\n\n\t\tChoices of the Framers: An \"Americanized\" Impeachment System\n\nThe English and colonial history thus informed the Framers' consideration and adoption of impeachment procedures at the Constitutional Convention. In some ways, the Framers adopted the general framework of impeachment inherited from English practice. The English Parliamentary structure of a bicameral legislature\u00e2\u0080\u0094dividing the power of impeachment between the \"lower\" house, which impeached individuals, and an \"upper\" house, which tried them\u00e2\u0080\u0094was replicated in the federal system with the power to impeach given to the House of Representatives and the power to try impeachments assigned to the Senate. \nNonetheless, influenced by the impeachment experiences in the colonies, the Framers ultimately adopted an \"Americanized\" impeachment practice with a republican character distinct from English practice. The Framers' choices narrowed the scope of impeachable offenses and persons subject to impeachment as compared to English practice. For example, the Constitution established an impeachment mechanism exclusively geared toward holding public officials, including the President, accountable. This contrasted with the English practice of impeachment, which could extend to any individual save the Crown and was not limited to removal from office, but could lead to a variety of punishments. Likewise, the Framers adopted a requirement of a two-thirds majority vote for conviction on impeachment charges, shielding the process somewhat from naked partisan control. This too differed from the English practice, which allowed conviction on a simple majority vote. And in England, the Crown could pardon individuals following an impeachment conviction. In contrast, the Framers restricted the pardon power from being applied to impeachments, rendering the impeachment process essentially unchecked by the executive branch. Ultimately, the Framers' choices in crafting the Constitution's impeachment provisions provide Congress with a crucial check on the other branches of the federal government and inform the Constitution's separation of powers.\n\n\t\t\tImpeachment Trials\n\nThe Framers also applied the lessons of English history and colonial practice in determini ng the structure and location of impeachment trials. As mentioned above, most of the American colonies and early state constitutions adopted their own impeachment procedures before the establishment of the federal Constitution, placing the power to try impeachments in various bodies. At the Constitutional Convention, the proper body to try impeachments posed a difficult question. Several proposals were considered that would have assigned responsibility for trying impeachments to different bodies, including the Supreme Court, a panel of state court judges, or a combination of these bodies. One objection to granting the Supreme Court authority to try impeachments was that Justices were to be appointed by the President, casting doubt on their ability to be independent in an impeachment trial of the President or another executive official. Further, a crucial legislative check in the Constitution's structure against the judicial branch is impeachment, as Article III judges cannot be removed by other means. To permit the judiciary to have the ultimate say in one of the most significant checks on its power would subvert the purpose of that important constitutional limitation. \nRather than allowing a coordinate branch to play a role in the impeachment process, the Framers decided that Congress alone would determine who is subject to impeachment. This framework guards against, in the words of Alexander Hamilton, \"a series of deliberate usurpations on the authority of the legislature\" by the judiciary. Likewise, the Framers' choice to place both the accusatory and adjudicatory aspects of impeachment in the legislature renders impeachment \"a bridle in the hands of the legislative body upon the executive\" branch. That said, the Framers' choice also imposed institutional constraints on the process. Dividing the power to impeach from the authority to try and convict guards against \"the danger of persecution from the prevalency of a fractious spirit in either\" body. \nFinally, the Framers made one exception to the legislature's exclusive role in the impeachment process that promotes integrity in the proceedings. The Chief Justice of the United States presides at impeachment trials of the President of the United States. This provision ensures that a Vice President, in his usual capacity as Presiding Officer of the Senate, shall not preside over proceedings that could lead to his own elevation to the presidency, a particularly important concern at the time of the founding, when a President and Vice President could belong to rival parties.\n\n\t\t\tHigh Crimes and Misdemeanors\n\nThe Framers narrowed the standard for impeachable conduct as compared to the English experience. While the English Parliament never formally defined the parameters of what counted as impeachable conduct, the Framers restricted impeachment to treason, bribery, and \"other high Crimes and Misdemeanors,\" the latter phrase a standard inherited from English practice. This standard applied to behavior found damaging to the state, including significant abuses of a government office or power, misapplication of funds, neglect of duty, corruption, abridgement of parliamentary rights, and betrayals of the public trust.\nThe debates at the Constitutional Convention over what behavior should be subject to impeachment focused mainly on the President. In discussing whether the President should be removable by impeachment, Gouverneur Morris argued that the President should be removable through the impeachment process, noting concern that the President might \"be bribed by a greater interest to betray his trust,\" and pointed to the example of Charles II receiving a bribe from Louis XIV. \nThe adoption of the high crimes and misdemeanors standard during the Constitutional Convention reveals that the Framers did not envision impeachment as the proper remedy for simple policy disagreements with the President. During the debate, the Framers rejected a proposal to include\u00e2\u0080\u0094in addition to treason and bribery\u00e2\u0080\u0094\"maladministration\" as an impeachable offense, which would have presumably incorporated a broad range of common-law offenses. Although \"maladministration\" was a ground for impeachment in many state constitutions at the time of the Constitution's drafting, the Framers instead adopted the term \"high Crimes and Misdemeanors\" from English practice. James Madison objected to including \"maladministration\" as grounds for impeachment because such a vague standard would \"be equivalent to a tenure during pleasure of the Senate.\" The Convention voted to include \"high crimes and misdemeanors\" instead. Arguably, the Framers' rejection of such a broad term supports the view that congressional disagreement with a President's policy goals is not sufficient grounds for impeachment.\nOf particular importance to the understanding of high crimes and misdemeanors to the Framers was the roughly contemporaneous British impeachment proceedings of Warren Hastings, the governor general of India, which were transpiring at the time of the Constitution's formulation and ratification. Hastings was charged with high crimes and misdemeanors, which included corruption and abuse of power. At the Constitutional Convention, George Mason positively referenced the impeachment of Hastings. At that point in the Convention, a proposal to define impeachment as appropriate for treason and bribery was under consideration. George Mason objected, noting that treason would not cover the misconduct of Hastings. He also thought impeachment should extend to \"attempts to subvert the Constitution.\" Mason thus proposed that maladministration be included as an impeachable offense, although, as noted above, this was eventually rejected in favor of \"high Crimes and Misdemeanors.\"\nWhile evidence of precisely what conduct the Framers and ratifiers of the Constitution considered to constitute high crimes and misdemeanors is relatively sparse, the evidence available indicates that they considered impeachment to be an essential tool to hold government officers accountable for political crimes, or offenses against the state. James Madison considered it \"indispensable that some provision be made for defending the community against incapacity, negligence, or perfidy of the chief executive,\" as the President might \"pervert his administration into a scheme of peculation or oppression,\" or \"betray his trust to foreign powers.\" Alexander Hamilton, in explaining the Constitution's impeachment provisions, described impeachable offenses as arising from \"the misconduct of public men, or in other words, from the abuse or violation of some public trust.\" Such offenses were \" Political , as they relate chiefly to injuries done immediately to the society itself.\" These political offenses could take innumerable forms and simply could not be neatly delineated.\nAt the North Carolina ratifying convention, James Iredell, later to serve as an Associate Justice of the Supreme Court, noted the difficulty in defining what constitutes an impeachable offense, beyond causing injury to the government. For him, impeachment was \"calculated to bring [offenders] to punishment for crime which is not easy to describe, but which every one must be convinced is a high crime and misdemeanor against government. . . . [T]he occasion for its exercise will arise from acts of great injury to the community.\" He thought the President would be impeachable for receiving a bribe or \"act[ing] from some corrupt motive or other,\" but not merely for \"want of judgment.\" Similarly, Samuel Johnston, then the governor of North Carolina and later the state's first Senator, thought impeachment was reserved for \"great misdemeanors against the public.\"\nAt the Virginia ratifying convention, a number of individuals claimed that impeachable offenses were not limited to indictable crimes. For example, James Madison argued that were the President to assemble a minority of states in order to ratify a treaty at the expense of the other states, this would constitute an impeachable \"misdemeanor.\" And Virginia Governor Edmund Randolph, who would become the nation's first Attorney General, noted that impeachment was appropriate for a \"willful mistake of the heart,\" but not for incorrect opinions. Randolph also argued that impeachment was appropriate for a President's violation of the Foreign Emoluments Clause, which, he noted, guards against corruption.\nJames Wilson, delegate to the Constitutional Convention and later a Supreme Court Justice, delivered talks at the College of Philadelphia on impeachment following the adoption of the federal Constitution. He claimed that impeachment was reserved to \"political crimes and misdemeanors, and to political punishments.\" He argued that, in the eyes of the Framers, impeachments did not come \"within the sphere of ordinary jurisprudence. They are founded on different principles; are governed by different maxims; and are directed to different objects.\" Thus, for Wilson, the impeachment and removal of an individual did not preclude a later trial and punishment for a criminal offense based on the same behavior. \nJustice Joseph Story's writings on the Constitution echo the understanding that impeachment applied to political offenses. He noted that impeachment applied to those \"offences \u00e2\u0080\u00a6 committed by public men in violation of their public trust and duties,\" duties that are often \"political.\" And like Hamilton, Story considered the range of impeachable offenses \"so various in their character, and so indefinable in their actual involutions, that it is almost impossible to provide systematically for them by positive law.\"\nAt the time of ratification of the Constitution, the phrase \"high crimes and misdemeanors\" thus appears understood to have applied to uniquely \"political\" offenses, or misdeeds committed by public officials against the state. Such offenses simply resist a full delineation, as the possible range of potential misdeeds in office cannot be determined in advance. Instead, the type of misconduct that merits impeachment is worked out over time through the political process. In the years following the Constitution's ratification, precisely what behavior constitutes a high crime or misdemeanor has thus been the subject of much debate.\n\n\tThe Role of the House of Representatives\n\nThe Constitution grants the sole power of impeachment to the House of Representatives. Generally speaking, the impeachment process has often been initiated in the House by a Member by resolution or declaration of a charge, although anyone\u00e2\u0080\u0094including House Members, a grand jury, or a state legislature\u00e2\u0080\u0094may request that the House investigate an individual for impeachment purposes. Indeed, in modern practice, many impeachments have been sparked by referrals from an external investigatory body. Beginning in the 1980s, the Judicial Conference has referred its findings to the House recommending an impeachment investigation into a number of federal judges who were eventually impeached. Similarly, in the impeachment of President Bill Clinton, an independent counsel\u00e2\u0080\u0094a temporary prosecutor given statutory independence and charged with investigating certain misconduct when approved by a judicial body \u00e2\u0080\u0094first conducted an investigation into a variety of alleged activities on the part of the President and his associates, and then delivered a report to the House detailing conduct that the independent counsel considered potentially impeachable. \nRegardless of the source requesting an impeachment investigation, the House has sole discretion under the Constitution to begin any impeachment proceedings against an individual. In practice, impeachment investigations are often handled by an already existing or specially created subcommittee of the House Judiciary Committee. The scope of the investigation can vary. In some instances, an entirely independent investigation may be initiated by the House. In other cases, an impeachment investigation might rely on records delivered by outside entities, such as those delivered by the Judicial Conference or an independent counsel. Following this investigation, the full House may vote on the relevant impeachment articles. If articles of impeachment are approved, the House chooses managers to present the matter to the Senate. The Chairman of the House Managers then presents the articles of impeachment to the Senate and requests that the body order the appearance of the accused. The House Managers typically act as prosecutors in the Senate trial. \nThe House has impeached nineteen individuals: fifteen federal judges, one Senator, one Cabinet member, and two Presidents. The consensus reflected in these proceedings is that impeachment may serve as a means to address misconduct that does not necessarily give rise to criminal sanction. According to congressional sources, the types of conduct that constitute grounds for impeachment in the House appear to fall into three general categories: (1) improperly exceeding or abusing the powers of the office; (2) behavior incompatible with the function and purpose of the office; and (3) misusing the office for an improper purpose or for personal gain. Consistent with scholarship on the scope of impeachable offenses, congressional materials have cautioned that the grounds for impeachment \"do not all fit neatly and logically into categories\" because the remedy of impeachment is intended to \"reach a broad variety of conduct by officers that is both serious and incompatible with the duties of the office.\"\nWhile successful impeachments and convictions of federal officials represent some clear guideposts for what constitutes impeachable conduct, impeachment processes that do not result in a final vote for impeachment and removal also may influence the understanding of Congress, executive and judicial branch officials, and the public over what constitutes an impeachable offense. A prominent example involves the first noteworthy attempt at a presidential impeachment, aimed at John Tyler in 1842. At the time, the presidential practice had generally been to reserve vetoes for constitutional, rather than policy, disagreements with Congress. Following President Tyler's veto of a tariff bill on policy grounds, the House endorsed a select committee report condemning President Tyler and suggesting that he might be an appropriate subject for impeachment proceedings. The possibility apparently ended when the Whigs, who had led the movement to impeach, lost their House majority in the midterm elections. In the years following the aborted effort to impeach President Tyler, Presidents have routinely used their veto power for policy reasons. This practice is generally seen as an important separation of powers limitation on Congress's ability to pass laws rather than a potential ground for impeachment.\nLikewise, although President Richard Nixon resigned before impeachment proceedings were completed in the House, the approval of three articles of impeachment by the House Judiciary Committee against him may inform lawmakers' understanding of conduct that constitutes an impeachable offense. The approved impeachment articles included allegations that President Nixon obstructed justice by using the office of the presidency to impede the investigation into the break-in of the Democratic National Committee headquarters at the Watergate Hotel and Office Building and authorized a cover-up of the activities that were being investigated. President Nixon was alleged to have abused the power of his office by using federal agencies to punish political enemies and refusing to cooperate with the Judiciary Committee's investigation. While no impeachment vote was taken by the House, the Nixon experience nevertheless established what some would call the quintessential case for impeachment\u00e2\u0080\u0094a serious abuse of the office of the presidency that undermined the office's integrity.\nThat said, one must be cautious in extrapolating wide-ranging lessons from the lack of impeachment proceedings in the House. Specific behavior not believed to constitute an impeachable offense in prior contexts might be considered impeachable in a different set of circumstances. Moreover, given the varied contextual permutations, the full scope of impeachable behavior resists specification, and historical precedent may not always serve as a useful guide to whether conduct is grounds for impeachment. For instance, no President has been impeached for abandoning the office and refusing to govern. That this event has not occurred, however, hardly proves that this behavior would not constitute an impeachable offense meriting removal from office.\n\n\tThe Role of the Senate\n\n\t\tHistorical Practice\n\nThe Constitution grants the Senate sole authority \"to try all impeachments.\" The Senate thus enjoys broad discretion in establishing procedures to be undertaken in an impeachment trial. For instance, in a lawsuit challenging the Senate's use of a trial committee to take and report evidence, the Supreme Court in Nixon v. United States unanimously ruled that the suit posed a nonjusticiable political question and was not subject to judicial resolution. The Court explained that the term \"try\" in the Constitution's provisions on impeachment was textually committed to the Senate for interpretation and lacked sufficient precision to enable a judicially manageable standard of review. In reaching this conclusion, the Court noted that the Constitution imposes three precise requirements for impeachment trials in the Senate: (1) Members must be under oath during the proceedings; (2) conviction requires a two-thirds vote; and (3) the Chief Justice must preside if the President is tried. Given these three clear requirements, the Court reasoned that the Framers \"did not intend to impose additional limitations on the form of the Senate proceedings by the use of the word 'try.'\" Thus, subject to these three clear requirements of the Constitution, the Senate enjoys substantial discretion in establishing its own procedures during impeachment trials.\nWhile the Senate determines for itself how to conduct impeachment proceedings, the nature and frequency of Senate impeachment trials largely hinge on the impeachment charges brought by the House. The House has impeached thirteen federal district judges, a judge on the Commerce Court, a Senator, a Supreme Court Justice, the secretary of an executive department, and two Presidents. But the Senate ultimately has only convicted and removed from office seven federal district judges and a Commerce Court judge. While this pattern obviously does not mean that Presidents or other civil officers are immune from removal based on impeachment, the Senate's acquittals may be considered to have precedential value when assessing whether particular conduct constitutes a removable offense. For instance, the first subject of an impeachment by the House involved a sitting U.S. Senator for allegedly conspiring to aid Great Britain's attempt to seize Spanish-controlled territory. The Senate voted to dismiss the charges in 1799, and no Member of Congress has been impeached since. The House also impeached Supreme Court Justice Samuel Chase, who was widely viewed by Jeffersonian Republicans as openly partisan for, among other things, misapplying the law. The Senate acquitted Justice Chase, establishing, at least for many, a general principle that impeachment is not an appropriate remedy for disagreement with a judge's judicial philosophy or decisions.\n\n\t\tRequirement of Oath or Affirmation\n\nThe Constitution requires Senators sitting as an impeachment tribunal to take a special oath distinct from the oath of office that all Members of Congress must take. This requirement underscores the unique nature of the role the Senate plays in impeachment trials, at least in comparison to its normal deliberative functions. The Senate practice has been to require each Senator to swear or affirm that he will \"do impartial justice according to the Constitution and laws.\" The oath was originally adopted by the Senate before proceedings in the impeachment of Senator Blount in 1798 and has remained largely unchanged since. \n\n\t\tJudgment in Cases of Impeachment\n\nWhile the Constitution authorizes the Senate, following an individual's conviction in an impeachment trial, to bar an individual from holding office in the future, the text of the Constitution does not make clear that a vote for disqualification from future office must be taken separately from the initial vote for conviction. Instead, the potential for a separate vote for disqualification has arisen through the historical practice of the Senate. The Senate did not choose to disqualify an impeached individual from holding future office until the Civil War era. Federal district judge West H. Humphreys took a position as a judge in the Confederate government but did not resign his seat in the U.S. government. The House impeached Humphreys in 1862. The Senate then voted unanimously to convict Judge Humphreys and separately voted to disqualify him from holding office in the future. Senate practice since the Humphreys case has been to require a simple majority vote to disqualify an individual from holding future office, rather than the supermajority required by the Constitution's text for removal, but it is unclear what justifies this result beyond historical practice. \nThe Constitution also distinguishes the impeachment remedy from the criminal process, providing that an individual removed from office following impeachment \"shall nevertheless be liable and subject to indictment.\" The Senate's power to convict and remove individuals from office, as well as to bar them from holding office in the future, thus does not overlap with criminal remedies for misconduct. Indeed, the unique nature of impeachment as a political remedy distinct from criminal proceedings ensures that \"the most powerful magistrates should be amenable to the law.\" Rather than helping police violations of strictly criminal activity, impeachment is a \"method of national inquest into the conduct of public men\" for \"the abuse or violation of some public trust.\" Impeachable offenses are those that \"relate chiefly to injuries done immediately to the society itself.\" Put another way, the purpose of impeachment is to protect the public interest, rather than impose a punitive measure on an individual. This distinction was highlighted in the impeachment trial of federal district judge Alcee Hastings. Judge Hastings had been indicted for a criminal offense, but was acquitted. In 1988, the House impeached Hastings for much of the same conduct for which he had been indicted. Judge Hastings argued that the impeachment proceedings constituted \"double jeopardy\" because of his previous acquittal in a criminal proceeding. The Senate rejected his motion to dismiss the articles against him. The Senate voted to convict and remove Judge Hastings on eight articles, but it did not disqualify him from holding office in the future. Judge Hastings was later elected to the House of Representatives.\n\n\tHistory of Impeachment in Congress\n\nThe Constitution provides that the President, Vice President, and all civil officers are subject to impeachment for \"treason, bribery, or other high Crimes and Misdemeanors.\" The meaning of high crimes and misdemeanors, like the other provisions in the Constitution relevant to impeachment, is not primarily determined through the development of jurisprudence in the courts. Instead, the meaning of the Constitution's impeachment clauses is \"liquidated\" over time, or determined through historical practice. The Framers did not delineate with specificity the complete range of behavior that would merit impeachment, as the scope of possible \"offenses committed by federal officers are myriad and unpredictable.\" According to one scholar, impeachments are sometimes \"aimed at articulating, establishing, preserving, and protecting constitutional norms,\" or \"'constructing' constitutional meaning and practices.\" At times, impeachment might be used to reinforce an existing norm, indicating that certain behavior continues to constitute grounds for removal; in others, it may be used to establish a new norm, setting a marker that signifies what practices are impeachable for the future. Examining the history of impeachment in Congress can thus illuminate the constitutional meaning of impeachment, including when Congress has established or reaffirmed a particular norm.\n\n\t\tEarly Historical Practices (1789\u00e2\u0080\u00931860)\n\nCongressional understanding of the scope of activities subject to impeachment and the potential persons who may be impeached was first put to the test during the Adams Administration. In 1797, letters sent to President Adams revealed a conspiracy by Senator William Blount\u00e2\u0080\u0094in violation of the U.S. government's policy of neutrality on the matter and the Neutrality Act \u00e2\u0080\u0094to organize a military expedition with the British to invade land in the American Southwest under Spanish control. The House voted to impeach Senator Blount on July 7, 1797, while the Senate voted to expel Senator William Blount the next day. Before impeaching Senator Blount, several House Members questioned whether Senators were \"civil officers\" subject to impeachment. But Samuel W. Dana of Connecticut argued that Members of Congress must be civil officers, because other provisions of the Constitution that mention offices appear to include holding legislative office. Despite already having voted to impeach Senator Blount, it was not until early in the next year that the House actually adopted specific articles of impeachment against him. \nAt the Senate impeachment trial in 1799, Blount's attorneys argued that impeachment was improper because Blount had already been expelled from his Senate seat and had not been charged with a crime. But the primary issue of debate was whether Members of Congress qualified as civil officers subject to impeachment. The House prosecutors argued that under the American system, as in England, virtually anyone was subject to impeachment. The defense responded that this broad interpretation of the impeachment power would enable Congress to impeach state officials as well as federal, upending the proper division of federal and state authorities in the young Republic. The Senate voted to defeat a resolution that declared Blount was a \"civil officer\" and therefore subject to impeachment. The Senate ultimately voted to dismiss the impeachment articles brought against Blount because it lacked jurisdiction over the matter, although the impeachment record does not reveal the precise basis for this conclusion. In any event, the House has not impeached a Member of Congress since. \nThe first federal official to be impeached and removed from office was John Pickering, a federal district judge. The election of President Thomas Jefferson in 1800, along with Jeffersonian Republican majorities in both Houses of Congress, signaled a shift from Federalist party control of government. Much of the federal judiciary at this early stage of the Republic were members of the Federalist party, and the new Jeffersonian Republican majority strongly opposed the Federalist-controlled courts. John Pickering was impeached by the House of Representatives in 1803 and convicted by the Senate on March 12, 1804. The circumstances of Judge Pickering's impeachment are somewhat unique as it appears that the judge had been mentally ill for some time, although the articles of impeachment did not address Pickering's mental faculties but instead accused him of drunkenness, blasphemy on the bench, and refusing to follow legal precedent. Judge Pickering did not appear at his trial, and Senator John Quincy Adams apparently served as a defense counsel. Following debate in a closed session, the Senate voted to permit evidence of Judge Pickering's insanity, drunkenness, and behavior on the bench. The Senate also rejected a resolution to disqualify three Senators, who were previously in the House and had voted to impeach Judge Pickering, from participating in the impeachment trial. The Senate voted to convict Judge Pickering guilty as charged, but the articles did not explicitly specify that any of Pickering's behavior constituted a high crime or misdemeanor. Objections to the framing of the question at issue caused several Senators to withdraw from the trial.\nOn the same day the Senate convicted Judge Pickering, the House of Representatives impeached Supreme Court Justice Samuel Chase. Like the impeachment trial of Judge Pickering, the proceedings occurred following the election of President Thomas Jefferson and amid intense conflict between the Federalists and Jeffersonian Republicans. Justice Chase was viewed by Jeffersonian Republicans as openly partisan, and in fact the Justice openly campaigned for Federalist John Adams in the presidential election of 1800. Republicans also took issue with Justice Chase's aggressive approach to jury instructions in Sedition Act prosecutions. The eight articles of impeachment accused him of acting in an \"arbitrary, oppressive, and unjust\" manner at trial, misapplying the law, and expressing partisan political views to a grand jury. The Senate trial began on February 4, 1805. Both the House Managers and defense counsel for Justice Chase presented witnesses detailing the Justice's behavior. While some aspects of the dispute focused on whether Justice Chase took certain actions, the primary conflict centered on whether his behavior was impeachable. Before reaching a verdict, the Senate approved a motion from Senator James Bayard, a Federalist from Delaware, that the underlying question be whether Justice Chase was guilty of high crimes and misdemeanors, rather than guilty as charged. Of the eight articles, a majority of Senators voted to convict on three, while the remaining five did not muster a majority for conviction. But the Senate vote ultimately fell short of the necessary two-thirds majority to secure a conviction on any of the articles. \nThe trial raised several questions that have recurred throughout the history of impeachments. For example, is impeachment limited to criminal acts, or does it extend to noncriminal behavior? The opposing sides in the Chase case took differing views on this matter, as they would in later impeachments to come. Due in part to the charged political atmosphere of the historical context, the attempted impeachment of Justice Chase has also come to represent an important limit on the scope of the impeachment remedy. Commentators have interpreted the acquittal of Justice Chase as establishing that impeachment does not extend to congressional disagreement with a judge's opinions or judicial philosophy. At least some Senators who voted to acquit did not consider the alleged offenses as rising to the level of impeachable behavior. \nBy the time of the next impeachment in 1830, both houses of Congress were controlled by Jacksonian Democrats, and the federal courts were unpopular with Congress and the public. The House of Representatives impeached James Peck, a federal district judge, for abusing his judicial authority. The sole article accused the judge of holding an attorney in contempt for publishing an article critical of Peck and barring the attorney from practicing law for eighteen months. The context surrounding Judge Peck's actions involved disputes over French and Spanish land grant titles following the transfer of land in the Louisiana territory from French to U.S. control. Shortly after Missouri was admitted to the United States as part of the Missouri Compromise in 1821, Judge Peck decided a land rights case against the claimants in favor of the United States. The attorney for the plaintiffs wrote an article critical of the decision in a local paper. Judge Peck held the attorney in contempt, sentenced him to jail for twenty-four hours, and barred him from practicing law for eighteen months.\nThe House impeached Judge Peck by a wide margin. Of central concern during the Senate trial were the limits of a judge's common law contempt power, a matter that appeared to be in dispute. The Senate ultimately acquitted Judge Peck, with roughly half of the Jacksonian Democrats voting against conviction. Shortly thereafter, Congress passed a law reforming and defining the scope of the judicial contempt power. \nFinally, in the midst of the Civil War, federal district judge West H. Humphreys was appointed to a position as a judge in the Confederate government, but he did not resign as a U.S. federal judge. In 1862, the House impeached and the Senate convicted Judge Humphreys for joining the Confederate government and abandoning his position. As in the trial of Judge Pickering previously, Judge Humphreys did not attend the proceedings. Unlike in the case of Judge Pickering, however, no defense was offered in the impeachment trial of Judge Humphreys.\n\n\t\tImpeachment of Andrew Johnson\n\nThe impeachment and trial of President Andrew Johnson took place in the shadow of the Civil War and the assassination of President Abraham Lincoln. President Johnson was a Democrat and former slave owner who was the only southern Senator to remain in his seat when the South seceded from the Union. President Lincoln, a Republican, appointed Johnson military governor of Tennessee in 1862, and Johnson was later selected as Lincoln's second-term running mate on a \"Union\" ticket. Given these unique circumstances, President Johnson lacked both a party and geographic power base when in office, which likely isolated him when he assumed the presidency following the assassination of President Lincoln. \nThe majority Republican Congress and President Johnson clashed over, among other things, Reconstruction policies implemented in the former slave states and control over officials in the executive branch. President Johnson vetoed twenty-one bills while in office, compared to thirty-six vetoes by all prior Presidents. Congress overrode fifteen of Johnson's vetoes, compared to just six with prior Presidents. On March 2, 1867, Congress reauthorized, over President Johnson's veto, the Tenure of Office Act, extending its protections for all officeholders. In essence, the Act provided that all federal officeholders subject to Senate confirmation could not be removed by the President except with Senate approval, although the reach of this requirement to officials appointed by a prior administration was unclear. Congressional Republicans apparently anticipated the possible impeachment of President Johnson when drafting the legislation; Republicans already knew of President Johnson's plans to fire Secretary of War Edwin Stanton, and the Act provided that a violation of its terms constituted a \"high misdemeanor.\"\nPresident Johnson then fired Secretary Stanton without the approval of the Senate. Importantly, his Cabinet unanimously agreed that the new restrictions on the President's removal power imposed by the Tenure of Office Act were unconstitutional. Shortly thereafter, on February 24, 1868, the House voted to impeach President Johnson. The impeachment articles adopted by the House against President Johnson included defying the Tenure of Office Act by removing Stanton from office and violating (and encouraging others to violate) the Army Appropriations Act. One article of impeachment also accused the President of making \"utterances, declarations, threats, and harangues\" against Congress.\nThe Senate appointed a committee to recommend rules of procedure for the impeachment trial which then were adopted by the Senate, including a one-hour time limit for each side to debate questions of law that would arise during the trial. Chief Justice Salmon P. Chase presided over the trial and was sworn in by Associate Justice Samuel Nelson. During the swearing-in of the individual Senators, the body paused to debate whether Senator Benjamin Wade of Indiana, the president pro tempore of the Senate, was eligible to participate in the trial. Because the office of the Vice President was empty, under the laws of succession at that time Senator Wade would assume the presidency upon a conviction of President Johnson. Ultimately, the Senator who raised this point, Thomas Hendricks of Indiana, withdrew the issue and Senator Wade was sworn in.\nAn important point of contention at the trial was whether the Tenure of Office Act protected Stanton at all because of his appointment by President Lincoln, rather than President Johnson. Counsel for President Johnson argued that impeachment for violating a statute whose meaning was unclear was inappropriate, and the statute barring removal of the Secretary of War was an unconstitutional intrusion into the President's authority under Article II.\nThe Senate failed to convict President Johnson with a two-thirds majority by one vote on three articles, and it failed to vote on the remaining eight. But reports suggest that several Senators were prepared to acquit if their votes were needed. Seven Republicans voted to acquit; of those Senators, some thought it questionable whether the Tenure of Office Act applied to Stanton and believe it was improper to impeach a President for incorrectly interpreting an arguably ambiguous law. \nThe implications of the acquittal of President Johnson are difficult to encapsulate neatly. Some commentators have concluded that the failure to convict President Johnson coincides with a general understanding that while impeachment is appropriate for abuses of power or violations of the public trust, it does not pertain to political or policy disagreements with the President, no matter how weighty. Of course, it bears mention that by the time of the Senate trial Johnson was in the last year of his Presidency, was not going to receive a nomination for President by either major political party for the next term, and appears to have promised in private to appoint a replacement for Stanton that could be confirmable. More broadly, the Johnson impeachment also represented a larger struggle between Congress and the President over the scope of executive power, one that arguably reconstituted their respective roles following the Civil War presidency of Abraham Lincoln.\n\n\t\tPostbellum Practices (1865\u00e2\u0080\u00931900)\n\nThe postbellum experience in American history saw a variety of government officials impeached on several different grounds. These examples provide important principles that guide the practice of impeachment through the present day. For example, the Senate has not always conducted a trial following an impeachment by the House. In 1873, the House impeached federal district judge Mark. H. Delahay for, among other things, drunkenness on and off the bench. The impeachment followed an investigation by a subcommittee of the House Judiciary Committee into his conduct. Following the House vote on impeachment, Judge Delahay resigned before written impeachment articles were drawn up, and the Senate did not hold a trial. The impeachment of Judge Delahay shows that the scope of impeachable behavior is not limited to strictly criminal behavior; Congress has been willing to impeach individuals for behavior that is not indictable, but still constitutes an abuse of an individual's power and duties.\nThis period of American history was fraught with partisan conflict over Reconstruction. Besides President Johnson, a number of other individuals were investigated by Congress during this time for purposes of impeachment. For example, in 1873, the House voted to authorize the House Judiciary Committee to investigate the behavior of Edward H. Durrell, federal district judge for Louisiana. A majority of the House Judiciary Committee reported in favor of impeaching Judge Durell for corruption and usurpation of power, including interfering with the state's election. Judge Durrell resigned on December 1, 1874, and the House discontinued impeachment proceedings.\nThe first and only time a Cabinet-level official was impeached occurred during the presidential administration of Ulysses S. Grant. Grant's Secretary of War, William W. Belknap, was impeached in 1876 for allegedly receiving payments in return for appointing an individual to maintain a trading post in Indian territory. Belknap resigned two hours before the House unanimously impeached him, but the Senate still conducted a trial in which Belknap was acquitted. During the trial, upon objection by Belknap's counsel that the Senate lacked jurisdiction because Belknap was now a private citizen, the Senate voted 37-29 in favor of jurisdiction. A majority of Senators voted to convict Belknap, but no article mustered a two-thirds majority, resulting in acquittal. A number of Senators voting to acquit indicated that they did so because the Senate lacked jurisdiction over an individual no longer in office. Notably, although bribery is explicitly included as an impeachable offense in the Constitution, the impeachment articles brought against Belknap instead charged his behavior as constituting high crimes and misdemeanors. Bribery was mentioned at the Senate trial, but it was not specifically referenced in the impeachment articles themselves.\n\n\t\tEarly Twentieth Century Practices\n\nThe twentieth century saw further development of the scope of conduct considered by Congress to be impeachable, including the extent to which noncriminal conduct can constitute impeachable behavior and the proper role of a federal judge. The question of judicial review of impeachments also received its first treatment in the federal courts.\nThe question of whether Congress can designate particular behavior as a \"high crime or misdemeanor\" by statute arose in the impeachment of Charles Swayne, a federal district judge for the Northern District of Florida, during the first decade of the twentieth century. A federal statute provided that federal district judges live in their districts and that anyone violating this requirement was \"guilty of a high misdemeanor.\" Judge Swayne's impeachment originated from a resolution passed by the Florida legislature requesting the state's congressional delegation to recommend an investigation into his behavior. The procedures followed by the House in impeaching Judge Swayne were somewhat unique. First, the House referred the impeachment request to the Judiciary Committee for investigation. Following this investigation, the House voted to impeach Judge Swayne based on the report prepared by the committee. The committee was then tasked with preparing articles of impeachment to present to the Senate. The House then voted again on these individual articles, each of which received less support than the single prior impeachment vote had received. The impeachment articles accused Judge Swayne of a variety of offenses, including misusing the office, abusing the contempt power, and living outside his judicial district. At the trial in the Senate, Judge Swayne essentially admitted to certain accused behavior, although his attorneys did dispute the residency charge, and Swayne instead argued that his actions were not impeachable. The Senate vote failed to convict Judge Swayne on any of the charges brought by the House.\nThe impeachability of certain noncriminal behavior for federal judges was firmly established by the impeachment of Judge Robert W. Archbald in 1912. Judge Archbald served as a federal district judge before being appointed to the short-lived U.S. Commerce Court, which was created to review decisions of the Interstate Commerce Commission. He was impeached by the House for behavior occurring both as a federal district judge and as a judge on the Commerce Court. The impeachment articles accused Judge Archbald of, among other things, using his position as a judge to generate profitable business deals with potential future litigants in his court. This behavior did not violate any criminal statute and did not appear to violate any laws regulating judges. Judge Archbald argued at trial that noncriminal conduct was not impeachable. The Senate voted to convict him on five articles and also voted to disqualify him from holding office in the future. Four of those articles centered on behavior that occurred while Judge Archbald sat on the Commerce Court, whereas the fifth described his conduct over the course of his career.\nIn the 1920s, a series of corruption scandals swirled around the administration of President Warren G. Harding. Most prominently, the Teapot Dome Scandal, which involved the noncompetitive lease of government land to oil companies, implicated many government officials and led to resignations and the criminal conviction and incarceration of a Cabinet-level official. The Secretary of the Navy, at the time Edwin Denby, was entrusted with overseeing the development of oil reserves that had recently been located. The Secretary of the Interior, Albert Fall, convinced Denby that the Interior Department should assume responsibility for two of the reserve locations, including in Teapot Dome, Wyoming. Secretary Fall then leased the reserves to two of his friends, Harry F. Sinclair and Edward L. Doheny. Revelations of the lease without competitive bidding launched a lengthy congressional investigation that sparked the eventual criminal conviction of Fall for bribery and conspiracy and Sinclair for jury tampering. President Harding, however, died in 1923, before congressional hearings began. The affair also generated significant judicial decisions examining the scope of Congress's investigatory powers.\nOne aspect of the controversy included an impeachment investigation into the decisions of then-Attorney General Harry M. Daugherty. In 1922, the House of Representatives referred a resolution to impeach Daugherty for a variety of activities, including his failure to prosecute those involved in the Teapot Dome Scandal, to the House Judiciary Committee. The House Judiciary Committee eventually found there was not sufficient evidence to impeach Daugherty. But in 1924, a Senate special committee was formed to investigate similar matters. That investigation spawned allegations of many improper activities in the Justice Department. Daugherty resigned on March 28, 1924.\nIn 1926, federal district judge George W. English was impeached for a variety of alleged offenses, including (1) directing a U.S. marshal to gather a number of state and local officials into court in an imaginary case in which Judge English proceeded to denounce them; (2) threatening two members of the press with imprisonment without sufficient cause; and (3) showing favoritism to certain litigants before his court. Judge English resigned before a trial in the Senate occurred; and the Senate dismissed the charges without conducting a trial in his absence.\nFederal district judge Harold Louderback was impeached in 1933 for showing favoritism in the appointment of bankruptcy receivers, which were coveted positions following the stock market crash of 1929 and the ensuing Depression. The House authorized a subcommittee to investigate, which held hearings and recommended to the Judiciary Committee that Judge Louderback be impeached. The Judiciary Committee actually voted against recommending impeachment, urging censure of Judge Louderback instead, but permitted the minority report that favored impeachment to be reported to the House together with the majority report. The full House voted to impeach anyway, but the Senate failed to convict him.\nShortly thereafter, the House impeached federal district judge Halsted L. Ritter for showing favoritism in and profiting from appointing receivers in bankruptcy proceedings; practicing law while a judge; and failing to fully report his income on his tax returns. The Senate acquitted Judge Ritter on each individual count alleging specific behavior, but convicted him on the final count which referenced the previous articles, and charged him with bringing his court into disrepute and undermining the public's confidence in the judiciary. \nCongress's impeachment of Judge Ritter was the first to be challenged in court. Judge Ritter sued in the Federal Court of Claims seeking back pay, arguing that the charges brought against him were not impeachable under the Constitution and that the Senate improperly voted to acquit on six specific articles but to convict on a single omnibus article. In rejecting Judge Ritter's suit, the court held that the Senate has exclusive jurisdiction over impeachments and courts lack authority to review the Senate's verdict.\n\n\t\tEffort to Impeach President Richard Nixon\n\nThe impeachment investigation and ensuing resignation of President Richard Nixon stands out as a profoundly important experience informing the standard for the impeachment of Presidents. Although President Nixon was never impeached by the House or subjected to a trial in the Senate, his conduct exemplifies for many authorities, scholars, and members of the public the quintessential case of impeachable behavior in a President. \nLess than two years after a landslide reelection as President, Richard Nixon resigned following the House Judiciary Committee's adoption of three articles of impeachment against him. The circumstances surrounding the impeachment of President Nixon were sparked by the arrest of five men for breaking into the Democratic National Committee Headquarters at the Watergate Hotel and Office Building. The arrested men were employed by the committee to Re-Elect the President (CRP), a campaign organization formed to support President Nixon's reelection.\nIn the early summer of 1973, Attorney General Elliot Richardson appointed Archibald Cox as a special prosecutor to investigate the connection between the five burglars and CRP. Likewise, the Senate Select Committee on Presidential Campaign Activities began its own investigation. After President Nixon fired various staffers allegedly involved in covering up the incident, he spoke on national television disclaiming knowledge of the cover-up. But the investigations uncovered evidence that President Nixon was involved, that he illegally harassed his enemies through, among other things, the use of tax audits, and that the men arrested for the Watergate break-in\u00e2\u0080\u0094the \"plumbers unit,\" because they were used to \"plug leaks\" considered damaging to the Nixon Administration\u00e2\u0080\u0094had committed burglaries before. Eventually a White House aide revealed that the President had a tape recording system in his office, raising the possibility that many of Nixon's conversations about the Watergate incident were recorded.\nThe President refused to hand over such tapes to the special prosecutor or Congress. In his capacity as special prosecutor, Cox then subpoenaed tapes of conversations in the Oval Office on Saturday, October 20, 1973. This sparked the sequence of events commonly known as the Saturday Night Massacre. In response to the subpoena, President Nixon ordered Attorney General Elliot Richardson to fire Special Prosecutor Cox. Richardson refused and resigned. Nixon ordered Deputy Attorney General William D. Ruckelshaus to fire the special prosecutor, but Ruckelshaus also refused to do so and resigned. Solicitor General Robert Bork, in his capacity as Acting Attorney General, then fired the special prosecutor. Nixon eventually agreed to deliver some of the subpoenaed tapes to the judge supervising the grand jury. The Justice Department appointed Leon Jaworski to replace Cox as special prosecutor.\nThe House Judiciary Committee began an official investigation of the Watergate issue and commenced impeachment hearings in April 1974. On March 1, 1974, a grand jury indicted seven individuals connected to the larger Watergate investigation and named the President as an unindicted coconspirator. On April 18, a subpoena was issued, upon the motion of the special prosecutor, by the United States District Court for the District of Columbia requiring the production of tapes and various items relating to meetings between the President and other individuals. Following a challenge to the subpoena in district court, the Supreme Court reviewed the case. On July 24, 1974, the Supreme Court affirmed the district court's order.\nIn late July, following its investigation and hearings, the House Judiciary Committee voted to adopt three articles of impeachment against President Nixon. The first impeachment article alleged that the President obstructed justice by attempting to impede the investigation into the Watergate break-in. The second charged the President with abuse of power for using federal agencies to harass his political enemies and authorizing burglaries of private citizens who opposed the President. The third article accused the President of refusing to cooperate with the Judiciary Committee's investigation. \nThe committee considered but rejected two proposed articles of impeachment. The first rejected article accused the President of concealing from Congress the bombing operations in Cambodia during the Vietnam conflict. This article was rejected for two primary reasons: some Members thought (1) the President was performing his constitutional duty as Commander-in-Chief and (2) Congress was given sufficient notice of these operations. \nThe second rejected article concerned receiving compensation in the form of government expenditures at President Nixon's private properties in California and Florida\u00e2\u0080\u0094which allegedly constituted an emolument from the United States in violation of Article II, Section 1, Clause 7 of the Constitution\u00e2\u0080\u0094and tax evasion. Those Members opposed to the portion of the charge alleging receipt of federal funds argued that most of the President's expenditures were made pursuant to a request from the Secret Service; that there was no direct evidence the President knew at the time that the source of these funds was public, rather than private; and that this conduct failed to rise to the level of an impeachable offense. Some Members opposed to the tax evasion charge argued that the evidence was insufficient to impeach; others that tax fraud is not the type of behavior \"at which the remedy of impeachment is directed.\" \nPresident Nixon resigned on August 9, 1974, before the full House voted on the articles. The lessons and standards established by the Nixon impeachment investigation and resignation are disputed. On the one hand, the behavior alleged in the approved articles against President Nixon is arguably a \"paradigmatic\" case of impeachment, constituting actions that are almost certainly impeachable conduct for the President. \nOn the other hand, the significance of the House Judiciary Committee's rejection of certain impeachment articles is unclear. In particular, whether conduct considered unrelated to the performance of official duties, such as the rejected article alleging tax evasion, can constitute an impeachable offense for the President is disputed. During the later impeachment of President Bill Clinton, for example, the majority and minority reports of the House Judiciary Committee on the committee's impeachment recommendation took different views on when conduct that might traditionally be viewed as private or unrelated to the functions of the presidency constitutes an impeachable offense. The House Judiciary Committee report that recommended articles of impeachment argued that perjury by the President was an impeachable offense, even if committed with regard to matters outside his official duties. In contrast, the minority views in the report argued that impeachment was reserved for \"conduct that constitutes an egregious abuse or subversion of the powers of the executive office.\" The minority noted that the Judiciary Committee had rejected an article of impeachment against President Nixon alleging that he committed tax fraud, mainly because that \"related to the President's private conduct, not to an abuse of his authority as President.\"\n\n\t\tImpeachment of President Bill Clinton\n\nThe impeachment of President Bill Clinton stemmed from an investigation that originally centered on financial transactions occurring years before President Clinton took federal office. Attorney General Janet Reno appointed Robert Fiske Jr. as a special prosecutor in January 1994 to investigate the dealings of President Clinton and his wife with the \"Whitewater\" real estate development during the President's tenure as attorney general and then governor of Arkansas. \nFollowing the reauthorization of the Independent Counsel Act in June, the Special Division of the United States Court of Appeals for the District of Columbia Circuit replaced Fiske in August with Independent Counsel Kenneth W. Starr, a former Solicitor General in the George H.W. Bush Administration and federal appellate judge. \nDuring the Whitewater investigation, Paula Jones, an Arkansas state employee, filed a civil suit against President Clinton in May 1994 alleging that he sexually harassed her in 1991 while governor of Arkansas. Lawyers for Jones deposed President Clinton at the White House and asked questions about the President's relationship with staffers, including an intern named Monica Lewinsky. Independent Counsel Starr received information alleging that Lewinsky had tried to influence the testimony of a witness in the Jones litigation, along with tapes of recordings between Monica Lewinsky and former White House employee Linda Tripp. Tripp had recorded conversations between herself and Lewinsky about Lewinsky's relationship with the President and hope of obtaining a job outside the White House. Starr presented this information to Attorney General Reno. Reno petitioned the Special Division of the United States Court of Appeals for the District of Columbia Circuit to expand the independent counsel's jurisdiction, and the Special Division issued an order on January 16, 1998, permitting the expansion of Starr's investigation into President Clinton's response to the Paula Jones case. Over the course of the spring and summer a grand jury investigated whether President Clinton committed perjury in his response to the Jones suit and whether he obstructed justice by encouraging others to lie about his relationship with Lewinsky. President Clinton appeared by video before the grand jury and testified about the Lewinsky relationship. \nIndependent Counsel Starr referred his report to the House of Representatives on September 9, 1998, noting that under the independent counsel statute, his office was required to do so because President Clinton engaged in behavior that might constitute grounds for impeachment. The House then voted to open an impeachment investigation into President Clinton's behavior, released the Starr report publicly, and the House Judiciary Committee voted to release the tape of the President's grand jury testimony.\nAlthough the House Judiciary Committee had already conducted several hearings on the possibility of impeachment, the committee did not engage in an independent fact-finding investigation or call any live witnesses to testify about the President's conduct. Instead, the Judiciary Committee largely relied on the Starr report to inform the committee's own report recommending impeachment, released December 16, 1998. The committee report recommended impeachment of President Clinton on four counts. The first article alleged that President Clinton perjured himself when testifying to a criminal grand jury about his response to the Jones lawsuit and his relationship with Lewinsky. The second alleged that the President committed perjury during a deposition in the civil suit brought against him by Paula Jones. The third alleged that President Clinton obstructed justice in the suit brought against him by Jones and in the investigation by Independent Counsel Starr. The fourth alleged that the President abused his office by refusing to respond to certain requests for admission from Congress and making untruthful responses to Congress during the investigation into his behavior.\nOn December 19, 1998, in a lame-duck session, the House voted to approve the first and third articles. After trial in the Senate, the President was acquitted on February 12, 1999. Statements of the Senators entered into the record on the impeachment reflect disagreement about what constitutes an impeachable offense for the President and whether Clinton's behavior rose to this level. For instance, Republican Senator Richard G. Lugar voted to convict on both articles, noting in his statement the gravity of the \"presidential misconduct at issue\" and arguing that the case was \"not about adultery.\" Instead, it centered on the obstruction of justice that occurred when the President \"lied to a federal grand jury and worked to induce others to give false testimony.\" For Senator Lugar, the President ultimately \"betrayed [the] trust\" of the nation through his actions and should be removed from office. In contrast, Republican Senator Olympia Snowe voted to acquit on both articles. In her statement, she admonished the President's \"lowly conduct,\" but concluded there was \"insufficient evidence of the requisite untruth and the requisite intent\" to establish perjury with regard to the concealment of his relationship with a subordinate; and the perjury charges regarding his relationship with a subordinate concerned statements that were largely \"ruled irrelevant and inadmissible in the underlying civil case\" which \"undermine[d] [their] materiality.\" She also stated that she thought one of the allegations in the second impeachment article had been proven\u00e2\u0080\u0094the President's attempt to influence the testimony of his personal assistant\u00e2\u0080\u0094but that the proper remedy for this was a criminal prosecution. Indeed, a number of Senators indicated that they did not consider the President's behavior to constitute an impeachable offense because the President's conduct was not of a distinctly public nature. For instance, Democratic Senator Byron L. Dorgan voted to acquit on both articles. He described Clinton's behavior as \"reprehensible,\" but concluded that it did not constitute \"a grave danger to the nation.\"\nThe significance of the Clinton impeachment experience to informing the understanding of what constitutes an impeachable offense is thus open to debate. One might point to the impeachment articles recommended by the House Judiciary Committee, but not adopted by the full House, as concerning conduct insufficient to establish an impeachable offense. Specifically, the House declined to impeach President Clinton for his alleged perjury in a civil suit against him as well as for alleged untruthful statements made in response to congressional requests. Likewise, some scholars have pointed to the acquittal in the Senate of both impeachment articles brought by the House as evidence that the Clinton impeachment articles lacked merit or were adopted on purely partisan grounds. The statements of some Senators mentioned above, reasoning that Clinton's conduct did not qualify as an impeachable offense, may support arguments that impeachment is not an appropriate tool to address at least some sphere of conduct by a President not directly tied to his official duties. Even so, the failure to convict President Clinton might instead simply reflect the failure of the House Managers to prove their case, or simply bare political calculation by some Senators. Ultimately, the lessons of the Clinton impeachment experience will be revealed in the future practice of Congress when assessing whether similar conduct is impeachable if committed by future Presidents.\n\n\t\tContemporary Judicial Impeachments\n\nCongress has impeached federal judges with comparatively greater frequency in recent decades, and some of these impeachments appear to augur important consequences for the practice in the future. In particular, within three years in the 1980s the House voted to impeach three federal judges, each occurring after a criminal prosecution of the judge. One impeached federal judge was not barred from future office and later was elected to serve in the House of Representatives, the body that had earlier impeached him. Another judge challenged the adequacy of his impeachment trial in a case that ultimately reached the Supreme Court, which ruled that the case was nonjusticiable. \nThe House of Representatives impeached federal district judge Harry E. Claiborne in 1986, following his criminal conviction and imprisonment for providing false statements on his tax returns. Despite his incarceration, Judge Claiborne did not resign his seat and continued to collect his judicial salary. The House unanimously voted in favor of four articles of impeachment against him. The first two articles against Judge Claiborne simply laid out the underlying behavior that had led to his criminal prosecution. The third article \"rest[ed] entirely on the conviction itself\" and stood for the principle that \"by conviction alone he is guilty of . . . 'high crimes' in office.\" The fourth alleged that Judge Claiborne's actions brought the \"judiciary into disrepute, thereby undermining public confidence in the integrity and impartiality of the administration of justice\" which amounted to a \"misdemeanor.\" \nThe Senate impeachment trial of Judge Claiborne was the first in which that body used a committee to take evidence. Rather than conducting a full trial with the entire Senate, the committee took testimony, received evidence, and voted on pretrial motions regarding evidence and discovery. The committee then reported a transcript of the proceedings to the full Senate, without recommending whether impeachment was warranted. The Senate voted to convict Judge Claiborne on the first, second, and fourth articles.\nIn 1988, the House impeached a federal district judge who had been indicted for a criminal offense but was acquitted. Judge Alcee L. Hastings was acquitted in a criminal trial where he was accused of conspiracy and obstruction of justice for soliciting a bribe in return for reducing the sentences of two felons. After his acquittal, a judicial committee investigated the case and concluded that Judge Hastings's behavior might merit impeachment. The Judicial Conference (a national entity composed of federal judges that reviews investigations of judges and may refer recommendations to Congress) eventually referred the matter to the House of Representatives, noting that impeachment might be warranted. The House of Representatives approved seventeen impeachment articles against Judge Hastings, including for perjury, bribery, and conspiracy.\nJudge Hastings objected to the impeachment proceedings as \"double jeopardy\" because he had already been acquitted in a previous criminal proceeding. The Senate, however, rejected his motion to dismiss the articles against him. The Senate again used a trial committee to receive evidence. That body voted to convict and remove Judge Hastings on eight articles, but did not vote to disqualify him from holding future office. Judge Hastings was later elected to the House of Representatives.\nBefore the trial of Judge Hastings even began in the Senate, the House impeached Judge Walter L. Nixon. Judge Nixon was convicted in a criminal trial of perjury to a grand jury and imprisoned. Following an investigation by the House Judiciary Committee's Subcommittee on Civil and Constitutional Rights, the Judiciary Committee reported a resolution to the full House recommending impeachment on three articles. The full House approved three articles of impeachment, the first two involving lying to a grand jury and the last for undermining the integrity of and bringing disrepute on the federal judicial system. The Senate convicted Judge Nixon on the first two articles but acquitted him on the third. \nJudge Nixon challenged the Senate's use of a committee to receive evidence and conduct hearings. He sued in federal court arguing that the use of a committee, rather than the full Senate, to take evidence violated the Constitution's provision that the Senate \"try\" all impeachments. The Supreme Court ultimately rejected his challenge in Nixon v. United States , ruling that the issue was a nonjusticiable political question because the Constitution grants the power to try impeachments \"in the Senate and nowhere else\"; and the word \"try\" \"lacks sufficient precision to afford any judicially manageable standard of review of the Senate's actions. \" As a result of this decision, impeachment proceedings appear largely immune from judicial review.\nTwo judges have been impeached in the twenty-first century. As with the three impeachments of judges in the 1980s, the first followed a criminal indictment. District Judge Samuel B. Kent pleaded guilty to obstruction of justice for lying to a judicial investigation into alleged sexual misconduct and was sentenced to thirty-three months in prison. The House impeached Judge Kent for sexually assaulting two court employees, obstructing the judicial investigation of his behavior, and making false and misleading statements to agents of the Federal Bureau of Investigation about the activity. Judge Kent resigned his office before a Senate trial. The Senate declined to conduct a trial following his resignation.\nAlthough the four previous impeachments of federal judges followed criminal proceedings, the most recent impeachment did not. In 2010, Judge G. Thomas Porteous Jr. was impeached for participating in a corrupt financial relationship with attorneys in a case before him, and engaging in a corrupt relationship with bail bondsmen whereby he received things of value in return for helping the bondsman develop corrupt relationships with state court judges. Judge Porteous was the first individual impeached by the House and convicted by the Senate based in part on conduct occurring before he began his tenure in federal office. The first and second articles of impeachment each alleged misconduct by Judge Porteous during both his state and federal judgeships. The fourth alleged that Judge Porteous made false statements to the Senate and FBI in connection with his nomination and confirmation to the U.S. District Court for the Eastern District of Louisiana.\nJudge Porteous's filings in answer to the articles of impeachment argued that conduct occurring before he was appointed to the federal bench cannot constitute impeachable behavior. The House Managers' replication, or reply to this argument, argued that Porteous's contention had no basis in the Constitution. On December 8, 2010, he was convicted on all four articles, removed from office, and disqualified from holding future federal offices. The first article, which included conduct occurring before he was a federal judge, was affirmed 96-0. The second article, approved 90-6, alleged that he lied to the Senate in his confirmation hearing to be a federal judge. A number of Senators explicitly adopted the reasoning supplied by expert witness testimony before the House that the crucial issue over the appropriateness of impeachment was not the timing of the misconduct, but \"whether Judge Porteous committed such misconduct and whether such misconduct demonstrates the lack of integrity and judgment that are required in order for him to continue to function\" in office.\nSenator Claire McCaskill explained in her statement entered in the Congressional Record that Judge Porteous's argument for an \"absolute, categorical rule that would preclude impeachment and removal for any pre-federal conduct\" should be rejected. \"That should not be the rule,\" she noted, \"any more than allowing impeachment for any pre-federal conduct that is entirely unrelated to the federal office.\" Senator Patrick Leahy agreed, noting that he \"reject[ed] any notion of impeachment immunity [for pre-federal behavior] if misconduct was hidden, or otherwise went undiscovered during the confirmation process, and it is relevant to a judge's ability to serve as an impartial arbiter.\"\n\n\tRecurring Questions About Impeachment\n\n\t\tWho Counts as an Impeachable Officer?\n\nThe Constitution explicitly makes \"[t]he President, Vice President and all civil Officers of the United States\" subject to impeachment and removal. Which officials are considered \"civil Officers of the United States\" for purposes of impeachment is a significant constitutional question that remains partly unresolved. Based on both the constitutional text and historical precedent, federal judges and Cabinet-level officials are \"civil Officers\" subject to impeachment, while military officers, state and local officials, purely private individuals, and Members of Congress likely are not. \nA question that neither the Constitution nor historical practice has answered is whether Congress may impeach and remove lower-level, non-Cabinet executive branch officials. The Constitution does not define \"civil Officers of the United States.\" Nor do the debates at the Constitutional Convention provide significant evidence of which individuals (beyond the President and Vice President) the Framers intended to be impeachable. Impeachment precedents in both the House and Senate are of equally limited utility with respect to subordinate executive officials (i.e., executive branch officials other than the President and Vice President). In all of American history, only one such official has been impeached: Secretary of War William Belknap. Thus, while it seems that executive officials of the highest levels have been viewed as \"civil Officers,\" historical precedent provides no examples of the impeachment power being used against lower-level executive officials. One must therefore look to other sources for aid in determining precisely how far down the federal bureaucracy the impeachment power might reach. \nThe general purposes of impeachment may assist in interpreting the proper scope of \"civil Officers of the United States.\" The congressional power of impeachment constitutes an important aspect of the various checks and balances built into the Constitution to preserve the separation of powers. It is a tool, entrusted to the House and Senate alone, to remove government officials in the other branches of government, who either abuse their power or engage in conduct that warrants their dismissal from an office of public trust. At least one commentator has suggested that the Framers recognized, particularly for executive branch officials, that there would be times when it may not be in the President's interest to remove a \"favorite\" from office, even when that individual has violated the public trust. As such, the Framers \"dwelt repeatedly on the need of power to oust corrupt or oppressive ministers whom the President might seek to shelter.\" If the impeachment power were meant to ensure that Congress has the ability to impeach and remove corrupt officials that the President was unwilling to dismiss, it would seem arguable that the power should extend to officers exercising a degree of authority, the abuse of which would harm the separation of powers and good government. \nThe writings of early constitutional commentators also arguably suggest a broad interpretation of \"civil Officers of the United States.\" Joseph Story addressed the reach of the impeachment power in his influential Commentaries on the Constitution , asserting that \" all officers of the United states [] who hold their appointments under the national government, whether their duties are executive or judicial, in the highest or in the lowest departments of the government , with the exception of officers in the army and navy, are properly civil officers within the meaning of the constitution, and liable to impeachment.\" Similarly, William Rawle reasoned that \"civil Officers\" included \"[ a ] ll executive and judicial officers, from the President downwards , from the judges of the Supreme Court to those of the most inferior tribunals. . . .\" Consistent with the text of the Constitution, these early interpretations suggest the impeachment power was arguably intended to extend to \"all\" executive officers, and not just Cabinet-level officials and other executive officials at the highest levels.\nThe meaning of \"officer of the United States\" under the impeachment provisions may be informed by other provisions of the Constitution that use the same phrase. Applying this contextual approach, the most thorough, and perhaps most helpful, judicial elucidation of the definition of \"Officers of the United States\" comes in the Constitution's Appointments Clause. Indeed, that provision, which establishes the methods by which \"Officers of the United States\" may be appointed, has generally been viewed as a useful guidepost in establishing the definition of \"civil Officers\" for purposes of impeachment.\nThe Appointments Clause provides that the President\nshall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.\nIn interpreting the Appointments Clause, the Court has distinguished \"Officers of the United States,\" whose appointment is subject to the requirements of the Clause, and non-officers, also known as employees, whose appointment is not. The amount of authority that an individual exercises will generally determine his classification as either an officer or employee. As established in Buckley v. Valeo , an officer is \"any appointee exercising significant authority pursuant to the laws of the United States,\" while employees are viewed as \"lesser functionaries subordinate to the officers of the United States,\" who do not exercise \"significant authority.\"\nThe Supreme Court has further subdivided \"officers\" into two categories: principal officers, who may be appointed only by the President with the advice and consent of the Senate; and inferior officers, whose appointment Congress may vest \"in the President alone, in the Courts of Law, or in the Heads of Departments.\" The Court has acknowledged that its \"cases have not set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes.\" The clearest statement of the proper standard to be applied in differentiating between the two types of officers appears to have been made in Edmond v. United States when the Court noted that \"[g]enerally speaking, the term 'inferior officer' connotes a relationship with some higher ranking officer or officers below the President . . . [and] whose work is directed and supervised at some level by others who were appointed by presidential nomination with the advice and consent of the Senate. \" Thus, in analyzing whether one may be properly characterized as either an inferior or a principal officer, the Court's decisions appear to focus on the extent of the officer's discretion to make autonomous policy choices and the authority of other officials to supervise and to remove the officer.\nUsing the principles established in the Court's Appointments Clause jurisprudence to interpret the scope of \"civil Officers\" for purposes of impeachment, it would appear that employees, as non-officers, would not be subject to impeachment. Thus, lesser functionaries\u00e2\u0080\u0094such as federal employees who belong to the civil service, do not exercise \"significant authority,\" and are not appointed by the President or an agency head\u00e2\u0080\u0094would not be subject to impeachment. At the opposite end of the spectrum, it would seem that any official who qualifies as a principal officer, including a head of an agency such as a Secretary, Administrator, or Commissioner, would be impeachable. \nThe remaining question is whether inferior officers, or those officers who exercise significant authority under the supervision of a principal officer, are subject to impeachment and removal. As noted above, an argument can be made from the text and purpose of the impeachment clauses, as well as early constitutional interpretations, that the impeachment power was intended to extend to \" all \" officers of the United States, and not just those in the highest levels of government. Any official exercising \"significant authority,\" including both principal and inferior officers, would therefore qualify as a \"civil Officer\" subject to impeachment. This view would permit Congress to impeach and remove any executive branch \"officer,\" including many deputy political appointees and certain administrative judges. \nThere is some historical evidence, however, to suggest that inferior officers were not meant to be subject to impeachment. For example, a delegate at the North Carolina ratifying convention asserted that \"[i]t appears to me . . . the most horrid ignorance to suppose that every officer, however trifling his office, is to be impeached for every petty offense . . . I hope every gentleman . . . must see plainly that impeachments cannot extend to inferior officers of the United States.\" Additionally, Governeur Morris, member of the Pennsylvania delegation to the Constitutional Convention, arguably implied that inferior officers would not be subject to impeachment in stating that \"certain great officers of State; a minister of finance, of war, of foreign affairs, etc. . . . will be amenable by impeachment to the public justice.\" \nDespite this ongoing debate, the authority to resolve any ambiguity in the scope of \"civil Officers\" for purposes of impeachment lays initially with the House, in adopting articles of impeachment, and then with the Senate, in trying the officer. \n\n\t\tIs Impeachment Limited to Criminal Acts?\n\nThe Constitution describes the grounds of impeachment as \"Treason, Bribery, or other high Crimes and Misdemeanors.\" As discussed above, the meaning of \"high Crimes and Misdemeanors\" is not defined in the Constitution or in statute. \nSome have argued that only criminal acts are impeachable offenses under the U.S. Constitution; impeachment is therefore inappropriate for noncriminal activity. In support of this assertion, one might note that the debate on impeachable offenses during the Constitutional Convention in 1787 shows that criminal conduct was encompassed in the \"high crimes and misdemeanors\" standard. \nAs noted above, the notion that only criminal conduct can constitute sufficient grounds for impeachment does not, however, track historical practice. A variety of congressional materials support the notion that impeachment applies to certain noncriminal misconduct. For example, House committee reports on potential grounds for impeachment have described the history of English impeachment as including noncriminal conduct and noted that this tradition was adopted by the Framers. In accordance with the understanding of \"high\" offenses in the English tradition, impeachable offenses under this view are \"constitutional wrongs that subvert the structure of government, or undermine the integrity of office and even the Constitution itself.\" \"[O]ther high crimes and misdemeanor[s]\" are not limited to indictable offenses, but apply to \"serious violations of the public trust.\" Congressional materials take the view that \"'Misdemeanor' . . . does not mean a minor criminal offense as the term is generally employed in the criminal law,\" but refers instead to the behavior of public officials. \"[H]igh Crimes and Misdemeanors\" may thus be characterized as \"misconduct that damages the state and the operations of governmental institutions.\" \nAccording to congressional materials, the purposes underlying the impeachment process also reflect that noncriminal activity may constitute sufficient grounds for impeachment. The purpose of impeachment is not to inflict personal punishment for criminal activity. In fact, the Constitution explicitly makes clear that impeached individuals are not immunized from criminal liability once they are impeached for particular activity. Instead, impeachment is a \"remedial\" tool; it serves to effectively \"maintain constitutional government\" by removing individuals unfit for office. Grounds for impeachment include abuse of the particular powers of government office or a violation of the \"public trust\" \u00e2\u0080\u0094conduct that is unlikely to be barred by statute. \nCongressional practice also supports this position. Many impeachments approved by the House of Representatives have included conduct that did not involve criminal activity. For example, in 1803, Judge John Pickering was impeached and convicted for, among other things, appearing on the bench \"in a state of total intoxication.\" In 1912, Judge Robert W. Archbald was impeached and convicted for abusing his position as a judge by inducing parties before him to enter financial transactions with him. In 1936, Judge Halstead Ritter was impeached and convicted for conduct that \"br[ought] his court into scandal and disrepute, to the prejudice of said court and public confidence in the administration of justice . . . and to the prejudice of public respect for and confidence in the Federal judiciary.\" And a number of judges were impeached for misusing their position for personal profit.\n\n\t\tAre the Standards for Impeachable Offenses the Same for Judges and Executive Branch Officials?\n\nSome have suggested that the standard for impeaching a federal judge differs from an executive branch official. While Article II, Section 1, of the Constitution specifies the grounds for the impeachment of civil officers as \"Treason, Bribery, or other high Crimes and Misdemeanors,\" Article III, Section 1, provides that federal judges \"hold their Offices during good Behaviour.\" One argument posits that these clauses should be read in conjunction, meaning that judges can be impeached and removed from office if they fail to exhibit good behavior or if they are guilty of \"treason, bribery, or other high Crimes and Misdemeanors.\" \nBut while one might find some support for the notion that the \"good behavior\" clause constitutes an additional ground for impeachment in early twentieth century practice, the \"modern view\" of Congress appears to be that the phrase \"good behavior\" simply designates judicial tenure. Under this reasoning, rather than functioning as a ground for impeachment, the \"good behavior\" phrase simply makes clear that federal judges retain their office for life unless they are removed through a proper constitutional mechanism. For example, a 1973 discussion of impeachment grounds released by the House Judiciary Committee reviewed the history of the phrase and concluded that the \"Constitutional Convention . . . quite clearly rejected\" a \"dual standard\" for judges and civil officers. The next year, the House Judiciary Committee's Impeachment Inquiry asked whether the \"good behavior\" clause provides another ground for impeachment of judges and concluded that \"[i]t does not.\" It emphasized that the House's impeachment of judges was \"consistent\" with impeachment of \"non-judicial officers.\" Finally, the House Report on the Impeachment of President Clinton affirmed this reading of the Constitution, stating that impeachable conduct for judges mirrored impeachable conduct for other civil officers in the government. The \"treason, bribery, and high Crimes and Misdemeanors\" clause thus serves as the sole standard for impeachable conduct for both executive branch officials and federal judges.\nStill, even if the \"good behavior\" clause does not delineate a standard for impeachment and removal for federal judges, as a practical matter, one might argue that the range of impeachable conduct differs between judges and executive branch officials because of the differing nature of each office. For example, one might argue that a federal judge could be impeached for perjury or fraud because of the importance of trustworthiness and impartiality to the judiciary, while the same behavior might not always constitute impeachable conduct for an executive branch official. But given the varied factors at issue\u00e2\u0080\u0094including political calculations, the relative paucity of impeachments of nonjudicial officers compared to judges, and the fact that a nonjudicial officer has never been convicted by the Senate\u00e2\u0080\u0094it is uncertain if conduct meriting impeachment and conviction for a judge would fail to qualify for a nonjudicial officer.\nThe impeachment and acquittal of President Clinton highlights this difficulty. The House of Representatives impeached President Clinton for (1) providing perjurious and misleading testimony to a federal grand jury and (2) obstruction of justice in regards to a civil rights action against him. The House Judiciary Committee report that recommended articles of impeachment argued that perjury by the President was an impeachable offense, even if committed with regard to matters outside his official duties. The report rejected the notion that conduct such as perjury was \"more detrimental when committed by judges and therefore only impeachable when committed by judges.\" The report pointed to the impeachment of Judge Claiborne, who was impeached and convicted for falsifying his income tax returns\u00e2\u0080\u0094an act which \"betrayed the trust of the people of the United States and reduced confidence in the integrity and impartiality of the judiciary.\" While it is \"devastating\" for the judiciary when judges are perceived as dishonest, the report argued, perjury by the President is \"just as devastating to our system of government.\" And, the report continued, both Judge Claiborne and Judge Nixon were impeached and convicted for perjury and false statements in matters distinct from their official duties. Likewise, the report concluded that President Clinton's perjurious conduct, though seemingly falling outside his official duties as President, nonetheless constituted grounds for impeachment.\nIn contrast, the minority views from the report opposing impeachment reasoned that \"not all impeachable offenses are crimes and not all crimes are impeachable offenses.\" The minority argued that the President is not impeachable for all potential crimes, no matter how minor; impeachment is reserved for \"conduct that constitutes an egregious abuse or subversion of the powers of the executive office.\" Examining the impeachment of President Andrew Johnson and the articles of impeachment drawn up for President Richard Nixon, the minority concluded that both were accused of committing \"public misconduct\" integral to their \"official duties.\" The minority noted that the Judiciary Committee had rejected an article of impeachment against President Nixon alleging that he committed tax fraud, primarily because that \"related to the President's private conduct, not to an abuse of his authority as President.\" \nThe minority did not explicitly claim that the grounds for impeachment might be different between federal judges and executive branch officials, but its reasoning at least hints in that direction. Its rejection of nonpublic behavior as sufficient grounds for impeachment of the President\u00e2\u0080\u0094including its example of tax fraud as nonpublic behavior that does not qualify\u00e2\u0080\u0094appears to conflict with the past impeachment and conviction of federal judges on just this basis. One reading of the minority's position is that certain behavior might be impeachable conduct for a federal judge, but not for the President. \nWhile two articles of impeachment were approved by the House, the Senate acquitted President Clinton on both charges. Even so, generating firm conclusions from this result is difficult, as there may have been varying motivations for these votes. One possibility is that the acquittal occurred because some Senators\u00e2\u0080\u0094though agreeing that the conduct merited impeachment\u00e2\u0080\u0094thought the House Managers failed to prove their case. Another is that certain Senators disagreed that the behavior was impeachable at all. Yet another possibility is that neither ideological stance was considered and voting was conducted solely according to political calculations. \n\n\t\tWhat Is the Constitutional Definition of Bribery?\n\nCivil officers are subject to impeachment for treason, bribery, or \"other high Crimes and Misdemeanors.\" Treason is defined in the constitutional text, but bribery is not. As this report has discussed, Congress has substantial discretion in determining what misconduct constitutes \"high Crimes and Misdemeanors\" meriting impeachment and removal for government officials. Likewise, Congress could presumably look to several different sources to inform its understanding of what behavior qualifies as bribery under the Constitution.\nOne source might be the current federal criminal code. Under federal statute, it is a criminal offense for a public official to corruptly seek or receive bribes in return for official acts.\nAnother might be the understanding of the crime of bribery at the nation's Founding. At the time of the Constitutional Convention, bribery was a common law crime, although its precise scope is somewhat difficult to determine. According to Blackstone, it included situations where a judge, or other person involved in the administration of justice, took \"any undue reward to influence his behavior in office.\" Though the scope of the crime of bribery was initially narrow, it appears to have expanded to include giving as well as receiving bribes, as well as attempted bribery in certain situations. Some commentators assert that, at the time of the Founding, the English and American common law definition of bribery had developed to apply not just to judges, but also to executive officers .\nNo matter the precise scope of bribery in the common law courts, in Parliamentary practice it was understood to constitute an impeachable offense in England at the time of the nation's Founding. In 1624, the House of Commons impeached the Lord Treasurer (one of the King's ministers) for bribery. \nActual debate on the meaning of bribery at the Constitutional Convention was limited. As mentioned above, while discussing presidential impeachment, Gouverneur Morris asserted that the President should be subject to the impeachment process because he might \"be bribed by a greater interest to betray his trust,\" noting the example of Charles II receiving a bribe from Louis XIV. \nThe First Congress enacted a federal bribery statute for customs officers, which provided that those officers convicted of taking or receiving a bribe be fined and barred from holding office in the future, while the payer of a bribe would be fined as well . The same Congress passed another bribery statute that applied to anyone who \"directly or indirectly, give[s] any sum or sums of money, or any other bribe, present or reward, or any promise, contract, obligation or security, for the payment or delivery of any money, present or reward, or any other thing to obtain or procure the opinion, judgment or decree of any judge or judges of the United States\" as well as the judge who accepted the bribe. Other officers of the United States were added to the federal statute's provisions in 1853. And the states passed their own laws about the time of the Constitution's drafting that prohibited bribery and the closely related crime of extortion by state officers and judges. \nA number of impeachments in the United States have charged individuals with misconduct that was viewed as bribery. In most of those instances, however, the specific articles of impeachment were framed as \"high crimes and misdemeanors\" or an \"impeachable offense.\" For instance, the House of Representatives approved articles of impeachment against then-Judge Hastings, including one for the \"impeachable offense\" of participating in a \"corrupt conspiracy to obtain $150,000 from defendants [in a case before him] in return for the imposition of [lighter] sentences.\" Although the article did not mention bribery, the Judiciary Committee report analyzing the article described Judge Hastings as participating in a \"bribery conspiracy\" or a \"bribery scheme.\" The Senate convicted Hastings on this article. Likewise, the first article of impeachment against Judge Porteous charged him with \"solicit[ing] and accept[ing] things of value\" from attorneys without disclosure and ruling in those clients favor. The second charged him with \"solicit[ing] and accept[ing] things of value . . . for his personal use and benefit, while at the same time taking official actions that benefitted\" a bail bondman and his sister. Neither article explicitly referenced bribery, but much like the Hastings impeachment, the Judiciary Committee report analyzing the articles alleged that Judge Porteous had participated in a \"bribery scheme.\" \nIn sum, the Framers provided that bribery was an impeachable offense for the President, Vice President, and other civil officers. At the time of the Constitution's drafting, bribery was a common law crime whose scope had expanded from its earlier roots. And Parliament had impeached ministers of the Crown for bribery. But the Framers did not adopt a formal definition of bribery in the Constitution, and the debates at the Constitutional Convention and during ratification do not clearly indicate the intended meaning of bribery for impeachment purposes. In any case, the practice of impeachment in the United States has tended to envelop charges of bribery within the broader standard of \"other high Crimes and Misdemeanors.\"\n\n\t\tImpeachment for Behavior Prior to Assuming Office\n\nMost impeachments have concerned behavior occurring while an individual is in a federal office. But some have addressed, at least in part, conduct before individuals assumed their positions. For example, in 1912, a resolution impeaching Judge Robert W. Archbald and setting forth thirteen articles of impeachment was reported out of the House Judiciary Committee and agreed to by the House. The Senate convicted Judge Archbald in January the next year. At the time that Judge Archbald was impeached by the House and tried by the Senate in the 62nd Congress, he was U.S. Circuit Judge for the Third Circuit and a designated judge of the U.S. Commerce Court. The articles of impeachment brought against him alleged misconduct in those positions as well as in his previous position as U.S. District Court Judge of the Middle District of Pennsylvania. Judge Archbald was convicted on four articles alleging misconduct in his then-current positions as a circuit judge and Commerce Court judge, and on a fifth article that alleged misuse of his office both in his then-current positions and in his previous position as U.S. District Judge. \nWhile Judge Archbald was impeached and convicted in part for behavior occurring before he assumed his then-current position, that behavior occurred while he held a prior federal office. Judge G. Thomas Porteous, in contrast, is the first individual to be impeached by the House and convicted by the Senate based in part on conduct occurring before he began his tenure in federal office. Article II alleged misconduct beginning while Judge Porteous was a state court judge as well as misconduct while he was a federal judge. Article IV alleged that Judge Porteous made false statements to the Senate and FBI in connection with his nomination and confirmation to the U.S. District Court for the Eastern District of Louisiana. He was convicted on all four articles, removed from office, and disqualified from holding future federal offices.\nOn the other hand, it does not appear that any President, Vice President, or other civil officer of the United States has been impeached by the House solely based on conduct occurring before he began his tenure in the office held at the time of the impeachment investigation, although the House has, on occasion, investigated such allegations.\n\n\t\tImpeachment After an Individual Leaves Office\n\nIt appears that federal officials who have resigned have still been thought to be susceptible to impeachment and a ban on holding future office. Secretary of War William W. Belknap resigned hours before the House impeached him, but the Senate still conducted a trial in which Belknap was acquitted. During the trial, upon objection by Belknap's counsel that the Senate lacked jurisdiction because Belknap was now a private citizen, the Senate voted in favor of jurisdiction. \nThat said, the resignation of an official under investigation for impeachment often ends impeachment proceedings. For example, no impeachment vote was taken following President Richard Nixon's resignation after the House Judiciary Committee decided to report articles of impeachment to the House. And proceedings were ended following the resignation of Judges English, Delahay, and Kent.\n\n\t\tWhat Is the Standard of Proof in House and Senate Impeachment Proceedings?\n\nIn the judicial system, the degree of certainty with which parties must prove their allegations through the production of evidence\u00e2\u0080\u0094what is known as the burden of persuasion or the standard of proof \u00e2\u0080\u0094varies depending on the type of proceeding. In a criminal trial, in which a defendant risks deprivation of life and liberty, the prosecutor's burden of proof is high. Each element of the offense must be proved \"beyond a reasonable doubt.\" In civil litigation between private parties, in which the potential harm to a defendant is less severe, the plaintiff's burden of proof is reduced. The allegations generally need only be proved by a \"preponderance of the evidence.\" An even more generous standard is used by federal grand juries, who may issue an indictment on a finding that there is \"probable cause\" to believe that a crime has occurred. In yet other settings, an intermediate standard of \"clear and convincing evidence\" is used. This burden is somewhere below \"reasonable doubt\" but higher than \"preponderance.\" \nThe Constitution establishes no clear standard of proof to be applied in the impeachment process. Neither has the House in its decision to impeach, nor the Senate in its decision to convict, chosen to establish (either by rule or precedent) a particular governing standard. The question has been repeatedly debated in both chambers, but ultimately individual Members have been free to use any standard they wish in deciding how to cast their respective votes. In short, when deciding questions of impeachment and removal, historical practice seems to indicate that Members need be convinced only to their own satisfaction. Moreover, even if the House or Senate chose to establish a governing standard of proof, it may be hard for such a rule to be enforced. \n\n\t\t\tStandard of Proof in the House\n\nIn the House, the debate over the standard of proof that should be applied in determining whether the evidence supports approval of articles of impeachment has generally focused on the lower end of the standards-of-proof spectrum. \nThose who have argued for the most easily satisfied probable cause standard have often analogized the House's decision to impeach to that of a grand jury's decision to indict. Like a grand jury, the House's role is to ascertain whether sufficient evidence exists to charge an official with an impeachable offense, not to determine guilt. That role is reserved to the Senate, which may apply a different, potentially higher standard of proof. As such, it is argued that the House should apply a similar standard to what is applied by an investigating grand jury\u00e2\u0080\u0094a standard such as preponderance of the evidence or \"probable cause.\" This position was perhaps most clearly articulated during the Judiciary Committee's consideration of the impeachment of Judge Charles Swayne in 1904 by Representative Powers, who argued the following: \nThis House has no constitutional power to pass upon the question of the guilt or the innocent of the respondent. He is not on trial before us. We have no right to take from him the presumption of innocence which he enjoys under the law. All we have the right to do is to say whether there has been made out such probable cause of guilt as to entitle the American people to the right to have the case tried before the Senate of the United States.\nThose who have argued for the more demanding clear and convincing standard have often focused on the gravity of the impeachment process and its impact not only on the impeached official, but in the case of a presidential impeachment, on the entire executive branch. For example, during the House's consideration of articles of impeachment against President Clinton, the President's counsel asserted that the clear and convincing standard was \"commensurate with the gravity of impeachment.\" \"Lower standards,\" it was argued, \"are simply not demanding enough to justify the fateful step of an impeachment trial.\" \nThe House Judiciary Committee's report issued in connection with its approval of articles of impeachment against President Nixon displays the House's historical reluctance to impose any formalized burden of proof on Members. In describing the articles, the report noted that the committee had found \"clear and convincing evidence\" of the individual impeachable offenses, but did not explicitly contend that such a finding was required, or that \"clear and convincing\" should represent the governing standard of proof in House impeachments. The dissenting Members took a different approach, arguing that they were persuaded that the applicable standard for proof in House impeachments \"must be no less rigorous than proof by 'clear and convincing evidence.'\" Even so, the minority not only acknowledged that the House has never sought to \"fix by rule\" an applicable standard of proof, but also explicitly stated that they would not \"advocate such a rule.\" \"The question,\" the minority concluded, \"is properly left to the discretion of individual Members.\" \n\n\t\t\tStandard of Proof in the Senate\n\nMuch like Members of the House, Senators are not bound by any specific burden of proof in the trial of an impeached official. Counsel for the impeached official have generally argued that individual Senators should adopt the most demanding standard of \"beyond a reasonable doubt,\" while the House Managers have generally urged a lower standard. \nThe Constitution's use of words like \"try\" and \"convicted\" could be read to suggest an intent that the Senate adopt a criminal-like standard in impeachment trials. Counsel for President Clinton argued this position, at least with respect to presidential impeachments, asserting that the Constitution's phrasing \"strongly suggests that an impeachment trial is akin to a criminal proceeding and that the beyond-a-reasonable-doubt standard of criminal proceedings should be used.\" House Managers, on the other hand, have generally argued that use of the \"beyond reasonable doubt\" standard is inappropriate. They have noted that \"an impeachment trial is not a criminal trial,\" nor are the consequences of a conviction\u00e2\u0080\u0094which are limited to removal from office and possible disqualification from holding future federal office\u00e2\u0080\u0094criminal in nature. \nThe Senate's approach of ensuring that its Members retain the ability to make individualized decisions on the standard of proof necessary for conviction was perhaps best exhibited during the impeachment trial of Judge Claiborne. There, counsel for Judge Claiborne submitted a motion to establish \"beyond a reasonable doubt\" as the applicable standard of proof in the trial. The House Managers disagreed, arguing that standard was inappropriate, and that setting any standards would prevent individual members from exercising their own personal judgment. Judge Claiborne's motion was ultimately rejected by the Presiding Officer, who held that the standard of proof to be applied was left to the discretion of each individual Senator.\nThis approach was affirmed in the Senate's most recent statement on the standard of proof in a Senate trial. During Judge Porteous's trial, the Senate trial committee referenced the resolution of the Claiborne motion, noting that the Senate had \"declin[ed] to establish an obligatory standard.\" Accordingly, the committee report concluded that \"Each Senator may, therefore, use the standard of proof that he or she feels is appropriate.\" \nAs such, rather than impose a specific standard of proof on its members, both the House and Senate have sought to ensure that individual Members remain free to make their own determinations, guided by their individual conscience and judgment, and their oath to do \"impartial justice.\" \n\n\t\tWhat Are the Applicable Evidentiary Rules and Standards in a Senate Impeachment Trial?\n\nLike most aspects of the Senate impeachment trial, the body's approach to evidentiary questions is unique. The Senate has not bound itself to any specific controlling set of evidentiary rules. Instead, the admissibility of evidence is primarily based on Senate precedent, with objections first ruled on by the Presiding Officer, but ultimately settled by a majority vote of the Senate. \nThe present Senate Impeachment Rules provide a basic procedural framework for how evidentiary questions are to be handled. Under the Rules, objections to the admissibility of evidence \"may be made by the parties or their counsel.\" Those objections are directed to the Presiding Officer who \"may rule on all questions of evidence.\" That ruling is given effect unless challenged by an individual Senator. At that point, the Rules provide that the question be \"submitted to the Senate for decision without debate.\" \nThe Rules set the process by which evidentiary questions are to be decided, but provide only the most basic guidance on the substantive standards to be applied by either the Presiding Officer or individual Senators in making such decisions. The Rules state only that the Presiding Officer's authority to rule on questions of evidence includes, but is not limited to, \"questions of relevancy, materiality, and redundancy of evidence and incidental questions.\" Similarly, the Senate reserves the right to \"determine competency, relevancy, and materiality.\" The Rules therefore suggest only that evidence should meet basic relevancy requirements. \nTo the extent there are additional substantive standards for either the Presiding Officer or individual Senators to apply in making evidentiary determinations, they appear to derive primarily from Senate precedent. Evaluating and understanding those precedents, however, is difficult because evidentiary questions submitted to the Senate are generally made with no debate. As such, the historical record of Senate deliberations on evidentiary questions typically includes the final disposition of the question and perhaps only limited evidence of the particular reasoning that led to the Senate's decision. \nGiven the quasi-judicial aspects of the Senate trial, the parties have often used judicial evidentiary standards, including the Federal Rules of Evidence, to support their motions to either allow or exclude evidence. The Senate has generally been receptive to this approach and in fact arguably supported some adherence to judicial rules of evidence. But more recent trials have made clear that the Senate is \"not bound by the Federal Rules of Evidence, although those rules may provide some guidance. . . .\" Indeed, it has been argued that the Federal Rules of Evidence, which were designed to protect jurors from prejudicial evidence and to help them judge evidence, have little if any place in a Senate impeachment trial, where each individual Senator must weigh all relevant evidence as he or she deems fit. This approach is consistent with Chief Justice Rehnquist's ruling during the Clinton impeachment trial that the Senators should not be referred to as \"jurors\" because in an impeachment trial \"the Senate is not simply a jury. It is a court. . . .\" Accordingly, while judicial principles may guide the Senate, the body primarily \"determine[s] the admissibility of evidence by looking to Senate precedents rather than court decisions. A Senate vote is the ultimate authority for determining the admissibility of evidence.\"\nIn the end, viewing House and Senate impeachment proceedings through the lens of established judicial constructs\u00e2\u0080\u0094including rules of procedure, evidence, and standards of proof\u00e2\u0080\u0094should be undertaken with caution. The impeachment process does not fit into existing judicial molds of either a criminal or civil proceeding. Indeed, it is not necessarily a judicial proceeding at all. It is instead an exceptional proceeding defined by its distinctive combination of judicial and legislative characteristics that has historically required a unique approach to procedural and evidentiary questions.\n\n\t\tAre Impeachment Proceedings Subject to Judicial Review?\n\nImpeachment proceedings have been challenged in federal court on a number of occasions. Perhaps most significantly, the Supreme Court has ruled that a challenge to the Senate's use of a trial committee to take evidence posed a nonjusticiable political question. In Nixon v. United States , Judge Walter L. Nixon had been convicted in a criminal trial on two counts of making false statements before a grand jury and was sent to prison. He refused, however, to resign and continued to receive his salary as a judge while in prison. The House of Representatives adopted articles of impeachment against the judge and presented the Senate with the articles. The Senate invoked Impeachment Rule XI, a Senate procedural rule which permits a committee to take evidence and testimony. After the committee completed its proceedings, it presented the full Senate with a transcript and report. Both sides presented briefs to the full Senate and delivered arguments, and the Senate then voted to convict and remove him from office. The judge then brought a suit arguing that the use of a committee to take evidence violated the Constitution's provision that the Senate \"try\" all impeachments.\nThe Supreme Court noted that the Constitution grants \"the sole Power\" to try impeachments \"in the Senate and nowhere else\"; and the word \"try\" \"lacks sufficient precision to afford any judicially manageable standard of review of the Senate's actions.\" This constitutional grant of sole authority, the Court reasoned, meant that the \"Senate alone shall have authority to determine whether an individual should be acquitted or convicted.\" In addition, because impeachment functions as the \" only check on the Judicial Branch by the Legislature,\" the Court noted the important separation of powers concerns that would be implicated if the \"final reviewing authority with respect to impeachments [was placed] in the hands of the same body that the impeachment process is meant to regulate.\" Further, the Court explained that certain prudential considerations\u00e2\u0080\u0094\"the lack of finality and the difficulty of fashioning relief\"\u00e2\u0080\u0094weighed against adjudication of the case. Judicial review of impeachments could create considerable political uncertainty, if, for example, an impeached President sued for judicial review.\nThe Court in Nixon was careful to distinguish the situation from Powell v. McC ormack , a case also involving congressional procedure where the Court declined to apply the political question doctrine. That case involved a challenge brought by a Member-elect of the House of Representatives, who had been excluded from his seat pursuant to a House Resolution. The precise issue in Powell was whether the judiciary could review a congressional decision that the plaintiff was \"unqualified\" to take his seat. That determination had turned, the Court explained, \"on whether the Constitution committed authority to the House to judge its Members' qualifications, and if so, the extent of that commitment.\" The Court noted that while Article I, Section 5, does provide that Congress shall determine the qualifications of its Members, Article I, Section 2, delineates the three requirements for House membership\u00e2\u0080\u0094Representatives must be at least twenty-five years old, have been U.S. citizens for at least seven years, and inhabit the states they represent. Therefore, the Powell Court concluded, the House's claim that it possessed unreviewable authority to determine the qualifications of its Members \"was defeated by . . . this separate provision specifying the only qualifications which might be imposed for House membership.\" In other words, finding that the House had unreviewable authority to decide its Members' qualifications would violate another provision of the Constitution. The Court therefore concluded in Powell that whether the three requirements in the Constitution were satisfied was textually committed to the House, \"but the decision as to what these qualifications consisted of was not.\" Applying the logic of Powell to the case at hand, the Nixon Court noted that here, in contrast, leaving the interpretation of the word \"try\" with the Senate did not violate any \"separate provision\" of the Constitution.\nIn addition, several other aspects of the impeachment process have been challenged. Judge G. Thomas Porteous sued seeking to bar counsel for the Impeachment Task Force of the House Judiciary Committee from using sworn testimony the judge had provided under a grant of immunity. The impeachment proceedings were started after a judicial investigation of Judge Porteous for alleged corruption on the bench. During that investigation, Judge Porteous testified under oath to the Special Investigatory Committee under an order granting him immunity from that information being used against him in a criminal case. Before the U.S. District Court for the District of Columbia, Judge Porteous argued that the use of his immunized testimony during an impeachment proceeding violated his Fifth Amendment right not to be compelled to serve as a witness against himself. The court rejected his challenge, reasoning that because the use of the testimony for an impeachment proceeding fell within the legislative sphere, the Speech or Debate Clause prevented the court from ordering the committee staff members to refrain from using the testimony.\nSimilarly, Judge Alcee L. Hastings sought to prevent the House Judiciary Committee from obtaining the records of a grand jury inquiry during the committee's impeachment investigation. Prior to the impeachment proceedings, although ultimately acquitted, Judge Hastings had been indicted by a federal grand jury for a conspiracy to commit bribery. Judge Hastings's argument was grounded in the separation of powers: he claimed that permitting disclosure of grand jury records for an impeachment investigation risked improperly allowing the executive and judicial branches to participate in the impeachment process\u00e2\u0080\u0094a tool reserved for the legislature. The U.S. Court of Appeals for the Eleventh Circuit, however, rejected this \"absolutist\" concept of the separation of powers and held that \"a merely generalized assertion of secrecy in grand jury materials must yield to a demonstrated, specific need for evidence in a pending impeachment investigation.\"\nThe U.S. District Court for the District of Columbia initially threw out Judge Hastings's Senate impeachment conviction, because the Senate had tried his impeachment before a committee rather than the full Senate. The decision was vacated on appeal and remanded for reconsideration under Nixon v. United States . The district court then dismissed the suit because it presented a nonjusticiable political question.\n\n\tConclusion\n\nInfluenced by both English and colonial practice, the Framers of the Constitution crafted an Americanized impeachment remedy that ultimately holds government officers accountable for political offenses, or misdeeds committed by public officials against the state. The meaning of the Constitution's impeachment provisions has been worked out over time, informed by the historical practices of the House and Senate in pursuing impeachment for the misconduct of government officers. Impeachment is also generally immune from judicial review, meaning that Congress has substantial discretion in how it structures impeachment proceedings.\nThe Constitution does not delineate the range of misconduct that qualifies as \"high Crimes and Misdemeanors,\" perhaps because the scope of possible offenses by government officers is impossible to delineate in advance. The history of impeachment in the United States shows that the remedy has generally applied against government officers for abuses of power, corruption, and conduct determined incompatible with an individual's office, but does not extend to strictly political or policy disagreements.","output":null}
{"id":"crs_R46331","pid":"crs_R46331_0","input":"\tOverview\n\nThis report describes selected health care-related provisions that are scheduled to expire during the second session of the 116 th Congress (i.e., during calendar year [CY] 2020). For purposes of this report, expiring provisions are defined as portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring provisions included in this report are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. The report also includes health care-related provisions enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or extended under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ). This report describes health care-related provisions within the same scope that expired during the first session of the 116 th Congress (i.e., during CY2019). Although the Congressional Research Service (CRS) has attempted to be comprehensive, it cannot guarantee that every relevant provision is included here.\nThe two types of provisions discussed in this report generally are enacted in the context of authorization laws and thus are typically within the purview of congressional authorizing committees. The duration that a provision is in effect usually is regarded as creating a timeline for legislative decisionmaking. In choosing this timeline, Congress navigates tradeoffs between the frequency of congressional review and the stability of funding or other legal requirements that pertain to the program. \nThe first type of provision in this report provides or controls mandatory spending, meaning it provides temporary funding, temporary increases or decreases in funding (e.g., Medicare provider bonus payments), or temporary special protections that may result in changes in funding levels (e.g., Medicare funding provisions that establish a floor). The second type of provision defines the authority of government agencies or other entities to act, usually by authorizing a policy, project, or activity. Such provisions also may temporarily delay the implementation of a regulation, requirement, or deadline, or establish a moratorium on a particular activity.\nExpiring health care provisions that are predominantly associated with discretionary spending activities\u00e2\u0080\u0094such as discretionary authorizations of appropriations and authorities for discretionary user fees\u00e2\u0080\u0094are excluded from this report.\nCertain types of provisions with expiration dates that otherwise would meet the criteria set forth above are also excluded from this report. Some of these provisions are excluded, because they are transitional or routine in nature or have been superseded by congressional action that otherwise modifies the intent of the expiring provision. For example, statutorily required Medicare payment rate reductions and payment rate re-basings that are implemented over a specified period are not considered to require legislative attention and are excluded.\nThe report is organized as follows: Table 1 lists the relevant provisions that are scheduled to expire in 2020. Table 2 lists the relevant provisions that expired during 2019. The provisions in each table are organized by expiration date and applicable health care-related program. \nThe report then describes each listed provision, including a legislative history. The summaries are grouped by provisions scheduled to expire in 2020 followed by those that expired in 2019. Appendix A lists demonstration projects and pilot programs that are scheduled to expire in 2020 or that expired in 2019 and are related to Medicare, Medicaid, CHIP, and private health insurance programs and activities or other health care-related provisions that were enacted in the ACA or last extended under the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). Appendix B lists the status of provisions included in CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session , that did not apply within the scope of this report. Appendix C lists all laws that created, modified, or extended the health care-related expiring provisions described in this report. Appendix D lists abbreviations used in the report.\n\n\tCY2020 Expiring Provisions\n\n\t\tSocial Security Act (SSA) Title V: Sexual Risk Avoidance Education Program and Personal Responsibility Education Program\n\n\t\t\tSexual Risk Avoidance Education Program (SSA\u00c2 \u00c2\u00a7510; 42 U.S.C.\u00c2 \u00c2\u00a7710)5\n\n\t\t\t\tBackground\n\nThe Title V Sexual Risk Avoidance Education (SRAE) program, formerly known as the Abstinence Education Grants program, provides funding for education to adolescents aged 10 to 20 exclusively on abstaining from sexual activity outside of marriage. The Department of Health and Human Services (HHS) administers the program, and funding is provided primarily via formula grants. The 50 states, District of Columbia, and the territories are eligible to apply for funds. Jurisdictions request Title V SRAE funds as part of their request for Maternal and Child Health Block Grant funds authorized in SSA Section 501. Funds are allocated to jurisdictions based on their relative shares of low-income children. Funding is also available for eligible entities (not defined in statute) in jurisdictions that do not apply for funding. \n\n\t\t\t\tRelevant Legislation\n\nThe Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( PRWORA; P.L. 104-193 ), Section 912 , established the Abstinence Education Grants program and provided $50 million for each of FY1998 through FY2002. The Welfare Reform Extension Act of 2003 (WREA 2003; P.L. 108-40 ), Section 6, provided $50 million for FY2003. An Act to Extend the Temporary Assistance for Needy Families Block Grant Program, and Certain Tax and Trade Programs, and For Other Purposes ( P.L. 108-89 ), Section 101 , provided funding through March 31, 2014 in the manner authorized for FY2002 (i.e., $50 million, but proportionally provided for the first two quarters of FY2004). The Welfare Reform Extension Act of 2004 (WREA 2004 ; P.L. 108-210 ), Section 2 , provided funding through June 30, 2004 in the manner authorized for FY2002. TANF and Related Programs Continuation Act of 2004 ( P.L. 108-262 ) , Section 2 , provided funding through September 30, 2004 in the manner authorized for FY2002. Welfare Reform Extension Act, Part VIII ( P.L. 108-308 ) , Section 2 , provided funding through March 31, 2005 in the manner authorized for FY2004. The Welfare Reform Extension Act of 2005 (WREA 2005 ; P.L. 109-4 ), Section 2, provided funding through June 30, 2005 in the manner authorized for FY2004. TANF Extension Act of 2005 ( P.L. 109-19 ) , Section 2 , provided funding through September 30, 2005 in the manner authorized for FY2004. QI, TMA, and Abstinence Programs Extension and Hurricane Katrina Unemployment Relief Act of 2005 ( P.L. 109-91 ) , Section 102 , provided funding through December 31, 2005 in the manner authorized for FY2005. The Tax Relief and Health Care Act of 2006 (TRHCA; P.L. 109-432 ), Section 401 , provided funding through June 30, 2007 in the manner authorized for FY2006. An Act to Provide for the Extension of Transitional Medical Assistance, and Other Provisions ( P.L. 110-48 ) , Section 1 , provided funding through September 30, 2007 in the manner authorized for FY2006. TMA, Abstinence Education, and QI Programs Extension Act of 2007 ( P.L. 110-90 ) , Section 2 , provided funding through December 31, 2007 in the manner authorized for FY2007. The Medicare, Medicaid, and SCHIP Extension Act of 2007 ( MMSEA; P.L. 110-173 ), Section 202 , provided funding through June 30, 2008 in the manner authorized for FY2007. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA ; P.L. 110-275 ), Se ction 201 , provided funding through June 30, 2009 in the manner authorized for FY2007. ACA, Section 2954, provided $50 million for each of FY2010 through FY2014. Protecting Access to Medicare Act of 2014 ( PAMA ; P.L. 113-93 ), Section 205 , provided $50 million for FY2015. Medicare Access and CHIP Reauthorization Act of 2015 ( MACRA ; P.L. 114-10 ), Section 214 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50502 , renamed the program and provided $75 million for each of FY2018 and FY2019. Continuing App ropriations Act, 2020, and Health Extenders Act of 2019 ( P.L. 116-59 ), Section 12 01 , provided $10,684,931 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriation s Act, 2020, and Further Health Extenders Act of 2019 ( P.L. 116-69 ), Section 120 1 , provided $16,643,836 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) Division N, Section 303, provided $48,287,671 for the period of October 1, 2019 through May 22, 2020. Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ), S ection 3821 provided $75 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. \n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for the Title V SRAE program expires after November 30, 2020.\n\n\t\t\tPersonal Responsibility Education Program (SSA\u00c2 \u00c2\u00a7513; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a7713(f))\n\n\t\t\t\tBackground\n\nThe Personal Responsibility Education Program (PREP) is a broad approach to teen pregnancy prevention that seeks to educate adolescents ages 10 through 19 and pregnant and parenting youth under age 21 on both abstinence and contraceptives to prevent pregnancy and sexually transmitted infections (STIs). Education services can address abstinence and\/or contraceptives to prevent pregnancy and STIs. PREP includes four types of grants, which are administered by HHS: (1) State PREP grants, (2) Competitive PREP grants, (3) Tribal PREP, and (4) PREP\u00e2\u0080\u0093Innovative Strategies (PREIS). A majority of PREP funding is allocated to states and territories via the State PREP grant. The 50 states, District of Columbia, and the territories are eligible for funding. Funds are allocated by formula based on the proportion of youth aged 10 to 20 in each jurisdiction relative to other jurisdictions.\n\n\t\t\t\tRelevant Legislation\n\nACA, Section 2953 , established PREP and provided $75 million annually from FY2010 through FY2014. PAMA, Section 206 provided $75 million for FY2015. MACRA, Section 215 , provided $75 million for each of FY2016 and FY2017. BBA 2018, Section 50503 , provided $75 million for each of FY2018 and FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019, Section 1202, provided $10,684,931 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1202, provided $16,643,836 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 304, provided $48,287,671 for the period of October 1, 2019 through May 22, 2020. CARES Act , Section 382 2 provided $75 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. \n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for PREP expires after November 30, 2020.\n\n\t\tSSA Title VXIII: Medicare\n\n\t\t\tQuality Measure Selection (SSA\u00c2 \u00c2\u00a71890A; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395aaa-1)\n\n\t\t\t\tBackground\n\nSSA Section 1890A requires the HHS Secretary to establish a pre-rulemaking process to select quality measures for use in the Medicare program. As part of this process, the Secretary makes available to the public measures under consideration for use in Medicare quality programs and broadly disseminates the quality measures that are selected to be used, while the consensus-based entity with a contract (National Quality Form, or NQF) gathers multi-stakeholder input and annually transmits that input to the Secretary. NQF fulfills this requirement through its Measure Applications Partnership (MAP), an entity that convenes multi-stakeholder groups to provide input into the selection of quality measures for use in Medicare and other federal programs. MAP publishes annual reports with recommendations for selection of quality measures in February of each year, with the first report published in February 2012. \n\n\t\t\t\tRelevant Legislation\n\nACA, Section 3014(c) , transferred a total of $20 million from the Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) Trust Funds for each of FY2010 through FY2014 to carry out SSA Section 1890A(a)-(d) (and the amendments made to SSA Section 1890(b) by ACA Section 3014(a)). PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. BBA 2018, Section 50206 , transferred $7.5 million for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Section 1401, transferred $1,069,000 for the period beginning October 1, 2019, and ending November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1401, transferred $1,665,000 for the period beginning October 1, 2019, and ending December 20, 2019. Further Consolidated Appropriations Act, 2020 , Division N, Section 102, transferred $4,830,000 for the period beginning October 1, 2019, and ending May 22, 2020. CARES Act, Section 3802 , provided $20 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020. \n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act to carry out the measure selection activities under SSA Section 1890A(a)-(d) expires after November 30, 2020.\n\n\t\t\tContract with a Consensus-Based Entity Regarding Performance Measurement (SSA\u00c2 \u00c2\u00a71890(d); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395aaa)\n\n\t\t\t\tBackground\n\nUnder SSA Section 1890, the HHS Secretary is required to have a contract with a consensus-based entity (e.g., NQF) to carry out specified duties related to performance improvement and measurement. These duties include, among others, priority setting, measure endorsement, measure maintenance, and annual reporting to Congress.\n\n\t\t\t\tRelevant Legislation\n\nMIPPA, Section 183 , transferred, from the Medicare HI and SMI Trust Funds, a total of $10 million for each of FY2009 through FY2012 to carry out the activities under SSA Section 1890. American Taxpayer Relief Act of 2012 ( ATRA ; P.L. 112-240 ) , Section 609(a) , transferred $10 million for FY2013 and modified the duties of the consensus-based entity. Pathway for SGR Reform Act of 2013 ( PSRA ; P.L. 113-67 ) , Section 1109 , required that transferred funding remain available until expended. PAMA, Section 109 , transferred $5 million for the remainder of FY2014 (from April 1, 2014, to September 30, 2014) and $15 million for the first six months of FY2015 (from October 1, 2014, to March 31, 2015) to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d); funds were required to remain available until expended. MACRA, Section 207 , transferred $30 million for each of FY2015 through FY2017 to carry out both SSA Section 1890 and SSA Section 1890A(a)-(d). The funding provided under MACRA for FY2015 effectively replaced the funding provided under PAMA for that year; therefore, the total funding for FY2015 was $30 million. Funds were required to remain available until expended. BBA 2018, Section 50206 , transferred $7.5 million from the Medicare HI and SMI Trust Funds for each of FY2018 and FY2019 to carry out both Section 1890 and SSA Section 1890A(a)-(d). The section also added new HHS reporting requirements and modified existing NQF reporting requirements to specify use of funding, among other things. Amounts transferred for each of FY2018 and FY2019 are in addition to any unobligated balances that remained from prior years' transfers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Section 1401, transferred $1,069,000 for the period beginning October 1, 2019, and ending November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Section 1401, transferred $1,665,000 for the period beginning October 1, 2019, and ending December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 102, transferred $4,830,000 for the period beginning October 1, 2019, and ending May 22, 2020. CARES Act, Section 3802 , provided $20 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, funding was provided for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided during that same period in FY2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act to support the contract with the consensus-based entity under SSA Section 1890 expires after November 30, 2020.\n\n\t\t\tMedicare Access and CHIP Reauthorization Act of 2015 (MACRA) Technical Assistance to Small Practices and Practices in Health Professional Shortage Areas (SSA \u00c2\u00a71848(q)(11); 42 U.S.C. \u00c2\u00a71395w\u00e2\u0080\u00934(q))(11)\n\n\t\t\t\tCurrent Law\n\nMACRA made several fundamental changes to how Medicare pays for physician and practitioner services by (1) changing the methodology for determining the annual updates to the conversion factor, (2) establishing new methods for paying for professional services under Medicare Part B, including a merit-based incentive payment system (MIPS) to consolidate and replace several existing incentive programs and to apply value and quality adjustments to the Medicare physician fee schedule (MPFS), and (3) establishing the development of, and participation in, alternative payment models (APMs). \nTo provide technical assistance to small practices and practices in health professional shortage areas, MACRA required the HHS Secretary to enter into contracts or agreements with appropriate entities (such as quality-improvement organizations, regional extension centers, or regional health collaboratives) to offer guidance and assistance to MIPS-eligible professionals in practices of 15 or fewer professionals. Under the technical assistance program, priority is required to be given to professionals located in rural areas, health professional shortage areas, or practices with low composite scores under the new payment system. The guidance and assistance is provided with respect to the MIPS performance categories or with respect to how to transition to the implementation of and participation in an APM. \nFor purposes of implementing the technical assistance program, $20 million from the SMI Trust Fund was made available to the Centers for Medicare & Medicaid Services (CMS) for each of FY2016-FY2020. These amounts are available until expended.\n\n\t\t\t\tRelevant Legislation\n\nMACRA, Section 101, provided for the transfer of $20 million, for each of FY2016 through FY2020, from the Medicare SMI Trust Fund.\n\n\t\t\t\tCurrent Status\n\nNo funds to support the technical assistance program have been authorized beyond FY2020.\n\n\t\t\tFloor on Work Geographic Practice Cost Indices (SSA\u00c2 \u00c2\u00a71848(e)(1); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395w-4(e)(1)(E))\n\n\t\t\t\tBackground\n\nPayments under the Medicare MPFS are adjusted geographically for three factors to reflect differences in the cost of resources needed to produce physician services: physician work, practice expense, and medical malpractice insurance. The geographic adjustments are indices\u00e2\u0080\u0094known as Geographic Practice Cost Indices (GPCIs)\u00e2\u0080\u0094that reflect how each area compares to the national average in a \"market basket\" of goods. A value of 1.00 represents the average across all areas. These indices are used in the calculation of the payment rate under the MPFS. Several laws have established a minimum value of 1.00 (floor) for the physician work GPCI for localities where the work GPCI was less than 1.00.\n\n\t\t\t\tRelevant Legislation\n\nMMA , Section 412, provided for an increase in the work geographic index to 1.0 (floor) for any locality for which the work geographic index was less than 1.0 for services furnished from January 1, 2004, through December 31, 2006. TRHCA , Section 102 , extended the floor through December 31, 2007. MMSEA , Section 103, extended the floor through June 30, 2008. MIPPA , Section 134, extended the floor through December 31, 2009. In addition, beginning January 1, 2009, MIPAA set the work geographic index for Alaska to 1.5 if the index otherwise would be less than 1.5; no expiration was set for this modification. ACA , Section 3102, extended the floor through December 31, 2010. Medicare and Medicaid Extenders Act of 2010 (MMEA; P.L. 111-309 ) , Section 103, extended the floor through December 31, 2011. Temporary Payroll Tax Cut Continuation Act of 2011 ( TPTCCA, P.L. 112-78 ) , Section 303, extended the floor through February 29, 2012. Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, P.L. 112-96 ) , Section 3004, extended the floor through December 31, 2012, and required the Medicare Payment Advisory Commission (MedPAC) to report on whether any work geographic adjustment to the MPFS is appropriate, what that level of adjustment should be (if appropriate), and where the adjustment should be applied. The report also was required to assess the impact of such an adjustment, including how it would affect access to care. ATRA , Section 602, extended the floor through December 31, 2013. PAMA , Section 102, extended the floor through March 31, 2015. MACRA , Section 201, extended the floor through December 31, 2017. BBA 2018 , Section 50201, extended the floor through December 31, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 101 , extended the floor through March 22, 2020. CARES Act, Section 3801, extended the floor through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nThe authority for the MPFS GPCI floor expires after November 30, 2020.\n\n\t\t\tHome Health Prospective Payment System Rural Add-On for High Utilization Counties (SSA \u00c2\u00a71895; 42 U.S.C. \u00c2\u00a71395fff note)\n\n\t\t\t\tBackground\n\nFederally certified home health (HH) agencies receive increased payments under the HH prospective payment system (PPS) for Medicare home health care episodes furnished to beneficiaries in rural areas. Before BBA 2018, when provided by legislation, the HH\u00c2\u00a0 rural add-on \u00c2\u00a0was a fixed percent age \u00c2\u00a0increase to the HH PPS that was applied\u00c2\u00a0uniformly to \u00c2\u00a0 Medicare home health episodes of care provided in rural counties.\u00c2\u00a0\nUnder BBA 2018, the add-on was applied unvaryingly for the first year the legislation extended the increase d \u00c2\u00a0payment, providing a 3% rural add-on payment to Medicare home health episodes furnished in any rural county that began in CY2018. After CY2018, BBA 2018 provided home health agencies a 3%, 2%, and 1% HH PPS add-on payment for services furnished in rural counties beginning during CY2019-CY2021, respectively, unless the Medicare home health services were, or are, furnished in a rural county with one of the two\u00c2\u00a0 below-described\u00c2\u00a0 designations, in which case alternative add-on payments were \/are \u00c2\u00a0provided:\nFor home health episodes furnished to beneficiaries who reside in\u00c2\u00a0 low population density\u00c2\u00a0 counties, which are defined as rural counties that have a population density of six or fewer individuals per square mile, BBA 2019 provided 4%, 3%, 2%, and 1% HH PPS add-on payments for services beginning during CY2019-CY2022, respectively , and For home health episodes provided to beneficiaries who reside in\u00c2\u00a0 high utilization\u00c2\u00a0 counties, which are defined as rural counties in the top quartile of all counties rendering home health services (by the number of HH episodes furnished per 100 Medicare eligibles), BBA 2018 provided 1.5% and 0.5% HH PPS add-on payments for home health episodes beginning in CY2019-CY2020, respectively. BBA 2018 provided no add-on payment for episodes furnished in high utilization rural counties that begin in CY2021 or CY2022.\nUnder BBA 2018, rural counties were to be categorized only once and such determination applies to payment home health episodes through CY2022. \n\n\t\t\t\tRelevant Legislation\n\nThe Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000; P.L. 106-554 ), Section 508, \u00c2\u00a0established a 10% add-on to Medicare's HH PPS rates for home health episodes provided to beneficiaries in rural areas beginning April 1, 2001, through March 31, 2003. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( MMA ; P.L. 108-173 ), Section 421, \u00c2\u00a0provided a 5% add-on for services beginning April 1, 2004, through March 31, 2005. Deficit Reduction Act of 2005 ( DRA ; P.L. 109-171 ) , Section 5201, \u00c2\u00a0provided a 5% add-on for services beginning January 1, 2006, through December 31, 2006. ACA Section, 3131, \u00c2\u00a0provided a 3% add-on for services beginning April 1, 2010, through December 31, 2015. MACRA, Section 210, \u00c2\u00a0provided a 3% add-on for services beginning January 1, 2016 through December 31, 2017. BBA 2018, Section 50208, \u00c2\u00a0provided a 3% add-on for services beginning in CY2018. BBA 2018 provided a 3%, 2%, and 1% add-on for services beginning in years CY2019-CY2021, respectively, unless the services were provided in a low population density or high utilization rural county. For services provided in low population density rural counties, BBA 2018 provided an add-on at 4%, 3%, 2%, and 1% for services beginning in years CY2019-CY2022, respectively. For services furnished in high utilization rural counties, a 1.5% and 0.5% add-on was provided for services beginning in years CY2019-CY2020, respectively.\u00c2\u00a0\n\n\t\t\t\tCurrent Status\n\nAfter December 31, 2020, home health agencies are no longer set to receive an add-on payment for services provided in rural counties designated as high utilization counties.\u00c2\u00a0\n\n\t\tOther Medicare Provisions\n\n\t\t\tOutreach and Assistance for Low-Income Programs (MIPPA \u00c2\u00a7119; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395b-3\u00c2 note)\n\n\t\t\t\tBackground\n\nThe Administration for Community Living (ACL) administers federal grant programs that fund outreach and assistance to older adults, individuals with disabilities, and their caregivers in accessing various health and social services. Funding for these programs is provided through discretionary budget authority in annual appropriations to the following entities:\nState Health Insurance Assistance Programs (SHIPs): programs that provide outreach, counseling, and information assistance to Medicare beneficiaries and their families and caregivers on Medicare and other health insurance issues. Area Agencies on Aging (AAA): state-designated public or private nonprofit agencies that address the needs and concerns of older adults at the regional or local levels. AAAs plan, develop, coordinate, and deliver a wide range of home and community-based services. Most AAAs are direct providers of information and referral assistance programs. Aging and Disability Resource Centers (ADRCs): programs in local communities that assist older adults, individuals with disabilities, and caregivers in accessing the full range of long-term services and supports options, including available public programs and private payment options.\nThe National Center for Benefits and Outreach Enrollment assists organizations to enroll older adults and individuals with disabilities into benefit programs that they may be eligible for, such as Medicare, Medicaid, the Supplemental Security Income (SSI) program, and the Supplemental Nutrition Assistance Program (SNAP), among others.\nIn addition to discretionary funding for these programs, beginning in FY2009, MIPPA provided funding for specific outreach and assistance activities to Medicare beneficiaries. This mandatory funding was extended multiple times, most recently in the CARES Act through November 30, 2020, and provided for outreach and assistance to low-income Medicare beneficiaries including those who may be eligible for the Low-Income Subsidy program, Medicare Savings Program (MSP), and the Medicare Part D Prescription Drug Program. The HHS Secretary is required to transfer specified amounts for MIPPA program activities from the Medicare Trust Funds.\n\n\t\t\t\tRelevant Legislation\n\nMIPPA , Section 119, authorized and provided a total of $25 million for FY2009 to fund low-income Medicare beneficiary outreach and education activities through SHIPs, AAAs, ADRCs, and coordination efforts to inform older Americans about benefits available under federal and state programs. ACA , Section 3306, extended authority for these programs and provided a total of $45 million for FY2010 through FY2012 in the following amounts: SHIPs, $15 million; AAAs, $15 million; ADRCs, $10 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. ATRA , Section 610, extended authority for these programs through FY2013 and provided a total of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. PSRA , Section 1110, extended authority for these programs through the second quarter of FY2014 and provided funds at FY2013 levels ($25 million) for the first two quarters of FY2014 (through March 31, 2014). PAMA , Section 110, extended authority for these programs through the second quarter of FY2015 (through March 31, 2015). For FY2014, PAMA provided a total of $25 million at the following FY2013 funding levels: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5.0 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5.0 million. In addition, PAMA provided funds at FY2014 levels for the first two quarters of FY2015 (through March 31, 2015). MACRA , Section 208, extended authority for these programs through September 30, 2017. For FY2015, MACRA provided funding at the previous year's level of $25 million in the following amounts: SHIPs, $7.5 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $5 million. For FY2016 and FY2017, MACRA provided $37.5 million annually, a $12.5 million per year increase from FY2015 funding levels, in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. BBA 2018, Section 50207, extended authority for these programs through September 30, 2019. For FY2018 and FY2019, BBA 2018 provides funding at the FY2017 funding level of $37.5 million annually in the following amounts: SHIPs, $13 million; AAAs, $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits and Outreach Enrollment, $12 million. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019, Section 1402, extended authority for these programs through November 21, 2019. For October 1, 2019 to November 21, 2019, they provided a total of $5.343 million in the following amounts: SHIPs, $1.852 million; AAAs $1.069 million; ADRCs, $712,000; and the contract with the National Center for Benefits Outreach and Enrollment, $1.710 million. F urther Continuing Appropriations Act, 2020 , and F urther H ealth Extenders Act of 2019 , Section 1402, extended authority for these programs through December 20, 2019. For November 22, 2019 to December 20, 2019, they provided a total of $2.98 million in the following amounts: SHIPs, $1.033 million; AAAs $597,000; ADRCs, $397,000; and the contract with the National Center for Benefits Outreach and Enrollment, $953,000. Further Consolidated Appropriations Act, 2020, Division N, Section 103, extended authority for these programs through May 22, 2020. For December 21, 2019 to May 22, 2020, it provided a total of $15.823 million in the following amounts: SHIPs, $5.485 million; AAAs $3.165 million; ADRCs, $2.110 million; and the contract with the National Center for Benefits Outreach and Enrollment, $5.063 million. CARES Act, Section 3803, extended authority for these programs through November 30, 2020. For FY2020, it provided a total of $37.5 million in the following amounts (which supersedes the funding previously provided by law for all periods of FY2020): SHIPs, $13 million; AAAs $7.5 million; ADRCs, $5 million; and the contract with the National Center for Benefits Outreach and Enrollment, $12 million. Additionally, funding was provided for these programs for a specified portion of FY2021 (October 1, 2020 through November 30, 2020) at the same proportional share of amounts provided for FY2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for low-income outreach and assistance programs will expire after November 30, 2020. However, funds appropriated will be available for obligation until expended.\n\n\t\tSSA Title XIX: Medicaid\n\n\t\t\tProtection for Recipients of Home and Community-Based Services Against Spouse Impoverishment (SSA \u00c2\u00a71924; 42 U.S.C. 1396r-5 note)\n\n\t\t\t\tBackground\n\nWhen determining financial eligibility for Medicaid-covered long-term services and supports (LTSS), there are specific rules under SSA Section 1924 for the treatment of a married couple's assets when one spouse needs long-term care provided in an institution, such as a nursing home. Commonly referred to as \"spousal impoverishment rules,\" these rules attempt to equitably allocate income and assets to each spouse when determining Medicaid financial eligibility and are intended to prevent the impoverishment of the non-Medicaid spouse. For example, spousal impoverishment rules require state Medicaid programs to exempt all of a non-Medicaid spouse's income in his or her name from being considered available to the Medicaid spouse. Joint income of the couple is divided in half between the spouses, and the Medicaid spouse can transfer income to bring the non-Medicaid spouse up to certain income thresholds. Assets of the couple, regardless whose name they are in, are combined and then split in half. The non-Medicaid spouse can retain assets up to an asset threshold determined by the state within certain statutory parameters. Prior to enactment of the ACA, spousal impoverishment rules applied only in situations where the Medicaid participant was receiving LTSS in an institution. States had the option to extend these protections to certain home and community-based services (HCBS) participants under a Section 1915(c) waiver program.\nBeginning January 1, 2014, ACA Section 2404 temporarily substituted the definition of \"institutionalized spouse\" under SSA Section 1924(h)(1) to include application of these spousal impoverishment protections to all married individuals who are eligible for HCBS authorized under certain specified authorities. Thus, beginning January 1, 2014, for a five-year time period, the ACA required states to apply the spousal impoverishment rules to all married individuals who are eligible for HCBS under these specified authorities, not just those receiving institutional care. This modified definition expired on December 31, 2018. The 116 th Congress extended the authority for these protections and included a provision regarding state flexibility in the application of income or asset disregards for married individuals receiving certain HCBS.\n\n\t\t\t\tRelevant Legislation\n\nACA, Section 2404, required states to extend spousal impoverishment rules to certain beneficiaries receiving HCBS for a five-year period beginning on January 1, 2014. The Medicaid Extenders Act of 2019 ( P.L. 116-3 ), Section 3 , extended this provision through March 31, 2019. The Medicai d Services Investment and Accountability Act of 2019 ( P.L. 116-16 ), Section 2, extended this provision through September 30, 2019. The Sustaining Excellence in Medicaid Act of 2019 ( P.L. 116-39 ), Section 3, extended this provision through December 31, 2019. Further Consolidated Appropriations Act, 2020 , Section 204, extended this provision through May 22, 2020. CARES Act, Section 3812, further extended this provision through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nThe authority for the extension of spousal impoverishment protections for certain Medicaid HCBS recipients will expire after November 30, 2020.\n\n\t\tSSA Title XXI: State Children's Health Insurance Program (CHIP)\n\n\t\t\tIncrease to Enhanced Federal Medical Assistance Percentage (E-FMAP) (SSA\u00c2 \u00c2\u00a72105(b); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71397ee(b))\n\n\t\t\t\tBackground\n\nThe federal government's share of CHIP expenditures (including both services and administration) is determined by the enhanced federal medical assistance percentage (E-FMAP) rate. The E-FMAP rate is based on the federal medical assistance percentage (FMAP) rate, which is the federal matching rate for the Medicaid program. The FMAP formula compares each state's average per capita income with average U.S. per capita income. FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%.\nThe E-FMAP rate is calculated by reducing the state share under the regular FMAP rate by 30%. Statutorily, the E-FMAP (or federal matching rate) can range from 65% to 85%. For some CHIP expenditures, the federal matching rate is different from the E-FMAP rate. For instance, the matching rate for translation and interpretation services is the higher of 75% or states' E-FMAP rate plus 5 percentage points. Also, for services provided to children with family incomes exceeding 300% of the federal poverty level (FPL) with an exception for certain states, the matching rate is the lower regular FMAP rate. \n\n\t\t\t\tRelevant Legislation\n\nACA, Section 2101 , included a provision to increase the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures from FY2016 through FY2019. Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes ( P.L. 115-120 ), Section 3005, extended the increase to the E-FMAP rate for one year through FY2020. However, for FY2020 the increase to the E-FMAP is 11.5 percentage points instead of 23 percentage points.\n\n\t\t\t\tCurrent Status\n\nThe increase to the E-FMAP expires after September 30, 2020.\n\n\t\tPublic Health Service Act (PHSA)\n\n\t\t\tCommunity Health Center Fund (PHSA\u00c2 \u00c2\u00a7330; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a7254b-2(b)(1))\n\n\t\t\t\tBackground\n\nThe Community Health Center Fund (CHCF) provided mandatory funding for federal health centers authorized in PHSA Section 330. These centers are located in medically underserved areas and provide primary care, dental care, and other health and supportive services to individuals regardless of their ability to pay. The mandatory CHCF appropriations are provided in addition to discretionary funding for the program; however, the CHCF comprised more than 70% of health center programs' appropriations in FY2019, the last year where final appropriations data are available. \n\n\t\t\t\tRelevant Legislation\n\nACA, Section 10503, established the CHCF and provided a total of $9.5 billion to the fund annually from FY2011 through FY2015, as follows: $1 billion for FY2011, $1.2 billion for FY2012, $1.5 billion for FY2013, $2.2 billion for FY2014, and $3.6 billion for FY2015. The ACA also provided $1.5 billion for health center construction and renovation for the period FY2011 through FY2015. MACRA, Section 221, provided $3.6 billion for each of FY2016 and FY2017 to the CHCF. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes ( P.L. 115-96 ), Section 3101(a), provided $550 million for the first and second quarters of FY2018 to the CHCF. BBA 2018, Section 50901, made a number of changes to the health center program replaced language that had provided two quarters of funding and provided $3.8 billion to the CHCF in FY2018 and $4 billion in FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Division B, Section 1101 , provided $569,863,014 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $887,671,223 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Ap propriations Act, 2020, Division N, Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $2,575,342,466 for the period of October 1, 2019 through May 22, 2020. CARES Act , Section 3831, provided $4 billion for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $668,493,151 was provided for the period of October 1, 2020 through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for CHCF expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended.\n\n\t\t\tSpecial Diabetes Programs (PHSA\u00c2 \u00c2\u00a7\u00c2\u00a7330B and 330C; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a7\u00c2\u00a7254c-2(b) and 254c-3(b))\n\n\t\t\t\tBackground\n\nThe Special Diabetes Program for Type I Diabetes (PHSA Section 330B) provides funding for the National Institutes of Health to award grants for research into the prevention and cure of Type I diabetes. The Special Diabetes Program for Indians (PHSA Section 330C) provides funding for the Indian Health Service (IHS) to award grants for services related to the prevention and treatment of diabetes for American Indians and Alaska Natives who receive services at IHS-funded facilities. \n\n\t\t\t\tRelevant Legislation\n\nThe Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ), Sections 4921 and 4922, established the two special diabetes programs and transferred $30 million annually from CHIP funds to each program from FY1998 through FY2002. BIPA 2000, Section 931, increased each program's annual appropriations to $70 million for FY2001 through FY2002 and provided $100 million for FY2003. An Act to Amend the Public Health Service Act with Respect to Special Diabetes Programs for Type 1 Diabetes and Indians ( P.L. 107-360 ) , Section 1, increased each program's annual appropriations to $150 million and provided funds from FY2004 through FY2008. MMSEA, Section 302, provided $150 million for each program through FY2009. MIPPA, Section 303, provided $150 million each program through FY2011. MMEA, Section 112, provided $150 million each program through FY2013. ATRA, Section 625, provided $150 million each program through FY2014. PAMA, Section 204, provided of $150 million each program through FY2015. MACRA, Section 213, provided $150 million each program through FY2017. Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ), Section 301(b), provided $37.5 million for first quarter of FY2018 for the Special Diabetes Program for Indians (Note: it did not provide funding for the Special Diabetes Program for Type I Diabetes.) An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes, Section 3102, provided $37.5 million for the second quarter for the Special Diabetes Program for Indians and provided $37.5 million for the first and second quarters of FY2018 for the Special Diabetes Program for Type I Diabetes. BBA 2018, Section 50902, replaced language that had provided funding for the first and second quarters of FY2018 to provide $150 million for each program in FY2018 and FY2019. Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 , Division B, Section 1102 , provided $ 21,369,863 for each program for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1102 , struck the amount that had been provided in P.L. 116-59 and provided $ 33,287,671 for each program for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 402, struck the amount that had been provided in P.L. 116-69 , and provided $96,575,342 for each program for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3832, provided $150 million for FY2020 for each program, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $ 25,068,493 was provided for each program for the period of October 1, 2020 through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for the two special diabetes programs expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended.\n\n\t\t\tNational Health Service Corps Appropriations (PHSA\u00c2 \u00c2\u00a7338H; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a7254b-2(b)(2))\n\n\t\t\t\tBackground\n\nThe National Health Service Corps (NHSC) provides scholarships and loan repayments to certain health professionals in exchange for providing care in a health professional shortage area for a period of time that varies based on the length of the scholarship or the number of years of loan repayment received. The NHSC receives mandatory funding from the CHCF through PHSA Title III. The NHSC also received discretionary appropriations in FY2011. Between FY2012 and FY2017, the program did not receive discretionary appropriations. Beginning in FY2018 and continuing in FY2019, the program received discretionary appropriations, primarily to expand the number and type of substance abuse providers participating in the NHSC. The mandatory funding from the CHCF represents more nearly three-quarters of the program's funding in both FY2018 and FY2019, the last years where final appropriations data are available. \n\n\t\t\t\tRelevant Legislation\n\nACA, Section 10503, funded $1.5 billion to support the NHSC annually from FY2011 through FY2015, as follows: $290 million for FY2011, $295 million for FY2012, $300 million for FY2013, $305 million for FY2014, and $310 million for FY2015. Funds are to remain available until expended. MACRA, Section 221, funded $310 million for each of FY2016 and FY2017 for the NHSC. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes Section 3101 , funded $65 million for the first and second quarters of FY2018 for the NHSC. BBA 2018, Sec tion 50901 , replaced language that had provided two-quarters of funding and funded $310 million for each of FY2018 and FY2019 for the NHSC. Continuing Appropriations Act, 2020, and Health Extend ers Act of 2019, Division B, Section 1101 , provided $18,021,918 for the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $28,072,603 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020, Division N, Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $81,445,205 for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3831, provided $310 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $51,808,219 was provided for the period of October 1, 2020 through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for the CHCF component of the NHSC expires after November 30, 2020. Any unused portion of grants awarded for a given fiscal year prior to November 30, 2020, will remain available until expended.\n\n\t\t\tTeaching Health Centers (PHSA\u00c2 \u00c2\u00a7340H; 42\u00c2 U.S.C.\u00c2 \u00c2\u00a7256h)\n\n\t\t\t\tBackground\n\nThe Teaching Health Center program provides direct and indirect graduate medical education (GME) payments to support medical and dental residents training at qualified teaching health centers (i.e., outpatient health care facilities that provide care to underserved patients).\n\n\t\t\t\tRelevant Legislation\n\nACA, Section 5508 , established the Teaching Health Center program and provided $230 million for direct and indirect GME payments for the period of FY2011 through FY2015. MACRA, Section 221, provided $60 million for each of FY2016 and FY2017 for direct and indirect GME payments for teaching health centers. Disaster Tax Relief and Airport and Airway Exten sion Act of 2017, Section 301 , provided $15 million for the first quarter of FY2018 for direct and indirect GME payments for teaching health centers. An Act to amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to issue Department of Homeland Security-wide guidance and develop training programs as part of the Department of Homeland Security Blue Campaign, and for other purposes, Section 3101 , struck the first quarter of funding and provided $30 million for the first and second quarters of FY2018 for direct and indirect GME payments for teaching health centers. It also limited the amount of funding that could be used for administrative purposes. B BA 2018, Section 50901 , made a number of changes to the Teaching Health Center program and replaced language that had provided two-quarters of funding and provided $126.5 million for each of FY2018 and FY2019 for direct and indirect GME payments for teaching health centers. Continuing Appropriations Act, 2020, and Health Extenders Act of 2 019 , Division B , Section 1101 , provided $44,164,384 or the period of October 1, 2019 through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019, Division B, Section 1101 , struck the amount that had been provided in P.L. 116-59 and provided $68,794,521 for the period of October 1, 2019 through December 20, 2019. Further Consolidated Appropriations Act, 2020 , Division N , Section 401, struck the amount that had been provided in P.L. 116-69 , and provided $ 199,589,041 for the period of October 1, 2019 through May 22, 2020. CARES Act, Section 3831, provided $126.5 million for FY2020, which supersedes the funding previously provided by law for all periods of FY2020. Additionally, $21,141,096 was provided for the period of October 1, 2020 through November 30, 2020.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the CARES Act for Teaching Health Center GME payments expires after November 30, 2020, but unused funds remain available until expended.\n\n\tOther CY2020 Expiring Provisions\n\n\t\tHealth Coverage Tax Credit (IRC\u00c2 \u00c2\u00a735; 26 U.S.C.\u00c2 \u00c2\u00a735)\n\n\t\t\tBackground\n\nThe Health Coverage Tax Credit (HCTC) subsidizes 72.5% of the cost of qualified health insurance for eligible taxpayers and their family members. Potential eligibility for the HCTC is limited to two groups of taxpayers. One group is composed of individuals eligible for Trade Adjustment Assistance (TAA) allowances because they experienced qualifying job losses. The other group consists of individuals whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation because of financial difficulties. HCTC-eligible individuals are allowed to receive the tax credit only if they either cannot enroll in certain other health coverage (e.g., Medicaid) or are not eligible for other specified coverage (e.g., Medicare Part A). To claim the HCTC, eligible taxpayers must have qualified health insurance (specific categories of coverage, as specified in statute). The credit is financed through a permanent appropriation under 31 U.S.C. \u00c2\u00a71324(b)(2); therefore, the financing of the HCTC is not subject to the annual appropriations process.\n\n\t\t\tRelevant Legislation\n\nThe T rade Act of 2002 ( P.L. 107-210 ), Sections 2 01-203, authorized the Health Coverage Tax Credit, specified the eligibility criteria for claiming the credit, and made conforming amendment to the U.S.C. for purposes of financing the credit. The American Recovery and Reinvestment Act of 2009 ( ARRA, P.L. 111-5 ), Part VI: TAA Health Coverage Improvement Act of 2009 , expanded eligibility for and subsidy of the HCTC including retroactive amendments, and provided $80 million for FY2009 and FY2010 to implement the enacted changes to the HCTC. The Trade Adjustment Assistance Extension Act of 2011 ( P.L. 112-40 ), Section 241 , established a sunset date of before January 1, 2014. The T rade Preferences Extension Act of 2015 ( P.L. 114-27 ), Section 407 , retroactively reauthorized the HCTC and established a new sunset date of before January 1, 2020. Further Consolidated Appropriations Act, 2020, Section 146 , established a new sunset date of before January 1, 2021. \n\n\t\t\tCurrent Status\n\nAuthorization for the HCTC is scheduled to expire after December 31, 2020.\n\n\tCY2019 Expired Provisions\n\n\t\tPregnancy Assistance Fund\n\n\t\t\tPregnancy Assistance Fund (42 U.S.C. \u00c2\u00a718201-42 U.S.C. \u00c2\u00a718204)\n\n\t\t\t\tBackground\n\nThe Pregnancy Assistance Fund (PAF) program focuses on meeting the educational, social service, and health needs of vulnerable expectant and parenting individuals and their families during pregnancy and the postnatal period. The program identifies eligible populations as expectant and parenting teens, college students, and women of any age who experience domestic violence, sexual violence, sexual assault, or stalking. HHS administers the PAF program, and funding is awarded competitively to the 50 states, DC, U.S. territories, and tribal entities (hereinafter, grantees) that apply successfully. Grantees may use funds (1) to establish, operate, or maintain pregnancy or parenting services at institutions of higher education (IHEs), high schools, or community service providers; (2) to provide, in partnership with the state attorney general's office, certain legal and supportive services for women who experience domestic violence, sexual violence, sexual assault, or stalking while they are pregnant or parenting an infant; and (3) to support, either directly or through a subgrantee, public awareness about PAF services for the expectant and parenting population that is eligible for the program.\n\n\t\t\t\tRelevant Legislation\n\nACA, Section 10212 , established PAF and provided $25 million annually from FY2010 through FY2019.\n\n\t\t\t\tCurrent Status\n\nFunding authorized under the ACA expired after September 30, 2019. \n\n\t\tSSA Title VXIII: Medicare\n\n\t\t\tFunding for Implementation of Section 101 of MACRA (MACRA\u00c2 Section\u00c2 101(c)(3))\n\n\t\t\t\tBackground\n\nSection 101 of MACRA made fundamental changes to the way Medicare payments to physicians are determined and how they are updated. To implement the payment modifications in Section 101 of MACRA, the law authorized the transfer of $80 million from the SMI Trust Fund for each fiscal year beginning with FY2015 and ending with FY2019. The amounts transferred are to be available until expended.\n\n\t\t\t\tRelevant Legislation\n\nMACRA , Section 101 , provided for the transfer of $80 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund.\n\n\t\t\t\tCurrent Status\n\nAppropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. \n\n\t\t\tPriorities and Funding for Measure Development (SSA \u00c2\u00a71848(s); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395w-4(s))\n\n\t\t\t\tBackground\n\nSSA Section 1848(s) required the HHS Secretary to develop a plan for the development of quality measures for use in the MIPS program, which is to be updated as needed. The subsection also requires the Secretary to enter into contracts or other arrangements to develop, improve, update, or expand quality measures, in accordance with the plan. In entering into contracts, the Secretary must give priority to developing measures of outcomes, patient experience of care, and care coordination, among other things. The HHS Secretary, through CMS, annually reports on the progress made in developing quality measures under this subsection. \n\n\t\t\t\tRelevant Legislation\n\nMACRA, Section 102 , provided for the transfer of $15 million, for each of FY2015 through FY2019, from the Medicare SMI Trust Fund.\n\n\t\t\t\tCurrent Status\n\nAppropriated funds to support the activities under this subsection have not been enacted for FY2020 or subsequent fiscal years. However, funds appropriated prior to FY2020 are available for obligation through the end of FY2022.\n\n\t\t\tTemporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA\u00c2 \u00c2\u00a71886(m)(6)(B)(i); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395ww(m)(6)(B)(i))\n\n\t\t\t\tBackground\n\nMedicare pays LTCHs for certain inpatient hospital care under the LTCH prospective payment system (LTCH PPS), which is typically higher than payments for inpatient hospital care under the inpatient prospective payment system (IPPS). PSRA amended the law so that the LTCH PPS payment is no longer available for all LTCH discharges but instead is available only for those LTCH discharges that met specific clinical criteria. Specifically, LTCHs are paid under the LTCH PPS if a Medicare beneficiary either (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section \" Temporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA\u00c2\u00a0\u00c2\u00a71886(m)(6)(F); 42\u00c2\u00a0U.S.C.\u00c2\u00a0\u00c2\u00a71395ww(m)(6)(F)) .\"\nFor LTCH discharges that did not qualify for the LTCH PPS based on these clinical criteria, a \"site neutral payment rate\" similar to the PPS for inpatient acute care hospitals (IPPS) was to be phased-in. The site neutral rate is defined as the lower of an \"IPPS-comparable\" per diem amount, as defined in regulations, or the estimated cost of the services involved.\n\n\t\t\t\tRelevant Legislation\n\nPSRA, Section 1206(a), established patient criteria for payment under the LTCH PPS and a site neutral payment rate for LTCH patients who do not meet these criteria. During a phase-in period for discharges in cost-reporting periods beginning in FY2016 and FY2017, LTCHs received a blended payment amount based on 50% of what the LTCH would have been reimbursed under the LTCH PPS rate and 50% of the site neutral payment rate. For cost-reporting periods beginning in FY2018 and subsequent years, the LTCH was to receive the site neutral payment rate. BBA 2018, Section 51005 , extended the transition period to site neutral Medicare payments for LTCH patients who do not meet the patient criteria for an additional two years, to include discharges in cost-reporting periods beginning during FY2018 and FY2019. During this period, LTCHs continue to receive the 50\/50 blended payment for discharges that do not meet certain LTCH PPS criteria.\n\n\t\t\t\tCurrent Status\n\nThe extended transition period to site neutral payments during which LTCHs receive a blended payment for discharges that do not meet the patient criteria expired for discharges occurring in cost-reporting periods beginning during FY2020 and subsequent years.\n\n\t\t\tTemporary Exception for Certain Spinal Cord Conditions from Application of the Medicare LTCH Site Neutral Payment for Certain LTCHs (SSA\u00c2 \u00c2\u00a71886(m)(6)(F); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395ww(m)(6)(F))\n\n\t\t\t\tBackground\n\nMedicare pays LTCHs for inpatient hospital care under the LTCH PPS, which is typically higher than payments for inpatient hospital care under the IPPS. Effective for cost-reporting periods beginning in FY2016, LTCHS are paid the LTCH PPS rate for patients that meet one of the following two criteria: (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) is assigned to an LTCH PPS case-mix group that is based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. Discharges involving patients who have a principal diagnosis relating to a psychiatric diagnosis or rehabilitation do not qualify for the LTCH PPS rate. For LTCH discharges that did not qualify for the LTCH PPS based on these criteria, a site neutral payment rate is being phased-in for cost-reporting periods beginning FY2016 through FY2019. Subsequent legislation provided for other criteria to temporarily receive payment under the LTCH PPS. See section \" Temporary Extension of Long-Term Care Hospital (LTCH) Site Neutral Payment Policy Transition Period (SSA\u00c2\u00a0\u00c2\u00a71886(m)(6)(B)(i); 42\u00c2\u00a0U.S.C.\u00c2\u00a0\u00c2\u00a71395ww(m)(6)(B)(i)) \" for details related to site neutral payment.\n\n\t\t\t\tRelevant Legislation\n\nThe 21 st Century Cures Act (Cures Act; P.L. 114-255 ), Division C, Section 15009 , established an additional temporary criterion for payment under the LTCH PPS related to certain spinal cord conditions for discharges occurring in cost-reporting periods FY2018 and FY2019. Specifically, the LTCH PPS rate would apply to an LTCH discharge if all of the following are met: (1) the LTCH was a not-for-profit on June 1, 2014; (2) at least 50% of the LTCH's CY2013 LTCH PPS-paid discharges were classified under LTCH diagnosis related groups (DRGs) associated with catastrophic spinal cord injuries, acquired brain injury, or other paralyzing neuromuscular conditions; and (3) the LTCH during FY2014 discharged patients (including Medicare beneficiaries and others) who had been admitted from at least 20 of the 50 states, as determined by the HHS Secretary based on a patient's state of residency.\n\n\t\t\t\tCurrent Status\n\nThe authority for the temporary criterion related to certain spinal cord conditions to receive payment under the LTCH PPS expired for discharges occurring in cost reporting periods during FY2020 and for subsequent years.\n\n\t\t\tTransitional Payment Rules for Certain Radiation Therapy Services (SSA \u00c2\u00a71848(b)(11); 42\u00c2 U.S.C.\u00c2 \u00c2\u00a71395w-4(b)(11))\n\n\t\t\t\tBackground\n\nCurrently, Medicare payments for services of physicians and certain non-physician practitioners, including radiation therapy services, are made on the basis of a fee schedule. \nTo set payment rates under the MPFS, relative values units (RVUs) are assigned to each of more than 7,000 service codes that reflect physician work (i.e., the time, skill, and intensity it takes to provide the service), practice expenses, and malpractice costs. The relative value for a service compares the relative work and other inputs involved in performing one service with the inputs involved in providing other physicians' services. The relative values are adjusted for geographic variation in input costs. The adjusted relative values are then converted into a dollar payment amount by a conversion factor.\nCMS, which is responsible for maintaining and updating the fee schedule, continually modifies and refines the methodology for estimating RVUs. CMS is required to review the RVUs no less than every five years; the ACA added the requirement that the HHS Secretary periodically identify physician services as being potentially misvalued, and make appropriate adjustments to the relative values of such services under the Medicare physician fee schedule. \nIn determining adjustments to RVUs used as the basis for calculating Medicare physician reimbursement under the fee schedule, the HHS Secretary has authority, under previously existing law and as augmented by the ACA, to adjust the number of RVUs for any service code to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. \nUnder the potentially misvalued codes authority, certain radiation therapy codes were identified as being potentially misvalued in 2015. However, because of concerns that the existing code set did not accurately reflect the radiation therapy treatments identified, CMS created several new codes during the transition toward an episodic alternative payment model. \n\n\t\t\t\tRelevant Legislation\n\nPatient Access and Medicare Protection Act (PAMPA; P.L. 114-115 ), required CMS to apply the same code definitions, work RVUs, and direct inputs for the practice expense RVUs in CY2017 and CY2018 as applied in 2016 for these transition codes, effectively keeping the payments for these services unchanged, subject to the annual update factor. PAMPA exempted these radiation therapy and related imaging services from being considered as potentially misvalued services under CMS's misvalued codes initiative for CY2017 and CY2018. PAMPA also instructed the HHS Secretary to report to Congress on the development of an episodic alternative payment model under the Medicare program for radiation therapy services furnished in non-facility settings. BBA 2018 Section 51009, extended the restrictions through CY2019.\n\n\t\t\t\tCurrent Status\n\nThe payment restrictions expired after December 31, 2019.\nAppendix A. Demonstration Projects and Pilot\u00c2\u00a0Programs\nThis appendix lists selected health care-related demonstration projects and pilot programs that are scheduled to expire during the second session of the 116 th Congress (i.e., during calendar year [CY] 2020). The expiring demonstration projects and pilot programs listed below have portions of law that are time-limited and will lapse once a statutory deadline is reached, absent further legislative action. The expiring demonstration projects and pilot programs included here are those related to Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private health insurance programs and activities. This appendix also includes health care-related demonstration projects and pilot programs that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or extended in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ). No relevant demonstration projects and pilot programs within the same scope expired during the first session of the 116 th Congress (i.e., during CY2019). \nAlthough CRS has attempted to be comprehensive, it cannot guarantee that every relevant demonstration project and pilot program is included here.\n Table A-1 lists the relevant demonstration projects and pilot programs that are scheduled to expire in 2020. \nAppendix B. Provisions Included in the Previous CRS Health Care-Related Expiring Provisions\u00c2\u00a0Report\nThis appendix provides information on the provisions that were included in the previous CRS report on health care-related expiring provisions (CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session ) henceforth referred to as \"R45781,\" but were not detailed in the body of this report.\nAs does the current report, R45781 included expiring provisions (of the same two types discussed herein) related to Medicare, Medicaid, State Children's Health Insurance Program (CHIP), and private health insurance programs and activities as well as selected other health care-related provisions. R45781 included health care-related provisions that were enacted in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ) or, at the time of publication, had been extended under the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). R45781 also described health care-related provisions that, at the time of publication, were set to expire during the first session of the 116 th Congress (i.e., during calendar year [CY] 2019) or had expired during the 115 th Congress (i.e., during CY2017 or CY2018).\nSome of the provisions detailed in R45781 fell within the scope of this report. Such provisions expired in CY2019 or were extended and are set to expire in CY2020. Table B-1 includes the provisions detailed in R45781 that remain expired or were extended to dates beyond the 116 th Congress (i.e., after CY2020). The third column in Table B-1 provides each provision's expiration date as it was in R45781. The fourth column reflects updated information, indicating whether the expiration date remains \"unchanged\" by law or providing the current expiration date for provisions extended pursuant to congressional modification. \nTwo private health insurance provisions were included in R45781 that did not meet the report criteria but were set to expire in 2019. These provisions modified fees and taxes established by the ACA to help fund ACA activities, including those related to private health insurance. As reflected in Table B-1, those fee and tax provisions were permanently repealed in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ).\nUnlike the other provisions that were included in R45781 and were extended past CY2020, the extension for the Patient-Centered Outcomes Research Trust Fund (PCORTF) was legislatively undertaken in a manner that resulted in significant revisions to the program and\/or funding mechanisms detailed in R45781. Because of this, this appendix includes an updated provision summary below Table B-1. See, \"Patient-Centered Outcomes Research Trust Fund (IRC \u00c2\u00a79511 and \u00c2\u00a7\u00c2\u00a74375-4377, SSA \u00c2\u00a71183; 26 U.S.C. \u00c2\u00a79511; 26 U.S.C. \u00c2\u00a7\u00c2\u00a74375-4377; 42 U.S.C. \u00c2\u00a71320e-2).\" For more detailed background information on the other provisions included in Table B-1, see CRS Report R45781, Health Care-Related Expiring Provisions of the 116th Congress, First Session .\nTable B-1 does not include demonstration projects or pilot programs. The only project or program in Appendix A of R45781 that was not included in this report is the Demonstration Program to Increase Access to Dental Health Care Service. The demonstration program expired after March 23, 2017.\nPatient-Centered Outcomes Research Trust Fund (IRC \u00c2\u00a79511 and \u00c2\u00a7\u00c2\u00a74375-4377, SSA \u00c2\u00a71183; 26 U.S.C. \u00c2\u00a79511; 26 U.S.C. \u00c2\u00a7\u00c2\u00a74375-4377; 42 U.S.C. \u00c2\u00a71320e-2)\nBackground\nSSA Section 1181 establishes the Patient-Centered Outcomes Research Institute (PCORI), which is responsible for coordinating and supporting comparative clinical effectiveness research. PCORI has entered into contracts with federal agencies, as well as with academic and private sector research entities for both the management of funding and conduct of research. PHSA Section 937 requires the Agency for Healthcare Research and Quality (AHRQ) to broadly disseminate research findings that are published by PCORI and other government-funded comparative effectiveness research entities. \nIRC Section 9511 establishes the Patient-Centered Outcomes Research Trust Fund to support the activities of PCORI and to fund activities under PHSA Section 937. It provides annual funding to the PCORTF over the period FY2010-FY2019 from the following three sources: (1) annual appropriations, (2) fees on health insurance policies and self-insured plans, and (3) transfers from the Medicare HI and SMI Trust Funds. SSA Section 1183 provides for the transfer of the required funds from the Medicare Trust Funds. Transfers to PCORTF from the Medicare HI and SMI Trust Funds are calculated based on the number of individuals entitled to benefits under Medicare Part A or enrolled in Medicare Part B. IRC Sections 4375-4377 impose the referenced fees on applicable health insurance policies and self-insured health plans and describe the method for their calculation. \nFor each of FY2011 through FY2019, IRC Section 9511 requires 80% of the PCORTF funds to be made available to PCORI, and the remaining 20% of funds to be transferred to the HHS Secretary for carrying out PHSA Section 937. Of the total amount transferred to HHS, 80% is to be distributed to AHRQ, with the remainder going to the Office of the Secretary (OS)\/HHS.\nRelevant Legislation\nACA, Section 6301 , provided the following amounts to the PCORTF: (1) $10 million for FY2010, (2) $50 million for FY2011, and (3) $150 million for each of FY2012 through FY2019. In addition, for each of FY2013 through FY2019, the section provided an amount equivalent to the net revenues from a new fee that the law imposed on health insurance policies and self-insured plans. For policy\/plan years ending during FY2013, the fee equals $1 multiplied by the average number of covered lives. For policy\/plan years ending during each subsequent fiscal year through FY2019, the fee equals $2 multiplied by the average number of covered lives. Finally, the section (in addition to ACA Section 6301(d)) provided for transfers to PCORTF from the Medicare Part A and Part B trust funds; these are generally calculated by multiplying the average number of individuals entitled to benefits under Medicare Part A, or enrolled in Medicare Part B, by $1 (for FY2013) or by $2 (for each of FY2014 through FY2019). Under this provision, PCORTF was to terminate on September 30, 2019. Continu ing Appropriations Act, 2020, and Health Extenders Act of 2019 ( P.L. 116-59 ), Section 1403 , extended the termination date of PCORTF through November 21, 2019. Further Continuing Appropriations Act, 2020, and Further Health Extenders Act of 2019 ( P.L. 116-69 ), Section 1403 , further extended the termination date of PCORTF through December 20, 2019. Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), Division N, Section 104 , extends funding for PCORTF through FY2029 by appropriating both the amount equivalent to the net revenues received from the fees on health insurance policies and self-insured plans and providing a direct appropriation in a specified amount (the \"applicable amount\") for each of fiscal years 2020 through 2029. The transfers from the Medicare HI and SMI Trust Funds were not extended. The section extends the termination date of PCTORF through FY2029; extends the termination dates of the fees on health insurance policies and self-insured plans through FY2029; and extends the requirement that 20% of PCORTF funds be transferred to the HHS Secretary for carrying out PHSA Section 937 for each fiscal year through FY2029. The section also makes modifications to the authorizing language for PCORI relating to the composition of its Board; appointments to its Methodology Committee; and the identification of research priorities, among others. \nCurrent Status\nAppropriated funds to PCORTF expire after September 30, 2029. Funds transferred to the HHS Secretary under IRC Section 9511 remain available until expended. No amounts shall be available for expenditure from the PCORTF after September 30, 2029, and any amounts in the Trust Fund after such date shall be transferred to the general fund of the Treasury.\nAppendix C. Laws That Created, Modified, or Extended Current Health Care-Related Expiring\u00c2\u00a0Provisions\nAppendix D. List of Abbreviations\nAAA: Area Agencies on Aging\nACA: Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) \nACL: Administration for Community Living\nADRC: Aging and Disability Resource Center\nAHRQ: Agency for Healthcare Research and Quality\nAPM: Alternative payment model\nARRA: American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 )\nASC: Ambulatory Surgery Center\nATRA: American Taxpayer Relief Act of 2012 ( P.L. 112-240 )\nBBA 97: Balanced Budget Act of 1997 ( P.L. 105-33 )\nBBA 2018 : Bipartisan Budget Act of 2018 ( P.L. 115-123 )\nBIPA 2000 : Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 ( P.L. 106-554 )\nCARES Act: Coronavirus Aid, Relief, and Economic Security Act ( P.L. 116-136 )\nCHCF: Community Health Center Fund\nCHIP: State Children's Health Insurance Program\nCMS: Centers for Medicare & Medicaid Services\nCRS: Congressional Research Service\nCY: Calendar year\nDRA: Deficit Reduction Act of 2005 ( P.L. 109-171 )\nDRG: Diagnosis related group \nE-FMAP: Enhanced federal medical assistance percentage\nFFCRA: Families First Coronavirus Response Act ( P.L. 116-127 ) \nFMAP: Federal medical assistance percentage\nFPL: Federal poverty level\nFY: Fiscal year\nGME: Graduate medical education\nGPCI: Geographic Practice Cost Index\nHCBS: Home and community-based services\nHCTC: Health Coverage Tax Credit \nHH: Home health\nHHS: Department of Health and Human Services\nHI: Hospital Insurance\nIHE : Institution of higher education\nIHS: Indian Health Service\nIPPS: Medicare Inpatient Prospective Payment System\nIVIG: Intravenous immune globulin\nLTCH: Long-term care hospital\nLTCH PPS: Long-term care hospital prospective payment system\nLTSS: Long-term services and supports\nMA: Medicare Advantage\nMACRA: Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 )\nMAP: Measure Applications Partnership\nMCTRJCA: Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 )\nMedPAC: Medicare Payment Advisory Commission \nMIPPA: Medicare Improvements for Patients and Providers Act of 2008 ( P.L. 110-275 )\nMIPS: Merit-based incentive payment system\nMMA: Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-173 )\nMMEA: Medicare and Medicaid Extenders Act of 2010 ( P.L. 111-309 )\nMMSEA: Medicare, Medicaid and SCHIP Extension Act of 2007 ( P.L. 110-173 )\nMPFS: Medicare physician fee schedule\nMSP: Medicare Savings Program\nNHSC: National Health Service Corps\nNQF: National Quality Forum\nPAF: Pregnancy Assistance Fund\nPAMA: Protecting Access to Medicare Act of 2014 ( P.L. 113-93 )\nPAMPA: Patient Access and Medicare Protection Act ( P.L. 114-115 )\nPCORI: Patient-Centered Outcomes Research Institute\nPCORTF: Patient-Centered Outcomes Research Trust Fund\nPETI: Post-eligibility treatment of income\nPHSA: Public Health Service Act\nPPS: Prospective payment system\nPREIS: Personal Responsibility Education Program Innovative Strategies \nPREP: Personal Responsibility Education Program\nPRWORA: Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 )\nPSRA: Pathway for SGR Reform Act of 2013 ( P.L. 113-67 , Division B)\nRVU: Relative value unit\nSHIP: State Health Insurance Assistance Program\nSMI: Supplementary Medical Insurance\nSNAP: Supplemental Nutrition Assistance Program\nSRAE: Sexual Risk Avoidance Education\nSSA: Social Security Act\nSSI: Supplemental Security Income\nTAA: Trade Adjustment Assistance\nTANF: State Temporary Assistance for Needy Families\nTPTCCA: Temporary Payroll Tax Cut Continuation Act of 2011( P.L. 112-78 )\nTRHCA: Tax Relief and Health Care Act of 2006 ( P.L. 109-432 )\nU.S.C.: U.S. Code\nWREA 2003: Welfare Reform Extension Act of 2003 ( P.L. 108-40 )\nWREA 2004: Welfare Reform Extension Act of 2004 ( P.L. 108-210 )\nWREA 2005: Welfare Reform Extension Act of 2005 ( P.L. 109-4 )","output":null}
{"id":"crs_R46327","pid":"crs_R46327_0","input":"\tIntroduction\n\nCongress established the Office of Technology Assessment (OTA) in October 1972 in the Technology Assessment Act of 1972 (P.L. 92-484) to provide \ncompetent, unbiased information concerning the physical, biological, economic, social, and political effects of [technological] applications\" [to be used as a] \"factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications.\nThe agency operated for more than two decades, producing approximately 750 full assessments, background papers, technical memoranda, case studies, and workshop proceedings. In 1995, amid broader efforts to reduce the size of government, Congress eliminated funding for the operation of the agency. Congress appropriated funding for FY1996 \"to carry out the orderly closure\" of OTA. Although the agency ceased operations, the statute authorizing OTA's establishment, structure, functions, duties, powers, and relationships to other entities was not repealed.\nSince OTA's defunding, some Members of Congress, science and technology advocates, and others have sought to reestablish OTA or to establish similar analytical functions in another agency or nongovernmental organization. This report describes the OTA's historical mission, organizational structure, funding, staffing, operations, and perceived strengths and weakness. The report concludes with a discussion of issues and options surrounding reestablishing the agency or its functions. The report also includes three appendices. Appendix A provides a historical overview of discussions about the definition of \"technology assessment,\" a topic fundamental to OTA's mission and to any organization that would seek to fulfill OTA's historic role. Appendix B describes selected trends and factors that may contribute to a perceived need for technology assessment. Appendix C provides a history of legislative efforts to reestablish OTA or its functions since the agency was defunded. Appendix D provides a list of technology assessment products produced from 2002 to 2019 by the Government Accountability Office (GAO). Congress's guidance to GAO on technology assessment during this period is provided in the section \" Congress, GAO, and Technology Assessment .\"\n\n\tOverview of Science and Technology Advice to Policymakers\n\nGroundbreaking emerging technologies\u00e2\u0080\u0094in fields such as artificial intelligence, quantum computing, gene editing, hypersonics, autonomy, and nanotechnology\u00e2\u0080\u0094are widely anticipated to have substantial economic and social impacts, affecting the ways people work, travel, learn, live, and engage with others and the surrounding world. The impacts are likely to be felt by people of all ages, across most industries, and by government. Science, technology, and innovation have been of interest to government leaders throughout the nation's history. The federal government has looked to people and organizations with expertise in the development and application of new technologies to gain insights into their implications and potential public policy responses\u00e2\u0080\u0094both to accelerate and maximize their expected benefits and to reduce or eliminate expected adverse effects. Such policies may include, among other things\nthe funding of research and development (R&D) to accelerate the arrival and deployment of technologies and to identify their uses and potential implications; infrastructure policies, such as \"smart\" highways and cities, focused on creating environments where new technologies can flourish; regulations to guide and govern the development and use of technologies to ensure human health and public safety and to protect the environment; tax policies and other incentives to encourage investment in technology development and adoption; trade policies to maximize the global economic and societal potential of new technologies by fostering market access and eliminating tariff and nontariff barriers; intellectual property policies to protect the interests of those investing in technology development and commercialization; and education and training programs to promote U.S. leadership in innovation and ensure the adequacy of the science and technology workforce, as well as to help those who are displaced by new technologies to attain the knowledge and skills needed for other jobs.\nIn some cases, a specific science or technology outcome may be the primary objective of a proposed policy, while in other cases science and technology may play a role in a broader policy effort to achieve other societal goals, such as environmental quality, public health and safety, economic competitiveness, or national security. Science and technology activities, programs, and sectors can be affected by tradeoffs resulting from multiple policy objectives. For example, U.S. trade policy for high technology goods and services may involve complementary and competing policy objectives related to intellectual property protection, expansion of markets, protection of U.S. national security, and advancement of geopolitical objectives.\nU.S. government efforts to obtain guidance on scientific and technical issues and their policy implications extend back to the nation's founding. Some of these efforts were informal, with Presidents, Members of Congress, and executive branch officials seeking out insights of knowledgeable individuals on an ad hoc basis. \nPresidents and congressional leaders also relied on more formal advice from scientific and technical societies, and business and professional organizations for insights and guidance on science, technology, and innovation-related issues. A number of organizations and their members helped fill this role in the early years of the country's development, including the American Philosophical Society, co-founded by Benjamin Franklin in 1743; the American Academy of Arts and Sciences, founded in 1780 in Boston, whose charter members included John Adams and Samuel Adams; the Academy of Natural Sciences of Philadelphia, founded in 1812; the Smithsonian Institution, established by an act of Congress in 1846; and the American Association for the Advancement of Science, founded in 1848. \nIn 1863, Congress chartered the National Academy of Sciences and directed that \"the academy shall, whenever called upon by any department of the Government, investigate, examine, experiment, and report upon any subject of science or art, the actual expense of such investigations, examinations, experiments, and reports to be paid from appropriations which may be made for the purpose, but the Academy shall receive no compensation whatever for any services to the Government of the United States.\" Three related entities were subsequently formed to complement the knowledge and capabilities of the National Academy of Sciences: the National Academy of Engineering, the National Academy of Medicine, and the National Research Council. These four organizations are collectively referred to as the National Academies of Science, Engineering, and Medicine (NASEM) or simply, the National Academies. They are nonprofit, nongovernmental entities.\nIn addition, throughout the 20 th century, Congresses and Presidents, using statutory and executive authorities, respectively, established executive branch organizations to provide scientific insight and advice to the President, as well as informing Congress and federal departments and agencies. Advisory and coordinating organizations included the National Advisory Committee for Aeronautics (NACA, est. 1915), the Science Advisory Committee (SAC, est. 1951), the President's Science Advisory Committee (PSAC, est. 1956), the Intergovernmental Science, Engineering, and Technology Panel (ISETAP, est. 1976), the President's Committee on Science and Technology (PCST, est. 1976), and the President's Council of Advisors on Science and Technology (PCAST, est. 1990). Other organizations were established in statute. For example, the National Science Board (NSB, which oversees the National Science Foundation) was established by the National Science Foundation Act of 1950; a key statutory mandate of the NSB is to \"render to the President and to the Congress reports on specific, individual policy matters related to science and engineering and education in science engineering, as Congress or the President determines the need for such reports.\" In addition, many science and technology agencies in the executive branch have deep expertise across a wide spectrum of technologies; several of these have policy-oriented offices or programs.\nWhile Congress had its own science and technology advisory resources\u00e2\u0080\u0094including the Congressional Research Service (CRS) and the General Accounting Office (GAO, now the Government Accountability Office )\u00e2\u0080\u0094prior to the establishment of OTA, many federal science and technology advisory organizations and agencies were under the authority and direction of the President. Accordingly, during the decade preceding the establishment of OTA, a number of lawmakers expressed a need for Congress to have its own agency to conduct detailed science and engineering analyses and provide information tailored to legislative needs and the legislative process\u00e2\u0080\u0094to supplement the functions performed by GAO and CRS. For example, in a 1963 hearing, Representative George Miller, chairman of the House Committee on Science and Astronautics, stated \nWe are concerned with whether or not hasty decisions are handed down to us, but one of our difficulties is how to evaluate these decisions. We have to take a great deal on faith. We are not scientists \u00e2\u0080\u00a6 [but] I want to say that in our system of government we have our responsibility. We are not the rubber stamps of the administrative branch of Government\u00e2\u0080\u00a6 [We] recognize our responsibility to the people and the necessity for making some independent judgments \u00e2\u0080\u00a6 [but] we do not particularly have the facilities nor the resources that the executive department of the government has.\nIn August 1963, Senator Edward L. Bartlett, introduced a bill to establish in the legislative branch a congressional Office of Science and Technology:\nThe scientific revolution proceeds faster and faster \u00e2\u0080\u00a6 and the President, in requesting authority for these vast scientific programs undertaken by the Government,\u00e2\u0080\u00a6 has available to him the full advice and counsel of the scientific community\u00e2\u0080\u00a6. The Congress has no such help. The Congress has no source of independent scientific wisdom and advice. Far too often congressional committees for expert advice rely upon the testimony of the very scientists who have conceived the program, the very scientists who will spend the money if the program is authorized and appropriated for.\u00e2\u0080\u00a6 Congress as a body must equip itself to legislate on technological matters with coherence and comprehension.\nIn December 1963, Senator Bartlett testified at a hearing of the Committee on House Administration Subcommittee on Accounts on the establishment of a congressional science advisory staff:\nFaceless technocrats in long, white coats are making decisions today which rightfully and by law should be made by the Congress. These decisions dealing with the allocation of our scientific and technical resources must be made\u00e2\u0080\u00a6. I think the Congress should make these decisions. I think they should be made in a rational manner. I think they should be made by an informed legislature which understands the implications, the costs, and the priorities of its judgments.\nSimilarly, in a 1970 hearing of the House Subcommittee on Science, Research, and Development on H.R. 17046 (91 st Congress), a bill to establish OTA, subcommittee chair Representative Emilio Daddario stated\nThis Subcommittee has recognized a need to pay more attention to the technological content of legislative issues. Since 1963, a large portion of the Subcommittee efforts have been to develop avenues of information and advice for the Congress with outside groups, We have recognized the important need for developing Independent means of obtaining necessary and relevant technological Information for the Congress, without having to depend almost solely on the Executive Branch. In my view, it is only with this capability that Congress can assure its role as an equal branch in our Federal structure.\nDuring the 1972 House debate on establishing OTA, Representative Chuck Mosher reiterated the need for Congress to have its own science and technology advisory responsive solely to Members of Congress and congressional committees:\nLet us face it, Mr. Chairman, we in the Congress are constantly outmanned and outgunned by the expertise of the executive agencies. We desperately need a stronger source of professional advice and information, more immediately and entirely responsible to us and responsive to the demands of our own committees, in order to more nearly match those resources in the executive agencies.\nMany, perhaps most, of the proposals for new or expanding technologies come to us from the executive branch; or at least it is the representatives of those agencies who present expert testimony to us concerning such proposals. We need to be much more sure of ourselves, from our own sources, to properly challenge the agency people, to probe deeply their advice, to more efficiently force them to justify their testimony\u00e2\u0080\u0094to ask sharper questions, demand more precise answers, to pose better alternatives.\nPeter Blair, author of Congress' Own Think Tank: Learning from the Legacy of the Office of Technology Assessment, asserts that this perspective contributed to the establishment of OTA and other congressional science and technology analytical functions:\n[Many] viewed the creation of OTA, as well as the subsequent creation of CBO, and the expansion of [the Congressional Research Service] and [General Accounting Office] at around the same time, as part of a congressional reassertion of authority responding to Richard Nixon's presidency.\nWhile advocates for the creation of OTA asserted that its functions would be complementary to GAO and CRS, others expressed concerns about the costs of setting up another bureaucracy and suggested that the roles envisioned for OTA might be done by the existing agencies, perhaps at a lower cost. Some proposed, instead, that the functions intended for OTA be given to CRS or GAO.\n\n\tThe Office of Technology Assessment\n\nFor several years in the late 1960s and early 1970s, Congress explored and deliberated on the need for, and value of, technology assessment as an aid in policymaking decisions. In 1972, Congress enacted the Technology Assessment Act of 1972 (P.L. 92-484, codified at 2 U.S.C. \u00c2\u00a7\u00c2\u00a7471 et seq.), establishing the Office of Technology Assessment as a legislative branch agency. \nThe meaning of the term \"technology assessment\" is fundamental to the types of research and analysis that OTA or a successor organization might perform. There is no single authoritative definition of the term. In practice, an implicit definition is provided in the Technology Assessment Act of 1972:\nThe basic function of the Office shall be to provide early indications of the probable beneficial and adverse impacts of the applications of technology and to develop other coordinate information which may assist the Congress.\nIn the act, Congress found and declared that technological applications were \"large and growing in scale; and increasingly extensive, pervasive, and critical in their impact, beneficial and adverse, on the natural and social environment.\" Accordingly, Congress deemed it \"essential that, to the fullest extent possible, the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems.\"\nFurther, Congress found that existing legislative branch agencies were not designed to provide Congress with independently developed, adequate, and timely information related to the potential impact of technological applications.\nFor these reasons, Congress authorized the establishment of OTA to \"equip itself with new and effective means for securing competent, unbiased information concerning the physical, biological, economic, social, and political effects of such applications.\" The information provided by OTA would serve \"whenever appropriate, as one factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications.\" \nIn assigning functions, duties, and powers to OTA, Congress further refined its concept of technology assessment; these are described later in this report. For a discussion of the history and varying perspectives on the meaning of the term, see Appendix A .\n\n\t\tStatutory Organization and Authorities\n\nAs previously noted, the authorization for OTA's existence, structure, and functions remains in effect. This section provides an overview of OTA's structure, function and duties, powers, components and related organizations, and other information, as articulated in the agency's organic statute and codified at 2 U.S.C. \u00c2\u00a7\u00c2\u00a7471-481. Because these authorities remain in effect, despite the fact that OTA itself no longer exists, this section describes the authorities using the present tense.\n\n\t\t\tStructure, Functions, and Duties\n\nThe Technology Assessment Act of 1972 authorizes the establishment of an Office of Technology Assessment, composed of a Director and a Technology Assessment Board (TAB). The TAB is to \"formulate and promulgate the policies\" for OTA to be carried out by the Director. \nOTA's functions and duties include\nidentifying existing or probable impacts of technology or technological programs; ascertaining cause-and-effect relationships, where possible; identifying alternative technological methods of implementing specific programs; identifying alternative programs for achieving requisite goals; making estimates and comparisons of the impacts of alternative methods and programs; presenting findings of completed analyses to the appropriate legislative authorities; identifying areas where additional research or data collection is required to provide adequate support for its assessments and estimates; and undertaking such additional associated activities as directed by those authorized to initiate assessments (see below).\n\n\t\t\tPowers\n\nThe statute authorizes OTA \"to do all things necessary\" to carry out its functions and duties including, but not limited to\nmaking full use of competent personnel and organizations outside of OTA, public or private, and forming special ad hoc task forces or making other arrangements when appropriate; entering into contracts or other arrangements for the conduct of the work of OTA with any agency of the United States, with any state, territory, or possession, or with any person, firm, association, corporation, or educational institution; making advance, progress, and other payments which relate to technology assessment; accepting and utilizing the services of voluntary and uncompensated personnel necessary for the conduct of the work of OTA and providing transportation and subsistence for persons serving without compensation; acquiring by purchase, lease, loan, or gift, and holding and disposing of by sale, lease, or loan, real and personal property necessary for exercising the OTA's authority; and prescribing such rules and regulations as it deems necessary governing the operation and organization of OTA.\nThe act also authorizes OTA \"to secure directly from any executive department or agency information, suggestions, estimates, statistics, and technical assistance for the purpose of carrying out its functions.\" It also requires executive departments and agencies to furnish such information, suggestions, estimates, statistics, and technical assistance to OTA upon its request.\nOther provisions prohibit OTA from operating any laboratories, pilot plants, or test facilities, and authorize the head of any executive department or agency to detail personnel, with or without reimbursement, to assist OTA in carrying out its functions.\n\n\t\t\tTechnology Assessment Board\n\nUnder the act, the Technology Assessment Board (TAB) is to consist of 13 members: six Senators (three from the majority party and three from the minority party), six Members of the House of Representatives (three from the majority party and three from the minority party), and the OTA Director. The Director is to be a nonvoting member. The Senate members are to be appointed by the President pro tempore of the Senate; House members are to be appointed by the Speaker of the House of Representatives.\nThe act authorizes the TAB to \"formulate and promulgate the policies\" of OTA. It also authorizes the TAB, upon majority vote, to \"require by subpoena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, to administer such oaths and affirmations, to take such testimony, to procure such printing and binding, and to make such expenditures, as it deems advisable.\" It authorizes the TAB to make rules for its organization and procedures and authorizes any voting member of the TAB to administer oaths or affirmations to witnesses.\nThe chair and vice chair of the TAB are to alternate between the House and Senate each Congress. During each even-numbered Congress, the chair is to be chosen from the House members of the TAB, and the vice chair is to be chosen from the Senate members. In each odd-numbered Congress, the chair is to be chosen from the Senate members of the TAB, and the vice chair is to be chosen from among the House members.\nNo TAB was established after the 104 th Congress. The House did not formally appoint members in the 104 th Congress, but Senate membership in the TAB was continuous and therefore the Senate members served as OTA's board until the agency ceased operations in 1995.\n\n\t\t\tDirector, Deputy Director, and Other Staff\n\nUnder the act, the TAB is to appoint the OTA Director for a term of up to six years. The act authorizes the Director to exercise the powers and duties provided for in the act, as well as such powers and duties as may be delegated to the Director by the TAB. The TAB has the authority to remove the Director prior to the end of the six-year term.\nThe act authorizes the Director to appoint a Deputy Director. The Director and the Deputy Director are prohibited from engaging in any other business, vocation, or employment; nor is either allowed to hold any office in, or act in any capacity for, any organization, agency, or institution with which OTA contracts or otherwise engages.\nThe Director is to be paid at level III of the Executive Schedule and the Deputy Director is to be paid at level IV. The act authorizes the Director to appoint and determine the compensation of additional personnel to carry out the duties of OTA, in accordance with policies established by the TAB.\n\n\t\t\tInitiation of Technology Assessment Activities\n\nUnder the act, OTA may conduct technology assessments only at the request of \nthe chair of any standing, special, or select committee of either chamber of Congress, or of any joint committee of the Congress, acting on his or her own behalf or at the request of either the ranking minority member or a majority of the committee members; the TAB; or the Director, in consultation with the TAB.\n\n\t\t\tTechnology Assessment Advisory Council\n\nUnder the act, OTA is to establish a Technology Assessment Advisory Council (TAAC). The TAAC shall, upon request by the TAB, review and make recommendations to the TAB on activities undertaken by OTA; review and make recommendations to the TAB on the findings of any assessment made by or for OTA; and undertake such additional related tasks as the TAB may direct.\nUnder the act, the TAAC is to be composed of 12 members:\n10 members from the public, to be appointed by the TAB, who are to be persons \"eminent in one or more fields of the physical, biological, or social sciences or engineering or experienced in the administration of technological activities, or who may be judged qualified on the basis of contributions made to educational or public activities\"; the Comptroller General, who heads GAO; and the Director of the Congressional Research Service.\nThe public members of the TAAC are to be appointed to four-year terms. They are to receive compensation for each day engaged in the actual performance of TAAC duties at the highest rate of basic pay in the General Schedule. The law authorizes reimbursement of travel, subsistence, and other necessary expenses for all TAAC members.\nUnder the act, a TAAC member appointed from the public may be reappointed for a second term, but may not be appointed more than twice. The TAAC is to select its chair and vice chair from among its appointed members. The terms of TAAC members are to be staggered, according to a method devised by the TAB.\n\n\t\t\tServices and Assistance from CRS and GAO\n\nThe act authorizes the Librarian of Congress to make available to OTA such services and assistance of the Congressional Research Service as are appropriate and feasible, including, but not limited to, all of the services and assistance which CRS is otherwise authorized to provide to Congress. The Librarian is authorized to establish within CRS such additional divisions, groups, or other organizational entities as necessary for this purpose. Services and assistance made available to OTA by CRS may be provided with or without reimbursement from OTA, as agreed upon by the TAB and the Librarian.\nSimilarly, the act directs the Government Accountability Office to provide to OTA financial and administrative services (including those related to budgeting, accounting, financial reporting, personnel, and procurement) and such other services. Such services and assistance to OTA include, but are not limited to, all of the services and assistance that GAO is otherwise authorized to provide to Congress. Services and assistance made available to OTA by GAO may be provided with or without reimbursement from OTA, as agreed upon by the TAB and the Comptroller General.\n\n\t\t\tCoordination with the National Science Foundation\n\nUnder the act, OTA is to maintain a continuing liaison with the National Science Foundation with respect to grants and contracts for purposes of technology assessment, promotion of coordination in areas of technology assessment, and avoidance of unnecessary duplication or overlapping of research activities in the development of technology assessment techniques and programs.\n\n\t\t\tInformation Disclosure\n\nThe act requires that OTA assessments\u00e2\u0080\u0094including information, surveys, studies, reports, and related findings\u00e2\u0080\u0094shall be made available to the initiating committee or other appropriate committees of Congress. In addition, the act authorizes the public release of any information, surveys, studies, reports, and findings produced by OTA, except when doing so would violate national security statutes or when the TAB deems it necessary or advisable to withhold such information under the exemptions provided by the Freedom of Information Act.\n\n\t\t\tOther\n\nThe act requires OTA's contractors and certain other parties to maintain books and related records needed to facilitate an effective audit in such detail and in such manner as shall be prescribed by OTA. These books and records (and related documents and papers) are to be available to OTA and the Comptroller General, or their authorized representatives, for audits and examinations.\n\n\t\tFunding\n\nCongress appropriated funds for OTA from FY1974 to FY1996 in annual legislative branch appropriations acts. Funding was provided mainly through regular appropriations acts, but additional funding was provided in some years through supplemental appropriations acts. In some fiscal years, Congress reappropriated unused OTA funds from earlier appropriations, essentially carrying the funds over to the next year. In some years, appropriations were reduced through sequestration or rescission.\nOTA's funding grew steadily throughout its existence, from an initial appropriation of $2 million in FY1974 ($8.6 million in constant FY2019 dollars) to a current dollar peak of $21.3 million in FY1995 ($33.4 million in constant FY2019 dollars). See Figure 1 (current dollars) and Figure 2 (constant FY2019 dollars).\nOTA's budget peaked in constant dollars in FY1992 at $35.1 million in constant FY2019 dollars. OTA received $3.6 million ($5.6 million in constant FY2019 dollars) in FY1996 to close out its operations. According to the Office of Management and Budget, OTA was not funded beyond February 1996.\n\n\t\tStaffing\n\nCRS was unable to identify a consistent measurement of OTA staffing that spans the period during which Congress appropriated funds for the agency. Figure 3 includes OTA staffing levels using three different characterizations that were consistent during parts of this time period. The data are from the Budget of the United States Government for fiscal years 1976-1998. Using these measures, staffing was first reported for FY1974 at 42, and rose to 151 in FY1977. Staffing then fell through 1980 before rising again, but remained between 123 and 143 from FY1978 to FY1991. In FY1992, reported staffing jumped to 193, and rose to a reported 210 in FY1993. In FY1994, staffing fell to a reported 197 and continued to drop through the end of the agency's funding in FY1996.\nDuring most years of OTA's operations, Congress included an annual cap on the agency's total number of \"staff employees\" in annual appropriations laws, beginning with a cap of 130 in the FY1978 Legislative Branch Appropriations Act ( P.L. 95-94 ). This cap was included in subsequent appropriations bills through FY1983. Congress increased the cap to 139 staff employees for FY1984, then increased it again to 143 for FY1985 and maintained this level through FY1995. The cap established a maximum limit on the number of OTA staff employees. \nIn addition to full-time and temporary staff employees, OTA made extensive use of contractors. As shown in Figure 3 , OTA reported the statutory maximum of 143 employees from FY1985 to FY1991. In FY1992, a change in practice may have led to the reporting of contractors in its staffing level, resulting in the reported number of total compensable workyears exceeding total authorized (143) positions. Contractors supplemented the knowledge base of staff employees and were seen by OTA management as critical to the agency's ability to deliver authoritative products on emerging scientific and technological fields, especially with respect to OTA's technology scanning products that sought to characterize possible future science and technology paths and their potential implications.\n\n\tObservations on OTA's Design and Operations\n\nPeter Blair, in Congress' s Own Think Tank , noted that OTA was designed with the intention of serving the unique needs of Congress: \nThe agency's architects intended the reports and associated information OTA produced to be tuned carefully to the language and context of Congress. OTA's principal products\u00e2\u0080\u0094technology assessments\u00e2\u0080\u0094were designed to inform congressional deliberations and debate about issues that involved science and technology dimensions but without recommending specific policy actions.\nSupporters, critics, and analysts have offered a variety of views on the strengths and weaknesses of OTA. Some have found OTA's work to be professional, authoritative, and helpful to Congress. For example, in a 1979 hearing of the Senate Committee on Appropriations, Subcommittee on Legislative Branch Appropriations, Representative Morris Udall, serving as chairman of the OTA Technology Assessment Board, testified that \nThe usefulness of the OTA is clear. The office has a place in the legislative process\u00e2\u0080\u00a6. During my tenure on the Board, I have enjoyed watching OTA develop and building this record to the point where it is now on a decisive and effective course.\nOthers offered a variety of criticisms, including issues related to uniqueness\/duplication, timeliness, objectivity, and other factors, which likely helped to lay a foundation for its defunding. These are discussed below.\n\n\t\tUniqueness and Duplication\n\nSome supporters of OTA asserted that the agency served a unique mission, complementary to those of its sister congressional agencies. A 1978 report of the House Committee on Science and Technology Subcommittee on Science, Research, and Technology reporting on its 1977-1978 oversight hearings on OTA stated\nOTA has been set up to do a job for the Congress which is: (a) essential, (b) not capable of being duplicated by other legislative entities, and (c) proving useful and relied upon. OTA should retain its basic operating method of depending to a large extent on out-of-house professional assistance in performing its assessments. Continued congressional support for OTA is warranted.\nSubcommittee chairman Representative Ray Thornton subsequently stated that this report \"doesn't leave much doubt that the office is a valuable asset to the Congress.\"\nHowever, some critics asserted that the OTA mission and the work it did were already performed, or could be performed, by other organizations\u00e2\u0080\u0094such as GAO (then the General Accounting Office), CRS, or the National Academies.\nThis perspective was expressed by Senator Jim Sasser, chairman of the Senate Committee on Appropriations Subcommittee on the Legislative Branch, in a 1979 hearing:\nI am, frankly, troubled by the Office of Technology Assessment. This letter from Chairman Magnuson is just one more example of the type and tenor of questioning I receive from my colleagues and others about the Office of Technology Assessment. Frankly\u00e2\u0080\u00a6this recurring questioning raises doubts in my mind about the need for the Office of Technology Assessment. From time to time I hear that OTA very often duplicates studies conducted by the three other congressional analytical agencies, that is, the General Accounting Office, the Congressional Research Service and the Congressional Budget Office, or [by] executive branch agencies, such as the National Science Foundation.\nConcerns about duplication continued. During House floor debate on the Legislative Branch Appropriations Act, 1995, that eliminated funding for OTA, Representative Ron Packard, chairman of the Legislative Branch Subcommittee, stated\nIn our efforts in this bill we have genuinely tried to find where there is duplication in the legislative branch of Government. This is one area where we found duplication, serious duplication. We have several agencies that are doing very much the same thing in terms of studies and reports.\nI am aware of the invaluable service of OTA, but there are other agencies that do the same thing. The CRS has a science division of their agency. GAO has a science capability in their agency. They can do the same thing as OTA\u00e2\u0080\u00a6.\nWe ought to eliminate those agencies where duplication exists. This is one of those areas.\nIn 2006, Carnegie Mellon University professor Jon M. Peha asserted that, while nonfederal organizations produce high-quality work similar to that performed by OTA, their work is not necessarily duplicative of the type of work OTA was established to perform as the characteristics of their analyses (e.g., directive recommendations, timeliness, format) are qualitatively different and their motivations may be subject to question:\nThere still are more sources of information outside of government. These tend to be inappropriate for different reasons. The National Academies sometimes are an excellent resource for Congress, but for a different purpose. The National Academies generally attempt to bring diverse experts together to produce a consensus recommendation about what Congress should do. In many cases, Members of Congress do not want to be told what to do. Instead, they want a trustworthy assessment of their options, with the pros and cons of each, so they can make up their own minds. Universities and research institutes also produce valuable work on some important issues, but it rarely is generated at a time when Congress most needs it, or in a format that the overworked generalists of Congress can readily understand and apply. Moreover, Members of Congress must be suspicious that the authors of any externally produced report have an undisclosed agenda.\n\n\t\tTimeliness\n\nCongress established OTA to help it anticipate, understand, and consider \"to the fullest extent possible, the consequences of technological applications \u00e2\u0080\u00a6 in determination of public policy on existing and emerging national problems.\" To do this effectively, Congress needs information, analysis, and options on a timetable with the development and consideration of legislation.\nOTA supporters have noted that in recognizing the need for timeliness, the agency sought to inform congressional decisionmaking through a number of other mechanisms beyond its formal assessments. In addition to its formal assessments and summaries, OTA used the following additional mechanisms to inform Congress: technical and other memoranda, testimony, briefings, presentations, workshops, background papers, working papers, and informal discussions.\nRepresentative Rush Holt commented in 2006 that OTA's reports \"were so timely and relevant that many are still useful today.\"\nWhile OTA reports were often lauded for being authoritative and comprehensive, some critics asserted that the time it took for OTA to define a report, collect information, gather expert opinions, analyze the topic, and issue a report was not consistent with the faster pace of legislative decisionmaking:\nProbably the most frequent criticism of OTA from supporters and detractors alike is that it was too slow; some studies took so long that important decisions already were made when the relevant reports were released.\nIn its early years, some criticized OTA for producing too many short analyses; later others criticized the agency for concentrating on long-range studies and neglecting committee needs.\nIn 2001, the former chairman of the House Committee on Science Robert Walker noted\nToo often the OTA process resulted in reports that came well after the decisions had been made. Although it can be argued that even late reports had some intellectual value, they did not help Congress, which funded the agency, do its job.\nGeorgetown Law's Institute for Technology Law and Policy published a report on a June 2018 workshop on strategies for improving science and technology policy resources for Congress. Several participants asserted that \"OTA's model often failed to deliver timely information to Congress, as the comprehensiveness of the studies and the rigor of the peer review process meant that reports could take 18 months or more to publish.\"\n\n\t\tQuality and Utility\n\nSome criticisms related to the quality and utility of OTA reports to the legislative process. This concern, and others, were reflected in a 1979 statement by Senator Jim Sasser, chairman of the Senate Appropriations Subcommittee on the Legislative Branch: \nThe accusations are leveled that OTA studies are mediocre, and they are not used in the legislative process, but rather, most of them end up in the warehouse gathering dust, as so many government studies do\u00e2\u0080\u00a6. I am not being personally critical of you at all, but it falls to me to respond to these criticisms which I hear from my colleagues and others.\nIn 1984 the Heritage Foundation, a think tank, published a paper, Reassessing the Office of Technology Assessment , lauding the agency's independence and quality:\nOTA performs an important function for Congress. In an increasingly complex age, Congress needs the means to conduct analyses independent of those produced by industry, lobbies, and the executive branch. The quality control procedures of OTA, as a whole, seem as careful and complete as those of its sister agencies, the General Accounting Office and the Congressional Budget Office.\n\n\t\tObjectivity\n\nThere was and is a consensus that objectivity is essential to technology assessment if it is to serve as a foundation (among others) for congressional decision making. However, not all agree that objectivity is necessary to technology assessment, or even possible. \nSome assert OTA's work to have been objective. This perspective is reflected in comments by Representative Mark Takano who has stated, \"The foundation for good policy is accurate and objective analysis, and for more than two decades the OTA set that foundation by providing relevant, unbiased technical and scientific assessments for Members of Congress and staff.\" Similarly, Representative Sean Casten has stated, \"OTA gave us an objective set of truths. We may have creative ideas about how to deal with that truth, but let's not start by arguing about the laws of thermodynamics.\"\nA report for the Woodrow Wilson International Center for Scholars by Richard Sclove asserted that OTA's work implied a misleading presentation of objectivity:\nThe OTA sometimes contributed to the misleading impression that public policy analysis can be objective, obscuring the value judgments that go into framing and conducting any [technology assessment] study\u00e2\u0080\u00a6. In this regard an authoritative European review of [technology assessment] methods published in 2004 observes that [OTA] \u00e2\u0080\u00a6 represents the 'classical' [technology assessment] approach.... The shortcomings of the classical approach can be summarized in the fact that the whole [technology assessment] process \u00e2\u0080\u00a6 needs relevance decisions, evaluations, and the development of criteria, which is at least partially normative and value loaded.\nAnother scholar framed concerns about objectivity as a structural issue arising, in part, from single-party control of Congress during OTA's existence. The author noted the need for careful bipartisan and bicameral oversight to overcome perceptions and accusations of bias:\nSome Members of Congress raised noteworthy concerns. The most serious allegation was bias. It is not surprising that the party in the minority (before 1995) would raise concerns about bias, given that the other party had dominated Congress throughout OTA's existence\u00e2\u0080\u00a6. Bias or the appearance of bias can be devastating. An organization designed to serve Congress must be both responsive and useful to the minority, as well as the majority. Representatives of both parties and both houses must provide careful oversight, so that credit or blame for the organization's professionalism is shared by all.\nSome critics have asserted that OTA was responsive principally to the TAB, \"limiting its impact to a very narrow constituency.\" While the TAB membership was bipartisan and bicameral, this criticism implied that OTA's objectivity was affected to some degree by the perspectives of those serving on the TAB, adding to the notion of structural challenges faced by OTA in achieving objectivity or the appearance of objectivity.\nIn the 1980 book, Fat City : How Washington Waste s Your Taxes , author Donald Lambro, a Washington Times reporter, criticized OTA's work as partisan:\nMany of OTA's studies and reports \u00e2\u0080\u00a6 concentrated on issues that were of special concern to [Senator Ted Kennedy]. The views expressed in them were always, of course, right in line with Kennedy's views (or any liberal's, for that matter)\u00e2\u0080\u00a6. The agency's studies have proven to be duplicative, frequently shoddy, not altogether objective, and often ignored. \nThe 1984 Heritage Foundation paper Reassessing the Office of Technology Assessment asserted that despite OTA's quality control procedures, balance and objectivity concerns remained:\nEnough questions have been raised about OTA's procedures and possible biases, therefore, to warrant a thorough congressional review of OTA.\nThis was particularly the case, according to the Heritage paper, for products not requested or reviewed by OTA's congressional oversight board, the TAB. The paper singled out for criticism OTA's assessment of the Strategic Defense Initiative (SDI), President Reagan's plan for a weapon system that would serve as a shield from ballistic missiles. The Heritage Foundation paper asserted that the OTA report on SDI was marred by intentional political bias:\nIn the [SDI] study, for example, at least one OTA program division placed the political goal of discrediting SDI ahead of balanced and objective analysis.\nFurther, the Heritage paper asserted \nIt is also difficult to believe that the flaws in Carter's study and its disclosure of highly sensitive information are the result of naivete and misunderstanding on the part of the OTA. The evidence that some OTA staffers oppose the Administration's Strategic Defense Initiative seems clear and compelling.\"\nThe Heritage report notes that experts from the SDI office and from Los Alamos National Laboratory questioned the technical accuracy of the report. The report then notes that three analysts selected by OTA Director Jack Gibbons to review the report (described in the report as having been \"unsympathetic to strategic defense\") commended Carter's study and told Gibbons that he should not withdraw the report.\nIn 1988, citing the controversy over the OTA SDI report, Senator Jesse Helms asserted that OTA's work was not objective:\nOTA has been obsessed with proving that President Reagan's strategic defense initiative is both wrongheaded and dangerous almost since the very moment Mr. Reagan announced it in 1983. OTA has long ago lost its pretense that it is an objective scientific analysis group. By and large its reports are useless or irrelevant, but it has demonstrated over and over again that its work on SDI is both pernicious and distorted.\nIn 2016, Representative Rush Holt disagreed with the assertion of bias in OTA's SDI report asserting, \"When it came to missile defense, it was pretty clear to [OTA] that [the technology] wouldn't work as claimed, so they said so.\" \nA 2004 article in the journal The New Atlantis, \"Science and Congress,\" stated that \"the most significant reason for Republican opposition [to reestablishing OTA] is the belief that OTA was a biased organization, and that its whole approach was misguided: a way of giving a supposedly scientific rationale for liberal policy ideas and prejudices.\" The author offered several examples which, if viewed \"through Republican eyes\" support this belief. \nAccording to a report published by Georgetown Law's Institute for Technology Law and Policy, participants in a June 2018 workshop identified \"the perception of partisanship\" as one of two OTA weaknesses.\n\n\t\tCosts\n\nThe issue of the costs of OTA studies was a factor in early oversight of OTA by Congress. On behalf of the chairman of the Senate Appropriations Committee, the chairman of the Legislative Branch subcommittee raised concerns about \"allegations that OTA had either cost or time overruns on a large number of their contracts\" in a 1979 appropriations hearing. OTA responded that contract overruns had stemmed primarily from modification of the scope of contracts. The agency asserted that its operation was based on the extensive use of outside talent, and that contractors were engaged early in an assessment to help OTA staff and supporting panels to define in more detail the nature of the assessment. This could lead to additional contractor work assignments, requiring modifications to contracts or additional contracts to enable completion of assessments.\n\n\t\tPublic Input\n\nWhen OTA was established, analysts argued that public input into the technology assessment process was important. The efficacy of the OTA process for gaining such input has been a topic of debate. Some have asserted in retrospect that OTA did not have an effective mechanism for taking in public comments. Some former OTA staff have disputed this perception. One characterized the charge that OTA lacked citizen participation as \"outrageous\u00e2\u0080\u00a6. The OTA process was nothing if not participatory.\" Another former OTA staffer, Fred Wood, recognized OTA's efforts in seeking public participation, but lamented that these efforts fell short at times:\nPublic participation [by representatives of organized stakeholder groups] was one of the bedrock principles of the OTA assessment process.... Yet this aspect of OTA's methodology could be time consuming and still fall short of attaining fully balanced participation, while leaving some interested persons or organizations unsatisfied.\nThe TAAC served as one vehicle for nongovernmental input into OTA's work. However, in a 1977 hearing, former Representative Emilio Daddario, who introduced the legislation first proposing the creation of an Office of Technology Assessment, testified that the TAAC had been invented in \"a hurried effort to provide for some new method of public input into OTA activities, even though unfortunately its role was ill-defined.\"\n\n\t\tOther Criticisms\n\nSome have offered other criticisms of OTA. For example, a Wilson Center report identified the following additional criticisms of OTA: \ninconsistency in fully identifying and articulating technologies' ethical and social implications; failure to identify social repercussions that could arise from interactions among complexities of seemingly unrelated technologies; a lack of elucidation of circumstances in which a technology can induce a cascade of follow-on socio-technological developments; and failure to develop a \"capacity to cultivate, integrate or communicate the informed views of laypeople.\" \n\n\tCongressional Perspectives on Technology Assessment Expressed During OTA Defunding Debate\n\nAt the time of OTA's defunding, some Members of Congress expressed views on which other agencies and organizations might serve the functions performed by OTA\u00e2\u0080\u0094or however much of those functions was still deemed necessary. \nThe following excerpts from the House and Senate reports accompanying the Legislative Branch Appropriations Act, 1996 ( H.R. 1854 , 104 th Congress) and from floor debate on the bill provide insight into these post-OTA perspectives:\nThe report of the House Committee on Appropriations on H.R. 1854 directed that following the defunding of OTA, any of its necessary functions would be performed by other agencies, such as CRS and GAO, and that supplemental information would be provided by nongovernment organizations: \nIf any functions of OTA must be retained, they shall be assumed by other agencies such as Congressional Research Service or the General Accounting Office. Alternatively, the National Academy of Sciences, university research programs, and a variety of private sector institutions will be available to supplement the needs of Congress for objective, unbiased technology assessments.\nIn its report on the bill, the Senate Committee on Appropriations report stated its disagreement with the House's intent to transfer OTA functions to CRS. The report asserted a variety of differences between OTA and CRS and stated that assigning OTA functions to CRS would harm CRS:\nDuring consideration of the bill by the House of Representatives, an amendment was adopted transferring the functions of the Office of Technology Assessment to the Congressional Research Service. The Committee disagrees with this proposal. The purposes, procedures, methodologies, management, and governance of the CRS and the OTA are quite different, and the Committee believes the merger of the two would substantially harm the Congressional Research Service.\nIn debate on the Senate version of the bill, Senator Daniel Inouye asserted that OTA filled a unique and important role for which other legislative branch agencies were not suited:\nSome of my colleagues have suggested that we don't need an OTA.... How many of us are able to fully grasp and synthesize highly scientific information and identify the relevant questions that need to be addressed? The OTA was created to provide the Congress with its own source of information on highly technical matters. Who else but a scientifically oriented agency, composed of technical experts, governed by a bipartisan board of congressional overseers, and seeking information directly under congressional auspices, [can give] the Congress and the country accurate and essential information on new technologies? \nCan other congressional support agencies and staff provide the information we need? I am second to none in my high regard for these agencies, but each has its own distinct role. The U.S. General Accounting Office is an effective organization of auditors and accountants, not scientists. The Congressional Research Service is busy responding to the requests of members for information and research. The Congressional Budget Office provides the Congress with budget data and with analyses of alternative fiscal and budgetary impacts of legislation. Furthermore, each of these agencies is likely to have its budget reduced, or to be asked to take on more responsibilities, or both, and would find it extremely difficult to take on the kinds of specialized work that OTA has contributed.\nRepresentative Ron Packard, chair of the House Appropriations Committee's Legislative Branch subcommittee, described the elimination of OTA as \"legislative rightsizing\" and asserted the availability of other congressional agencies to fill OTA's role:\nIn our efforts in this bill we have genuinely tried to find where there is duplication in the legislative branch of Government. This is one area where we found duplication, serious duplication. We have several agencies that are doing very much the same thing in terms of studies and reports\u00e2\u0080\u00a6. I am aware of the invaluable service of OTA, but there are other agencies that do the same thing. The CRS has a science division of their agency. GAO has a science capability in their agency. They can do the same thing as OTA.\nWe evaluated how to best consolidate, and it was our conclusion as a committee that to eliminate OTA and absorb the essential functions into some of these other agencies that are going to continue was the best way to go\u00e2\u0080\u00a6.\nI admit OTA has done a good job. They have good, solid professionals, but those professionals can work with other agencies that will do those same functions, if they are essential. We also have the CRS, GAO, and other agencies, such as the National Academy of Sciences. There are many alternatives, or this work can even be privatized and contracted out for the services. But we do not need this agency that has now outgrown its usefulness \u00e2\u0080\u00a6 has now increased its mission to other areas beyond science.\nIn the House, Representative Henry Hyde stated his support for an amendment submitted by Representative Amo Houghton that would have transferred most of the funds and analysts to CRS:\n[The amendment] cuts 50 of 190 jobs. It cuts the budget by 32 percent, from $22 million down to $15 million. And it folds its functions into the Congressional Research Service. So we cut down on the money, we cut down on the personnel, we downsize to the bone, but we do not lose the function. It just seems to me in this era of fiber optics and lasers and space stations, we need access to an objective, scholarly source of information that can save us millions and billions.\nThe amendment to transfer funds and personnel to CRS was not passed.\n\n\tCongress, GAO, and Technology Assessment\n\nFollowing the defunding of OTA, Congress sought help from other organizations to fill a gap for scientific and technical information that previously would have been performed by OTA. According to one analysis, Congress initially increased its use of the National Academies for obtaining such information, though shortly thereafter its usage of the National Academies returned to pre-OTA defunding levels.\nAnother option employed by Congress for technology assessment capabilities has been reliance on the GAO. Beginning in the early 2000s, GAO undertook efforts to develop and improve its technology assessment capabilities. Some of these efforts were initiated by GAO itself, other efforts were initiated at Congress's direction. \nCongress has not given GAO statutory authority to conduct technology assessments. Rather, Congress provided GAO guidance with respect to its technology assessments and related activities in the form of reports accompanying annual Legislative Branch Appropriations bills since at least 2001. \nIn 2000, five years after Congress defunded OTA, GAO established the Center for Technology and Engineering in its Applied Research and Methods team. This center, led by GAO's Chief Technologist, later became GAO's Center for Science, Technology, and Engineering.\nShortly thereafter, Congress began to task GAO with technology assessment activities. In 2001, conferees on the Legislative Branch Appropriations Act, 2002 directed in report language that up to $500,000 of GAO's appropriation be obligated to conduct a technology assessment pilot project and that the results be reported to the Senate by June 15, 2002.\nThe conference report did not authorize an assessment topic, but three Senators requested GAO to assess technologies for U.S. border control together with a review of the technology assessment process. At the same time, six House Members wrote to GAO supporting the pilot technology assessment project. After consulting congressional staff, GAO agreed to assess biometric technologies. It used its regular audit processes and also its standing contract with The National Academies to convene two meetings that resulted in advice from 35 external experts on the use of biometric technologies and their implications on privacy and civil liberties. The resulting report was issued in November 2002 as Technology Assessment: Using Biometrics for Border Security (GAO-03-174).\nThe FY2003 Senate legislative branch appropriations report noted the utility of GAO's work and said that it was providing $1 million for three GAO studies in order to maintain an assessment capability in the legislative branch and to evaluate the GAO pilot process. However, this language was not included in the Senate bill ( S. 2720 , 107 th Congress); the House bill ( H.R. 5121 , 107 th Congress) or the accompanying report; or in P.L. 108-7 , which included as Title H, the Legislative Branch Appropriations Act, 2003. Although funds were not provided for a study, GAO conducted a technology assessment that was published in May 2004 as Cybersecurity for Cri tical Infrastructure Protection .\nFor FY2004, the Senate Committee on Appropriations recommended $1 million for two or three technology assessments by GAO, but directed the agency only to conduct this technology assessment work if it was consistent with GAO's mission. The conference report for the Legislative Appropriations Branch, 2004 ( P.L. 108-83 ) noted that \nFor the past two years the General Accounting Office (GAO) has been conducting an evaluation of the need for a technology assessment capability in the Legislative Branch. The results of that evaluation have generally concluded that such a capability would enhance the ability of key congressional committees to address complex technical issues in a more timely and effective manner.\nFurther, the conferees directed GAO to report by December 15, 2003, to the House and Senate Committees on Appropriations \"the impact that assuming a technology assessment role would have on [GAO's] current mission and resources.\" \nIn 2004, a bill was introduced in the Senate ( S. 2556 , 108 th Congress) to establish a technology assessment capability within GAO. The bill would have authorized the Comptroller General to initiate technology assessment studies or to do so at the request of the House, Senate, or any committee; to establish procedures to govern the conduct of assessments; to have studies peer reviewed; to avoid duplication of effort with other entities; to establish a five-member technology assessment advisory panel; and to have contracting authority to conduct assessments. In addition, the bill would have authorized $2 million annually to GAO to conduct assessments. The bill was referred to the Committee on Governmental Affairs and no further action was taken. A similar bill was introduced in the House ( H.R. 4670 , 108 th Congress) and referred to the House Committee on Science; no further action was taken.\nFor FY2005, GAO requested $545,000 in appropriations for four new full-time equivalent (FTE) positions and contract support to establish a baseline technology assessment capability that would allow the agency to conduct one assessment per year. In its report, the House Appropriations Committee did not address funding for GAO for technology assessment, but encouraged GAO to \"... retain its core competency to undertake additional technology assessment studies as might be directed by Congress.\" An amendment to add $30 million to GAO's FY2005 appropriations for the purpose of establishing a Center for Science and Technology Assessment was rejected by the House. \nThe Senate Committee on Appropriations report on the Legislative Branch Appropriations Act, 2005 ( S. 2666 , 108 th Congress) provided additional guidance to GAO with respect to its technology assessment activities, limiting future technology assessments to those having the support of leadership of both houses of Congress and to technology assessments that \"are intended to address significant issues of national scope and concern.\" In addition, the report directed the GAO Comptroller General to consult with the committee \"concerning the development of definitions and procedures to be used for technology assessments by GAO.\" \nIn 2007, the House Committee on Appropriations recommended $2.5 million for GAO for technology assessments in FY2008, stating that\nas technology continues to change and expand rapidly it is essential that the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems. The Committee believes it is necessary for the Congress to equip itself with effective means for securing competent, timely and unbiased information concerning the effects of scientific and technical developments and use the information in the legislative assessment of matters pending before the Congress.\nThat same year, the Senate committee report on the Legislative Branch Appropriations Act, 2008 ( S. 1686 , 110 th Congress) recommended $750,000 and four FTE employees to establish a permanent technology assessment function in the GAO. The report also stated that the committee had \"decided not to establish a separate entity to provide independent technology assessment for the legislative branch owing to budget constraints.\" Further, it asserted that GAO's focus on \"producing quality reports that are professional, objective, fact-based, fair, balanced, and nonpartisan is consistent with the needs of an independent legislative branch technology assessment function.\" In addition, the committee directed GAO \"to define an operational concept for this line of work, adapted from current tested processes and protocols,\" and to report to Congress on the concept.\nConferees on the Consolidated Appropriations Act, 2008 ( H.R. 2764 , 110 th Congress; P.L. 110-161 ) agreed to provide $2.5 million for GAO for technology assessments in FY2008, asserted the importance of technology assessment to Congress's public policy deliberations, and directed the Comptroller General to ensure that \"GAO is able to provide effective means for securing competent, timely and unbiased information to Congress regarding the effects of scientific and technical developments.\"\nFor FY2009, conferees continued funding for GAO's technology assessment and reminded the agency that \"for the assessments to be of benefit to the Congress, GAO must reach out and work with both bodies of Congress regarding these studies.\"\nFor FY2010, the House Committee on Appropriations recommended continuing GAO technology assessment funding at the FY2009 level. The conference report on Legislative Branch Appropriations Act, 2010, endorsed the chamber reports.\nNo direction was given by Congress to GAO in House, Senate, or conference appropriations reports regarding technology assessment for FY2011, FY2012, FY2013, or FY2014. \nIn its report on the Legislative Branch Appropriations Act, 2015 ( H.R. 4487 , 113 th Congress), the Senate Committee on Appropriations commended GAO for the technology assessment advice it provided to Congress for a decade, but asserted that the scale and scope of that work has been limited due to budget constraints. The committee recommended an increase in GAO funding to enhance the agency's technology assessment capabilities and directed GAO to submit a strategic plan for its technology assessment program. The strategic plan was to include proposed solutions to challenges constraining the GAO's technology assessment capabilities, approaches to increase responsiveness to congressional needs and priorities, and strategies to improve technology assessment procedures and methodologies, as well as identify additional authorities and resources that may be needed. \nIn its report on the Legislative Branch Appropriations Act, 2016 ( H.R. 2250 , 114 th Congress), the Senate Committee on Appropriations commended GAO for implementing a new strategic plan for its technology assessment program that expanded the scale and scope of its assessment analysis. Additionally, the committee encouraged GAO to focus hiring efforts on increasing technology assessment staff capacity.\nConferees on the Consolidated Appropriations Act, 2017 ( H.R. 244 , 114 th Congress) lauded GAO's technology assessment work and encouraged GAO to increase its scientific and technical capacity as its work portfolio requires:\nGAO's work is recognized in the area of technology assessment, since being tasked with this responsibility in 2002. GAO has produced highly technical and scientific reports in response to Congressional requests and statutory requirements. These reports have included technology assessments (TA), and other reports to Congress that incorporate analysis of scientific, technological and engineering issues in their evaluations of federal programs. GAO has also produced best practice guides for use across government on the topics of lifecycle cost estimating, project scheduling, and technology readiness assessment. GAO's work in these areas is led by GAO's Center for Science, Technology, and Engineering (CSTE). GAO's CSTE provides wide-ranging technical expertise across all of GAO's areas of work, including support to various studies of federal programs with science and technology elements, such as cybersecurity, nuclear and environmental issues, and major technical systems acquisitions, among others. Also noted is the work of CSTE's e-Security laboratory and Cost Engineering Sciences groups which conduct computer and network security evaluations and advanced operations research analyses (including cost, schedule, and technical performance), respectively. GAO has provided direct support to the Congress via congressional testimony, review of draft legislation, and the adoption of various report recommendations by Executive Branch agencies. GAO is commended for providing key direct technical support to various congressional committees on technology-focused topics such as the U.S. Capitol Police radio systems acquisition. It is noted that GAO is using rigorous methods in its technical reports, including engaging key external technical experts via group meetings conducted in partnership with the National Academies, cost-benefit analysis, risk analysis, technology maturity assessment, and scenario-based trend identification. Given the persistent and growing demand for this technical work, the Comptroller General is commended for his strategic initiative to build the scientific and technical capacity within GAO and encouraging further growth as the work portfolio requires. GAO is encouraged to continue a communication effort with Congress to ensure lawmakers are aware of these services.\nNo direction was given by Congress to GAO in FY2018 appropriations report language regarding technology assessment. \nConferees on the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, directed GAO to expand its technology assessment capacity by reorganizing its S&T function and to create a more prominent office for this purpose within GAO. Congress directed GAO to provide, within 180 days, a plan and timetable for how the new office could expand and enhance GAO's capabilities in scientific and technological assessments:\nTechnology Assessment : There is general support in Congress to bolster capacity of and enhance access to quality, independent science and technological expertise. Since 2002, GAO has provided direct support to Congress in the area of technology assessment through objective, rigorous, and timely assessments of emerging science and technologies. The Center for Science, Technology, and Engineering (CSTE) within GAO has developed such a capacity, providing wide-ranging technical expertise across all of GAO's areas of work. However, because the scope of technological complexities continues to grow significantly, the conferees seek opportunities to expand technology assessment capacity within the Legislative Branch.\nThe conferees encourage GAO to reorganize its technology and science function by creating a new more prominent office within GAO. GAO is directed to provide the Committees a detailed plan and timeline describing how this new office can expand and enhance GAO's capabilities in scientific and technological assessments. This plan should be developed in consultation with internal stakeholders of the Legislative Branch such as congressional staff and Members of Congress in addition to external stakeholders, including nonprofit organizations and subject matter experts knowledgeable in the field of emerging and current technologies. Further, such a plan should include a description of the revised organizational structure within GAO, provide potential cost estimates as necessary, and analyze the following issues: the appropriate scope of work and depth of analysis; the optimum size and staff skillset needed to fulfill its mission; the opportunity and utility of shared efficiencies within GAO; and the opportunities to increase GAO's engagement and support with Congress. GAO is directed to submit this report to the Committees within 180 days of enactment.\nIn January 2019, GAO announced plans to double the size of its current combined science and technology workforce. It also announced the establishment of a new Science, Technology Assessment, and Analytics (STAA) team focused on technology assessments and technical services for the Congress; auditing federal science and technology programs; compiling and utilizing best practices in the engineering sciences; and establishing an audit innovation lab to explore, pilot, and deploy new advanced analytic capabilities, information assurance auditing, and emerging technologies expected to affect auditing practices.\nIn April 2019, GAO issued its expansion and enhancement plan, GAO Science, Technology Assessment, and Analytics Team: Initial Plan and Considerations Moving Forward. According to the plan, the new GAO STAA office would perform the agency's existing science- and technology-focused work, as well as its new technology assessment activities. The GAO plan states that the number of STAA staff will increase from 49 to 70 by the end of FY2019 under the plan. STAA staff would eventually grow to as many as 100-140, depending on congressional requests for technology assessments and technical assistance. Functions to be performed by STAA include providing technology assessments and technical assistance to Congress; evaluation of S&T programs within the federal government; best practices guides in the engineering sciences, including cost, schedule, and technology readiness assessments; and an audit innovation lab.\nFrom 2002 through April 14, 2020, GAO published 16 technology assessment reports, including two in 2019. Appendix D provides a complete list of GAO technology assessments. \n\n\tNational Academy for Public Administration Study on Congress's Need for Additional Science and Technology Advice and Technology Assessment\n\nIn 2018, conferees on the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( H.R. 5895 , P.L. 115-244 ) noted recent testimony and requests for restoring funding for OTA and the need for Congress to have \"deep technical advice necessary to understand and tackle the growing number of science and technology policy challenges.\" \n\n\t\tCongress's Charge to NAPA\n\nIn this regard, Congress directed CRS to contract with the National Academy of Public Administration (NAPA) or a similar external entity to\nproduce a report detailing the current resources available to Members of Congress within the Legislative Branch regarding science and technology policy, including the GAO. This study should also assess the potential need within the Legislative Branch to create a separate entity charged with the mission of providing nonpartisan advice on issues of science and technology. Furthermore, the study should also address if the creation of such entity duplicates services already available to Members of Congress. CRS should work with the Committees in developing the parameters of the study and once complete, the study should be made available to relevant oversight Committees.\nIn 2018, CRS engaged NAPA to conduct the study and produce a report. In October 2019, NAPA published its report, Science and Technology Policy Assessment: A Congressionally Directed Review . \nNAPA articulated its mission in addressing the congressional direction as threefold: \nto detail the current resources available to Members of Congress within the legislative branch regarding science and technology policy, including GAO; to assess the potential need within the legislative branch to create a separate entity charged with the mission of providing nonpartisan advice on issues of science and technology, such as the former Office of Technology Assessment; and to address whether the creation of a separate legislative branch entity would duplicate services already available to Members of Congress.\n\n\t\tAssessment of Congressional Need for Additional Science and Technology Advice and Resources Available\n\nIn evaluating Congress's need for additional S&T advice, the NAPA study found that \"The range, speed, and impact of technical developments suggest a greater congressional need for internal expertise on S&T related issues,\" but that \"nearly every indictor of congressional capacity is moving the wrong way.\"\nThe report identified three types of congressional clients that need such information: Members of Congress, personal office staff, and committee staff. Broadly, NAPA found that most Members are reliant on staff and legislative support agencies (e.g., CRS, GAO) for science and technology policy support, but that the number of committee and personal office staff available for S&T policy work has decreased. NAPA also noted reductions in the number of CRS and GAO staff over 35 years. \n\n\t\t\tMembers of Congress\n\nThe report noted that Members typically do not have professional backgrounds in science and technology and states that Members \"often do not have the subject matter expertise to understand fast-moving, complex S&T issues.\" Therefore, Members without S&T backgrounds, \"rely on expert advisors like personal and committee staff and on legislative branch support agencies like the CRS and the GAO to help them understand technical policy issues.\" The report also cites a 2016 survey of senior congressional staff by the Congressional Management Foundation that found that \"Senators and Representatives lack the time and resources they need to understand, consider, and deliberate public policy and legislation.\"\n\n\t\t\tCommittee Staff\n\nNAPA found that committee staff are a critical source of policy expertise, but that the number of committee staff fell by 38% between 1981 and 2015, and by even more in some committees engaged in S&T policy matters. The report also noted the number of hearings\u00e2\u0080\u0094which NAPA describes as an opportunity to \"build subject matter expertise\"\u00e2\u0080\u0094fell by 63% between the 96 th Congress and 114 th Congress.\n\n\t\t\tPersonal Staff\n\nNAPA found that congressional offices are \"overwhelmed by constituent communication\" due to growth in digital communications and increases in population, and noted a finding by the Congressional Management Foundation that \"Congressional offices are devoting more resources to managing the growing volume of constituent communications.\" NAPA asserts that this trend, combined with fixed budgets, means that fewer staff are available for policy work.\nIn its report, NAPA concluded that \"as the Nation experiences accelerated S&T developments, certain indicators of Congress' ability to absorb, understand, analyze, and deal with the developments have declined.\"\n\n\t\tOptions Identified by NAPA\n\nThe report posited three options that it considered to address the gaps it had identified:\nOption 1. Enhance Existing Entities Enhance the capabilities of existing Legislative Branch support agencies, including GAO and CRS, including potential changes to current models;\nOption 2. Create a New Agency Create a separate agency to fill any existing gaps, with attention given to avoiding duplication of effort; and \nOption 3. Enhance Existing Entities and Create an Advisory Office Both enhance existing entities and create an S&T advisory office, led by a Congressional S&T Advisor, which focuses on strengthening the capacity of Congress to absorb and utilize science and technology policy information provided by GAO, CRS, and other sources.\n\n\t\tNAPA Recommendations\n\nThe NAPA report recommended option 3 with the following elements:\nGAO should further develop the capability of its Science, Technology Assessment, and Analytics mission team to meet some of the supply gaps identified in the NAPA report, including the need for technology assessments, and make appropriate changes in its organization and operating policies to accommodate the distinctive features of technology assessments and other foresight products. CRS should enhance and expand its quick-turnaround and consultative services in S&T-related policy issues. Congress should create an Office of the Congressional S&T Advisor (OCSTA), which would focus on efforts to build the absorptive capacity of Congress, to include supporting the recruitment and hiring of S&T advisors for House and Senate committees with major S&T oversight responsibilities. OCSTA would also be responsible for horizon scanning. Congress should create a Coordinating Council to be led by the Advisor and that includes representatives from CRS and GAO's STAA, and a National Academies ex officio member with the objective to limit duplication and coordinate available resources to most benefit the Congress.\n\n\t\tTechnology Assessment and Horizon Scanning\n\nIn its report, NAPA differentiates between technology assessments and \"horizon scans.\" NAPA states that horizon scans are reports 20-60 pages in length that seek to identify S&T issues that might arise in the future, including broad developments and important innovations, as well as estimating the timeframes for such developments. NAPA asserts that such information would allow Congress to know whether it is positioned to be successful in responding to such issues in terms of its structure, activities, and agenda. NAPA also states that horizon scanning can serve as an effective early warning system. While the NAPA report asserts that \"no agency expressly claims responsibility for preparing horizon scanning reports as distinct products for Congress,\" it later offers several examples of horizon scanning efforts undertaken by GAO and argues that these efforts \"provide a foundation to further expand capacity in this area.\"\n\n\t\tNAPA Evaluation of Whether to Reestablish OTA\n\nFollowing release of the report, NAPA panel members stated that it did not evaluate the need for reestablishing the Office of Technology Assessment. In this regard, NAPA asserted that it believed Congress had made clear its intent over the last two decades for technology assessment to be a mission of GAO.\nIn testimony, panel member Michael McCord asserted that the inability of Congress to reach a consensus about reestablishing OTA for more than two decades shaped the panel's perspective on considering the option. He further asserted that the absence of a consensus in this regard could undermine a reestablished OTA's ability to fulfill the mission its advocates seek. In response to a Member's question as to why the NAPA report did not recommend reinstating OTA or something similar, McCord responded \nWe did not recommend [reestablishing OTA]. [However,] it would be, I think, incorrect to say that [NAPA] would think it's a terrible idea if Congress did that. But you can't help but notice that for 25 years Congress has chosen not to do that. So the question whether the support is there to go that route and sustain it, that's a serious question for us, the viability of doing something that you consistently have chosen not to do\u00e2\u0080\u00a6. You could go that route eventually.\n\n\tOther Perspectives and Recommendations on OTA and the Adequacy of S&T Advice to Congress\n\nIn addition to NAPA, other organizations have produced reports on the value of reestablishing OTA and the broader question of the adequacy of S&T advice to Congress.\nIn 2018, the R Street Institute (R Street), a nonprofit, nonpartisan, public policy research organization, proposed reestablishment of OTA in its report Bring i n the Nerds: Reviving the Office of Technology Assessmen t . The report identifies and addresses a number of rationales that have been put forth by others as to why OTA should not be reestablished, including cost, political loss of face, perception by some of an ideological bias in OTA's work, providing a foundation for encouraging additional government intervention, and adding another governmental expert bureaucracy. The report concludes that \"Congress can most easily bolster its technology policy knowledge by reviving the OTA.\"\nIn September 2019, the Belfer Center for Science and International Affairs of Harvard's Kennedy School published a report, Building a 21 st Century Congress: Improving Congress's Science and Technology Expertise , focused on providing an overview of Congress's S&T-relevant needs and resources identifying potential actions to address what it perceives as gaps in meeting Congress's needs.\nThe Belfer Center report asserted that \"Congress is one of the most advised bodies in the world.\" In this regard, Belfer identifies internal resources available to Members\u00e2\u0080\u0094including GAO, CRS, and personal and committee staff\u00e2\u0080\u0094as well as external resources, such as executive branch agencies, think tanks, universities, civil society and nonprofit organizations, lobbyists, industry associations, and the National Academies.\nYet, even though Congress is provided with such advice and resources, Belfer asserted that\nsignificant gaps remain that hinder Congress's ability to produce timely, thoughtful, and comprehensive legislation on S&T issues. This results in a multitude of negative and many times public outcomes, such as ineffective or absent S&T legislation.\nThe report concluded that \"the core of the problem is a divide between what Congress can absorb and what information it receives.\" This finding is similar to that asserted by NAPA in its October 2019 report, Science and Technology Policy Assessment: A Congressionally Directed Review , on the need for improving the \"absorptive capacity of Congress\" (discussed in the previous section).\nTo address these gaps, the Belfer Center report proposed four actions: (1) Congress should create a legislative support body focused on S&T issues; (2) Congress should hire additional S&T talent in personal offices and committees; (3) Congress should provide committee and support agencies with increased funding to allow them to hire additional staff and pay a more competitive salary; and (4) external information providers should produce information in formats that are useful to Congress, generally products that are short, concise, customized for the audience, consistently offered, and timely.\nAn earlier report by the Belfer Center describes a \"widening gap between responsive lawmaking in Congress and the deepening complexity of advancements in science and technology\" and that \"certain weakened capabilities have atrophied the organization's absorptive capacity , or the ways by which it recognizes the value of, assimilates, and makes use of knowledge outside of itself.\" The report called for the establishment of a Congressional Futures Office that it describes as \"a new and deeply embedded internal support body\" that would gradually strengthen its \"capabilities through open-ended product-service design and dispersed global networks of expertise.\"\nA 2019 report, Evaluating the 2019 NAPA Report on S&T Policy Assessment and Resources for Congress , by the Lincoln Network and Demand Progress lauded the NAPA report for recognizing that Congress's S&T capacity gap is broader than just technology assessment and recognizing Congress's need for a mechanism to increase what NAPA referred to as Congress's absorptive capacity. The report agreed with NAPA with respect to its praise of GAO's outreach and transparency in its technology assessments activities. However, the report questioned \"whether GAO's culture will be able to adapt to effectively cover the full range of OTA's work (particularly that part concerning non-technical values and horizon scanning).\"\nIn addition, the Lincoln Network and Demand Progress report was critical of the absence of details on key features of NAPA's recommendation for an Office of the Congressional S&T Advisor (OCSTA). In particular, the report questioned how OCSTA would pick topics; how it would integrate new resources into committees; how it would engage in horizon scanning; issues related to OCSTA's oversight, statutory powers, and mechanism for coordinating with other legislative support agencies; and whether OCSTA is the right organization for the horizon scanning function.\nThe Lincoln Network and Demand Progress also recommended additional analysis on reviving and modernizing OTA, and on evaluating political considerations related to the feasibility of building congressional S&T capacity and the viability of maintaining it. Further, the report noted that NAPA recommended \"beefing up CRS in several areas,\" but noted that NAPA did \"not assess CRS's current capacity for S&T work versus the volume and type of congressional demands.\" The report cited assertions by one former CRS employee that CRS is risk-averse and increasingly politicized, leading to a loss of talent, and by another former CRS employee who asserted that CRS has moved from a policy of nonpartisan advice to one of neutrality which, in his view, has undermined CRS's analytical capabilities. The report recommended additional analysis of any CRS institutional challenges prior to making significant new investments in CRS.\n\n\tOptions for Congress\n\nSince 1995, several Members of Congress have undertaken numerous legislative efforts to restore funding for OTA or to affirm the need for an OTA-like technology assessment function. Appendix C , \"OTA\/Technology Assessment-Related Legislation in the 107 th -116 th Congresses,\" describes each of these efforts.\nOptions for Congress, if it chooses to reestablish an organizational capability with statutory authorization for conducting technology assessments, include\nreestablishing OTA without any changes to its statute, reestablishing OTA with changes to its statute, charging an existing legislative branch agency with new or expanded technology assessment authority and duties, or seeking technology assessments on a contractual basis from a nongovernmental organization such as the National Academies of Science, Engineering, and Medicine (National Academies).\nAlternatively, Congress could choose to rely on existing sources of scientific and technological analysis and technology assessment. Such sources include, but are not limited to, CRS, GAO federal executive branch agencies, federally chartered advisory committees, federally funded research and development centers, the National Academies, academic researchers, industry and trade associations, professional organizations, businesses, not-for-profit organizations, advocacy groups, think tanks, and labor organizations.\nThis section analyzes these options and their purported advantages and disadvantages.\n\n\t\tOption: Reestablish OTA Without Changes to Its Statute\n\nThough OTA was defunded, its statutory authorities remain law. If Congress opts to reestablish OTA without changes to its statutory authority, it may be able to do so solely by appropriating funds to the agency. However, given past report language about closure and abolition, Congress might choose to provide an explicit statement of its intent to reestablish OTA and\/or guidance on its reestablishment.\nSince 1995, some Members of Congress have undertaken a variety of legislative efforts seeking to reestablish OTA by authorizing or appropriating funding for OTA or to express a \"sense of the House\" or a \"sense of the Senate\" that OTA should be reestablished. Most recently, in the 116 th Congress, the House approved appropriations of $6 million for OTA in the Legislative Branch Appropriations Act, 2020 ( H.R. 2779 ); these funds were not included in the final legislative branch appropriations act for FY2020 ( P.L. 116-94 ).\nWhile OTA's statutory authorities remain in law, the appropriations act in which it was defunded referred to the \"orderly closure\" of OTA and the \"abolition of the Office of Technology Assessment,\" and provided for the disposition of \"all records and property of the Office (including the Unix system, all computer hardware and software, all library collections and research materials, and all photocopying equipment)\" If Congress intends to rely on the existing statute to reestablish OTA, then in addition to providing funds for its establishment and operations it might wish to reaffirm that it intends for the office to operate in accordance with the statute as it existed prior to the enactment of P.L. 104-53 . Also, because OTA and certain entities currently exist only in statute, the organization would need to be reestablished as provided for in the statute. For example, Congress would face the need to reestablish and appoint members of the TAB. The TAB would need to appoint an OTA Director. The OTA Director would need to hire OTA analysts and support staff, and possibly contract for additional analytical work. In addition, the newly formed organization would need to obtain office space, acquire assets such as furniture and equipment, and secure information and communications services, among other things.\nA chief advantage of this approach is simplicity, as it would simply require an appropriation and possibly a statement of Congress' intent to restart the agency and guidance regarding aspects of the restarting of the agency. Another potential advantage of this approach is that it might make the agency operational more quickly by avoiding lengthy and possibly contentious debate regarding new or revised authorities or other topics. \nDisadvantages of this approach include reliance on the original design of OTA, including its structure, management, and performance, without taking efforts to address past and contemporary analyses and criticisms of the agency. An OTA reestablished without addressing these critiques might be subject to criticism from congressional and external skeptics about the need for such an agency and its ability to effectively fulfill its statutory duties. Fiscal constraints may also continue to be a concern to some Members of Congress. Reestablishing OTA at a size comparable to the time of its defunding would require annual appropriations of tens of millions of dollars; OTA funding in FY1995 was $33.4 million in FY2018 dollars. \nOTA could be established over time with initial funding provided for office space, equipment, management, operational costs, and a small staff of analysts. Congress could gradually provide additional resources to grow the agency's analytical capabilities (e.g., additional analysts, management, contractors) as necessary to meet congressional demand for technology assessment products. For example, Congress defunded the Administrative Conference of the United States (ACUS), like OTA, in 1995. ACUS was reestablished in 2009 through an appropriation of $1.5 million. In FY2019, Congress appropriated $3.1 million for ACUS. Congress could provide funding for the reestablishment of OTA through several mechanisms, for example by allocating additional budget authority to Legislative Branch Appropriations that could be appropriated to OTA or by reallocating funding in the budget and appropriations process from one or more executive branch or legislative branch agency to OTA.\n\n\t\tOption: Reestablish OTA with Changes to Its Statute\n\nA second option for Congress is to reestablish OTA by providing funding while also reauthorizing the agency with amendments to its organic statute to address past or contemporary criticisms (\" Observations on OTA's Design and Operations \"). In such an undertaking, Congress might consider statutory changes that address past criticisms of OTA by helping to ensure that, for example\nOTA provides a unique function, differentiated from similar functions performed by other agencies; OTA delivers information, analysis, and options in a timely manner, consistent with the pace of legislative decisionmaking; OTA's technology assessments are relevant to the development and consideration of legislation; OTA's technology assessments are authoritative, thorough, and of high quality; the agency's composition of career civil servants, temporary staff, and contractors aligns with the needs of OTA over the short term and longer term; the public has appropriate opportunity for input; and OTA selects topics and conducts technology assessments in an objective manner, free from potential ideological, political, or other bias.\nCongress may wish to consider the merits of changes in the following areas:\nThe definition of technology assessment. A topic of intense discussion and debate in the period prior to OTA's establishment, the definition of technology assessment\u00e2\u0080\u0094in general and specifically with regard to advice for policymakers\u00e2\u0080\u0094remains a topic of discussion today. Congress might take into consideration past and current dialogue and analysis on this topic and whether there is a need to clarify the definition of the term in the context of the work to be performed by OTA. Appendix A provides a sampling of historical congressional and public discussion of the meaning of technology assessment. I nternal organization al structure . A number of the criticisms of OTA were, in part, related to structural issues. For example, as mentioned earlier, some have criticized OTA's focus on meeting the objectives of the TAB as greatly narrowing the agency's constituency. Others have noted that long-term, one-party control of both houses of Congress, regardless of which party is in control, can result in members of the minority party feeling that OTA's work favors the party in power. Congress may wish to consider structural changes that provide for broader input from outside the TAB or mechanisms for bipartisan approval of decisions on reports to be undertaken. Also, the current statute provides for a Director to be appointed by the TAB, and a Deputy Director to be appointed by the Director with TAB approval. Congress may wish to consider whether the positions, appointment processes, and powers of each are appropriate and adequate for accomplishing the mission of OTA. OTA conducted technology assessments on a wide range of topics, making it cost prohibitive to have permanent staff with deep expertise on each topic. OTA met its needs for specialized expertise for particular assessments through the use of contractors with specialized expertise. ( Figure 3 provides a quantitative window into the balance of staff effort and contractor effort at OTA for FY1992-FY1995.) Congress might opt to provide additional guidance to OTA on the composition of the agency's staff (full-time and part-time), the use of contractors (individuals and organizations), and approaches to managing the conduct of technology assessments. External structure . The current statute establishes the TAB, composed of equal numbers of House and Senate members from each party, to formulate and promulgate OTA policies. Congress may wish to consider whether the TAB is the best approach for this function or whether it might be performed by existing committees or subcommittees of Congress, by House and Senate leadership, by agency management, or through another mechanism. The current statute also establishes a TAAC to provide OTA access to external scientific, technical, and management expertise. Congress might consider whether the TAAC was effective in this role, other roles the TAAC might play (e.g., in reviewing proposed technology assessments), and the potential use of other mechanisms to obtain external expertise. Public participation. Some have suggested that OTA lacked a strong public input mechanism and have asserted that modern information and communication technology could be used to facilitate a much broader range of public input than was possible in 1995. The Wilson Center's report, Reinventing Technology Assessment: A 21 st Century Model, suggested that a reestablished U.S. technology assessment agency employ an approach used by a number of parliamentary technology assessment agencies in Europe known as participatory technology assessment (pTA):\nParticipatory technology assessment (pTA) enables laypeople, who are otherwise minimally represented in the politics of science and technology, to develop and express informed judgments concerning complex topics. In the process, pTA deepens the social and ethical analysis of technology, complementing the expert-analytic and stakeholder-advised approaches to [technology assessment] used by the former OTA.\nInitiation of technology assessments . The current statute authorizes the following officials and organizations to initiate a technology assessment: the chair of any standing, special, or select committee of either chamber of Congress, or of any joint committee of the Congress, acting on their own behalf or at the request of either the ranking minority member or a majority of the committee members; the TAB; or the Director, in consultation with the TAB. Congress might opt to expand this list to include any Member of Congress or at the request of a certain number of Members of Congress; reduce the list to include only some or one of those currently authorized; or to authorize the OTA Director to initiate assessments without any additional approval. Congress might also provide guidance to the OTA Director on prioritization of requests for technology assessment. Administrative provisions. The statute currently provides a variety of administrative authorities in areas such as personnel; contracting; real and personal property acquisition; recordkeeping; cooperation with executive and legislative branch agencies; and a proscription on operating laboratories, pilot plants, and test facilities. Congress may wish to review the existing authorities with respect to possible modifications, eliminations, or additions to these provisions.\nPotential advantages of this approach include the opportunity to address previously identified OTA issues, to improve agency performance, and to address concerns during debate on reestablishment.\nOne disadvantage to this approach may be an inability to achieve a consensus on how the OTA statute should be revised, reducing the likelihood of the agency's reestablishment. For those who see an immediate need for OTA-type analyses, a second disadvantage is that the agency's reestablishment could be delayed by hearings or studies on proposed changes, as well as consideration of amendments that might be offered to the revisions. \n\n\t\tOption: Charge an Existing Agency or Agencies with New or Expanded Technology Assessment Authorities and Duties\n\nAt the time OTA was defunded, some Members of Congress anticipated that one or more government agencies might expand their capabilities to meet Congress's need for technology assessments. This section describes options for establishing technology assessment functions within two legislative agencies, GAO and CRS.\n\n\t\t\tExpand the Government Accountability Office's Technology Assessment Function\n\nIn FY2002, at the direction of Congress, GAO began developing a technology assessment capability, publishing reports intended to \"explain the consequences that certain technology will have on the federal government\u00e2\u0080\u0094and on society as a whole.\" Congress might leverage or authorize these efforts.\nOne advantage of this approach is that it would build on an existing capability within the legislative branch. At Congress's direction, GAO has produced technology assessments since 2002 and has recently established a new STAA team with a growing staff of science and technology experts. Another advantage would be GAO's reputation for high quality analytical work. \nOne potential disadvantage is that, unlike the singular focus of OTA on technology assessment, this would be only one of several functions of GAO. A Washington Post editorial in 2018 noted that GAO has an institutional culture centered on audits and investigations, and asserted that it lacks \"a larger permanent staff of subject experts with whom legislators can build relationships, as well as the independence to better compete for resources.\"\nAn analysis of technology assessment options for Congress written by the American Action Forum, a not-for-profit organization, identified other potential weaknesses. The analysis asserted that GAO reports do not feature many policy options, unlike OTA reports; GAO lacks the in-house expertise OTA had, limiting its ability to counsel Members of Congress; and GAO's consultancy services\u00e2\u0080\u0094\"arguably the most important part of any technology assessment program, given the fast pace of technology policy\"\u00e2\u0080\u0094need reform. The analysis suggested, however, that GAO could potentially address these shortcomings with additional congressional direction and resources. \n\n\t\t\tCreate a Technology Assessment Function in the Congressional Research Service\n\nThe Congressional Research Service, a service unit of the Library of Congress, provides comprehensive research and analysis on all legislative and oversight issues of interest to Congress. CRS has a staff of about 600, including approximately 320 analysts and attorneys and 100 information professionals. CRS has expertise in a variety of policy fields, including many fields of science, engineering, and technology as well as S&T policy. \nMuch of CRS's work is provided in the form of consultancy in response to inquiries from Members of Congress, their personal staff, and congressional committee staff. \nMost of the analytical work of CRS experts is short-term in nature\u00e2\u0080\u0094measured in hours, days, or weeks\u00e2\u0080\u0094and conducted to meet specific requests of staff working on legislative or oversight issues. Some of CRS's longer and more analytically complex reports may take several months to produce. In contrast, OTA reports generally took 18 months or longer to produce.\nCRS does not have a statutory mission to perform technology assessments, nor has CRS otherwise received direction from Congress to conduct technology assessments. CRS has a statutory mission to prepare and provide information, research, and reference materials and services to Congress\u00e2\u0080\u0094to include House and Senate committees, joint committees of Congress, and Members of the Senate and House of Representatives. CRS serves Congress and not the public.\nAt the time Congress defunded OTA, some Members of Congress, including those on the House Appropriations Committee, anticipated that the Congressional Research Service might undertake some of the work performed by OTA. In 1999, CRS reorganized its operational structure and embedded science and technology analysts in CRS units in which science and technology issues were an important part of broader issue areas (e.g., energy, environment, health, defense). A smaller cadre of analysts in a discrete science and technology unit focused primarily on science and technology policy issues writ-large (e.g., policies associated with research and development funding and activities, technology transfer, innovation). Some have asserted that this change diminished CRS's ability to fill the gap left by OTA's closure. In his book, Congress's Own Think Tank , Peter Blair asserted that\nThe unintended result was a significant dilution of CRS's capability to cover science and technology policy issues. It was never realistic to presume that CRS was in a position to fill the void left by OTA's closure.\nAlternatively, CRS management and some policy analysts believed that the reorganization improved CRS's ability to provide more comprehensive analysis to Congress.\nPotential advantages of using CRS to conduct technology assessments might include CRS's reputation for providing Congress with authoritative, confidential, objective, timely, and nonpartisan analysis in support of congressional legislative and oversight activities, as well as CRS's current cadre of experts in science, engineering, technology, and S&T policy.\nDisadvantages include CRS's lack of experience and expertise in conducting in-depth technology assessments of the type historically performed by OTA. While CRS could potentially acquire such experience and expertise, this approach would require a departure from CRS's current work and organizational culture. It might also require additional financial resources, expanded facilities, the hiring of additional management and staff, and potentially the establishment of a new organizational unit within CRS devoted to technology assessment. While current staff with science, engineering, and technology expertise could contribute to the establishment of such a unit within CRS, that might detract from their ability to provide the analyses and services the agency currently provides to Congress. \n\n\t\tOption: Use the National Academies for Technology Assessment\n\nSince its founding under a congressional charter in 1863, the National Academies have been an authoritative source of high-quality expertise on science, engineering, and health matters for Congress and the nation. The National Academies produces analyses in seven major program areas: Behavioral and Social Sciences and Education, Earth and Life Studies, Engineering and Physical Sciences, Gulf Research, Health and Medicine, Policy and Global Affairs, and Transportation Research.\nMembers of each component of the National Academies\u00e2\u0080\u0094the National Academy of Sciences, National Academy of Engineering, and National Academy of Medicine\u00e2\u0080\u0094elect new members based on outstanding and continuing achievements in their fields. Academy members, together with other experts, serve pro bono on committees conducting National Academies studies and reports:\nEach year more than 6,000 of the world's foremost scientists, engineers, and health professionals volunteer their time to address some of society's toughest challenges by serving on the hundreds of study committees that are convened to answer specific sets of questions. Our peer-reviewed reports present the evidence-based consensus of these committees of experts.\nAt the time of OTA's defunding, some policymakers and analysts postulated that the National Academies (as well as other nongovernmental organizations such as universities) might undertake technology assessments. Representative Jack Kingston, chairman of the Subcommittee on Legislative Branch Appropriations, reiterated this perspective in House floor debate on FY2005 legislative branch appropriations:\nIn 1995 on a bipartisan level, we eliminated [OTA], and the belief at that time was that there were other committees that we could turn to to get technology studies and technology assessment. Some of these, for example, are the National Academy of Sciences, the National Academy of Engineering, the Institute of Medicine, and the National Research Council. All of them have hundreds of people who are technically educated.\nHowever, according to author Peter Blair, while the National Academies saw a short-term increase in congressional requests for reports following the closure of OTA, demand returned to its previous levels shortly thereafter:\nThe increased use of the [National Academies], however, was short-lived, lasting only one year\u00e2\u0080\u0094the number of congressionally mandated or requested [National Academies] reports doubled in the 105 th Congress (1997-1998) to 59, up from the historical average of about 22 studies (e.g., in the 104 th Congress [1995-1996] as OTA was closing down), but interestingly then dropped back to the historical average by the 107 th Congress (2001-2002).\nIt is unclear why the number of requests for National Academies fell after the initial increase. Among the possibilities: a decrease in demand for science and technology information and advice; a perception that such reports were not meeting Congress's needs in terms of factors such as relevance, timeliness, or actionability; and increased fiscal constraints.\nThe National Academies study process is highly structured, methodical, and deliberate. The process includes four major stages: defining the study; committee selection and approval; committee meetings, information gathering, deliberations, and drafting of the report; and report review. This process includes checks and balances \"at every step in the study process to protect the integrity of the reports and to maintain public confidence in them.\" Accordingly, some assert that the National Academies is not structured to respond to congressional needs in a timeframe consistent with the pace of legislative decisionmaking\u00e2\u0080\u0094a criticism also made of OTA.\nIn 2006, Peter Blair, in his capacity as executive director of the National Academy of Sciences' Division of Engineering and Physical Sciences, testified at a House Science Committee hearing on scientific and technical advice for Congress. In his written statement, Blair cited timeliness and cost as factors that could impede the National Academies' utility to legislative decisionmakers. With respect to timeliness, Blair stated that the average time for completion of a National Research Council (NRC) study was 18 months, but that it can take longer. He attributed this lengthiness to the study process (described above), coordination of the schedules of busy study committee members, and the time required for peer review, editing, production, and release. Blair noted further that, before a study can even begin, each congressionally mandated National Academies study must be defined and funded under negotiated contracts with federal agency sponsors:\n[It] often takes six to nine months [to move] through a government procurement process to initiate an NRC study even after a mandated study has been enacted in law (or included in report language). For those studies mandated by Congress, an additional delay often results from the time needed to enact the relevant legislation.\nWith respect to cost, Blair noted a widely held perception that the cost of National Academies studies was high, attributing this in part to the negotiation of separate contracts \"for each study, unlike the central funding for agency advisory committees.\" \nFurther, Blair noted that it is difficult for an organization to serve many different types of needs:\nLike any process designed to serve many needs, the NRC study process is not perfectly tuned to serve all government needs. For example, our process is less well equipped, currently, to go beyond technical analysis, to gauge the broader policy implications of alternative actions, especially those implications that may involve fundamental value judgments or tradeoffs for which it may be difficult or impossible to achieve consensus. \nTo address some of these perceived shortcomings, Blair suggested the potential utility of establishing a sub-unit of the National Academies that would employ \"a study process specifically adapted to congressional needs, adopting more of an OTA-like study model with base support and contracting capability as well as a task-order like funding mechanism.\" \nPotential advantages of using the National Academies to perform technology assessments include the organization's long-standing credibility and strong reputation for technical expertise and authoritative, objective, high-quality scientific and technical analysis; its congressional charter to help inform public policymakers on matters of science and technology; and its members' depth and breadth of knowledge across the spectrum of science and engineering disciplines.\nAs discussed above, potential disadvantages of relying on the National Academies to provide technology assessments to Congress include concerns about its cost, timeliness, and ability to assess and advise on implications involving non-scientific, non-technical value judgements and trade-offs.\nUltimately, the National Academies serves Congress as a private, nonprofit corporation negotiating a contract with the government\u00e2\u0080\u0094with all the advantages and disadvantages that process involves\u00e2\u0080\u0094and does not serve as a part of the legislative branch. \n\n\t\tOption: Rely on a Broad Range of Existing Organizations for Scientific and Technical Analysis and Technology Assessment\n\nWhile some identify a need for an organization to produce the types of technology assessments previously produced by OTA, others assert that Congress already has access to all of the scientific and technical advice it needs. Still others assert that the issue is not a lack of S&T information, but rather whether Congress uses existing sources effectively when making policy decisions. \nCongress may obtain scientific and technical analysis (and, in some cases, advice and recommendations) from a wide array of entities, including federal executive branch agencies, GAO, CRS, federally chartered advisory committees, federally funded research and development centers, the National Academies, academic researchers, industry and trade associations, professional organizations, businesses, not-for-profit organizations, advocacy groups, think tanks, labor organizations, and others. The types of information and analysis these organizations provide, and their authoritativeness, objectivity, independence, timeliness, and cost, vary widely. \nA key advantage of relying on existing agencies is that the infrastructure, people, and processes are currently in place, reducing the time and logistical complexities (e.g., hiring, acquiring space, establishing processes and procedures) associated with establishing new organization. In addition, relying on existing organizations may also reduce legislative hurdles associated with establishing a new organization.\nThe primary disadvantage of this approach, according to some, is that the information some of these entities currently provide to Congress may lack authoritativeness, objectivity, or independence. A key factor in the creation of OTA in 1972 was a perceived need for Congress to have its own, independent source of scientific and technical expertise, capable of providing in-depth technology assessments, provided by an institution responsive to the needs and timing of the legislative process. Some of the entities identified above, and the analysis they perform, may not embody all these characteristics. \n\n\tScience and Technology Advice to Congress: Identifying Needs and Avoiding Duplication in Meeting Them\n\nCongress uses information and analysis about science and technology and its implications to inform its deliberations and decisions that affect the U.S. economy, national security, quality of life, standard of living, public health and well-being, and other matters of national policy. A wide range of organizations provide science and technology information and analysis directly and indirectly to Congress. Some of these organizations are public, some private, and some quasi-governmental. Among the public organizations, some are part of the executive branch and others are in the legislative branch (i.e., CBO, CRS, and GAO). Some in Congress believe that there is a need to re-create OTA or an OTA-like organization, or to assign OTA-like responsibilities to an existing organization to meet Congress's unique information needs and produce analysis not currently being provided by existing organizations; others disagree. Some believe that a new organization should be established to handle some or all of the science and technology information and analysis services OTA was authorized to provide.\nDuplication of capabilities has been a concern expressed by some within Congress and external observers during debate about the establishment of OTA, during debate about the defunding of OTA, and during subsequent debate and discussions about reestablishing OTA or OTA-like capabilities. Most parties agree on the need to prevent the creation of duplicative organizations or functions, and to eliminate (or at least minimize) duplicative organizations, duplicative functions within organizations, and duplicative work, along with the costs associated with them.\nTo avoid duplication and meet its information and analysis needs, Congress may wish to further the process of\nidentifying the science and technology analysis it needs to support its deliberative processes and decisions; determining which federally funded organizations (e.g., federal agencies, quasi-public, and other nonprofit organizations) are currently charged with addressing the identified needs and how effectively the organizations address these needs; identifying areas of overlap or duplication of authorities and activities of the organizations and their components; identifying areas of need that are not being addressed by these organizations; and determining whether such needs can best be met by an existing organization or organizations; whether the identified needs merit the creation of a new organization, organizations, or the extension of the capabilities of an existing organization; or whether the costs of obtaining additional science and technology information and analysis outweighs the need.\nAppendix A. An Historical Overview of the Definition of Technology Assessment\nThe definition of the term technology assessment has a long history of discussion and debate. Much of this discussion occurred in the late 1960s and early 1970s during the efforts that ultimately led to the establishment of the Office of Technology Assessment in 1972. This appendix offers a variety of perspectives on the meaning of technology assessment in the context of public policy.\nIn the House of Representatives, the Committee on Science and Astronautics' Subcommittee on Science, Research, and Development played a leading role in the exploration of technology assessment to assist policymakers. In 1969, Representative Emilio Q. Daddario, chairman of the subcommittee, stated that technology assessment was identified as a major activity of the subcommittee in 1965. \nIn 1967, Representative Daddario introduced H.R. 6698 (90 th Congress) to establish a Technology Assessment Board for the purpose of\nidentifying the potentials of applied research and technology and promoting ways and means to accomplish their transfer into practical use, and identifying the undesirable by-products and side-effects of such applied research and technology in advance of their crystallization and informing the public of their potential in order that appropriate steps may be taken to eliminate or minimize them.\nThat same year, Representative Daddario put forth in a written statement, published as a committee print, the following definition of technology assessment:\nTechnology Assessment is a form of policy research which provides a balanced appraisal to the policymaker. Ideally, it is a system to ask the right questions and obtain correct and timely answers. It identifies policy issues, assesses the impact of alternative courses of action and presents findings. It is a method of analysis that systematically appraises the nature, significance, status, and merit of a technological program. The method may well vary from case to case\u00e2\u0080\u00a6.\nTechnology Assessment is designed to uncover three types of consequences\u00e2\u0080\u0094desirable, undesirable, and uncertain. The benefits that accrue from technology are naturally the driving force for its application. Economic growth is fostered by more convenient and efficient services or by new and less expensive goods. Society benefits when technology is developed around some value or goal, consistent with democracy. Undesirable consequences, sometimes played down by calling them harmful side effects, can be expected with most innovations. Technology means change\u00e2\u0080\u0094change to the natural environment, change in personal habits and behavior, change in social and economic patterns, and not infrequently, change in the legal and political processes. While many of these changes are beneficial, many are disruptive and dislocative. They change situations more rapidly than the pace at which individuals can adjust. The well-known cultural lag finds its logical beginnings in the phenomena. Assessment of the risks is a necessary concomitant to assessment of the benefits. \nUncertain consequences are the third type to be identified and assessed. Available information may point out early that an effect will occur and can give no idea of the degree of impact. When the severity of impact is not known further research is often warranted\u00e2\u0080\u00a6. In general, experimentation and pilot projects are required to determine what proscriptions might be necessary before the technology is able to successfully diffuse through society. \nIf assessment is a method of policy research that identifies the amount and type of change for alternative course of action and provides a balanced appraisal of each alternative, then what is the scope of technology assessment? What will it try to measure? What timeframe will it consider? What yardsticks will be used? How does assessment differ from other methods of analysis?\nAnswers to these questions will more concisely define Technology Assessment and more closely show its relationship to the policymaking process. \nTechnology Assessment for the Congress will deal for the most part with applications in the United States. It is worth noting though, that the entire world, and even outer space, is the system with which we are concerned\u00e2\u0080\u00a6. The international aspects of Technology Assessment will become more important as the power and ubiquity of man-made forces continue to increase\u00e2\u0080\u00a6.\nTo assess technology one has to establish cause and effect relationships from the action or project source to the locale of consequences. \nA direct or immediate effect is easy to spot and assess. The direct effects, in turn, will cause other consequences\u00e2\u0080\u0094indirect or derivative effects. As the scope of assessment moves outward in time the derivative effects become the result of many causes and not of one specific technological change\u00e2\u0080\u00a6. \nThe function of technology assessment is to identify all of these [impacts and trends]\u00e2\u0080\u0094both short-term and long range. The emphasis though will be on the short-term impacts that can be measured by natural science parameters. That is, the focus of Technology Assessment will be on those consequences that can be predicted with a useful degree of probability. Possible changes in values, attitudes, or motivations are important but not easily predicted. These changes are usually long term and fall beyond the primary focus of Technology Assessment. Therefore, because of their slow evolution, present human values and political motivations will serve as the frame of reference for purposes of measurement and appraisal. \nAssessment is a form of policy research and is not technological forecasting or program planning. It is a balanced analysis of how a technological program could proceed with the benefits and risks of each policy alternative carefully described. It incorporates prediction and planning, but only to expose the potential consequences of the program. \nAssessment is an aid to, and not a substitute for, judgment. Technology Assessment provides the decision maker with a list of future courses of action backed up by systematic analysis of the consequences. In this sense it is an analytical study that could be prepared by anyone. Its utility would be enhanced if it was undertaken for a particular policymaking group that could sketch in the nature of the problem for the study team beforehand. In a broader sense, assessment is part of the legislative process. Our subcommittee will gather and assess information before we can make any judgments. Part of this information will be actual assessment studies prepared for the subcommittee by scientific community and the Science Policy Research Division [of the Legislative Research Service, later renamed the Congressional Research Service]. When viewed as either a method of research or a part of the legislative process, Technology Assessment serves to provide information tailored to the constraints and needs of the policymaking process.\nShortly after assuming office in 1969, President Richard Nixon established the National Goals Research Staff, \"a small, highly technical staff, made up of experts in the collection, correlation and processing of data relating to social needs, and in the projection of social trends.\" The announcement of its formation offers a perspective on the Nixon Administration's view of the importance and role of technology assessment:\nWe can no longer afford to approach the long-term future haphazardly. As the pace of change accelerates, the processes of change become more complex. Yet at the same time, an extraordinary array of tools and techniques has been developed by which it becomes increasingly possible to project future trends\u00e2\u0080\u0094and thus to make the kind of informed choices which are necessary if we are to establish mastery over the process of change.\nThe functions of the National Goals Research Staff will include\nforecasting future developments, and assessing the long-range consequences of present social trends;\nmeasuring the probable future impacts of alternative courses of action, including measuring the degree to which changes in one area would likely affect another;\nestimating the actual range of social choice\u00e2\u0080\u0094that is, what alternative sets of goals might be attainable, in light of the availability of resources and possible rates of progress;\ndeveloping and monitoring social indicators that can reflect the present and future quality of American life, and the direction and rate of its change; and\nsummarizing, integrating, and correlating the results of related research activities being carried on within the various Federal agencies, and by State and local governments and private organizations.\nThe National Goals Research Staff was directed to produce a report by July 4, 1970, \"to help illuminate a possible range of national goals for [the U.S. Bicentennial].\" In July 1970, the organization released its first (and only) report, Towards Balanced Growth: Quantity with Quality , describing technology assessment:\nAdvanced technology of all sorts produces unexpected and often unwanted indirect consequences. A movement called \"technology assessment\" now advocates a more pervasive and systematic assessment of the social costs and benefits of both new and existing technology. The main issues are: To what extent should the use of new and old technology be restricted because of adverse side effects? What institutional mechanisms might assess and regulate technology? What effect would such a policy have on economic growth and on the size and nature of our technological and scientific establishments?\u00e2\u0080\u00a6\nIn short, what is meant by technology assessment is nothing more than a systematic planning or forecasting process that delineates options and costs, encompassing economic, environmental, and social considerations (both external and internal) and with special focus on technology-related \"bad,\" as well as \"good,\" effects.\nIn moving toward the establishment of the Office of Technology Assessment, Congress sought and received input from a number of sources about technology assessment in the context of public policy. \nAt the request of the House Committee on Science and Astronautics, reports on technology assessment were delivered by the National Academy of Sciences (NAS) and the National Academy of Engineering (NAE) in 1969, and the National Academy of Public Administration (NAPA) in 1970. \nThe National Academy of Sciences' report, Technology: Processes of Assessment and Choice , emphasizes the absence of a unitary concept of technology assessment and emphasizes that different views vary with the interests and perspectives of the proponent:\nThe choice \u00e2\u0080\u00a6 is between technological advance that proceeds without adequate consideration of its consequences and technological change that is influenced by a deeper concern for the interaction between man's tools and the human environment in which they do their work. \nFor those who hold this more balanced view, the expression \"technology assessment\" may acceptably describe what occurs when the likely consequences of a technological development are explored and evaluated. Their objective is to improve the quality of such efforts at exploration and evaluation of our technological order. But the concept of improved technology assessment is by no means a unitary one; it suggests different things to different people. The contents and focus of the notion vary with the vital interests and perspectives of its many proponents. \nTo some, concerned primarily with the preservation and enhancement of environmental quality , technology assessment suggests evaluation of technical changes or applications from the perspective of their likely impact on various environmental goals and resources\u00e2\u0080\u0094or the exploration of how particular environmental objectives might be affected, beneficially or adversely, by the growth and speed of various technologies\u00e2\u0080\u00a6.\nTo others, concerned with the measurement of social change as a step toward the achievement of broad national goals, technology assessment connotes the use of new tools to monitor the impacts on society of technical changes (among others) and to improve the quality of feedback from social effects to technological (and other) developments\u00e2\u0080\u00a6.\nYet another group is concerned broadly with the need for greater foresight and planning to guide technological change with more timely and comprehensive balancing of total costs against total benefits. To this group, technology assessment means an attempt to project the likely growth and probable impacts of specific technologies.\u00e2\u0080\u00a6\nAnother group, concerned with improving the allocation of public resources, views technology assessment as a means of identifying and measuring the possible uses of technologies generated by federally supported research and development activities. Of special concern to this group is the supposed transfer of space and defense technology and management techniques to the civilian sector, particularly for the solution of major social problems related to urbanization, such as housing, crime, transportation, and municipal services.\nAnd to still others, whose concerns lie with better program and policy evaluation and who do not restrict their attention to resource allocation, technology assessment represents one component of planning-programming-budgeting (PPB). Their emphasis is upon developing more precise definitions of program objectives as they related to national goals and priorities; more specific and unbiased criteria for assessing program potentiality and performance in cost-benefit terms; and more successful ways of modifying old programs or proposing new programs with the help of such analytic devices.\nThe National Academy of Engineering's report, A Study of Technology Assessment , states that one of its underlying concerns entering the study\u00e2\u0080\u0094a concern expressed by a number of technology assessment skeptics\u00e2\u0080\u0094was that the outcome of such assessments would primarily be to impede technology commercialization. Nevertheless, the NAE report concluded that technology assessment could prove a useful tool for legislators:\nWhen the Committee on Public Engineering Policy first undertook its assignment to explore the concept of technology assessment, we were concerned about the concept's utility and practicality. Prior to our feasibility studies, we felt\u00e2\u0080\u0094perhaps as others may have\u00e2\u0080\u0094that results from such assessments might become primarily impediments to the uses of technology. We can now reflect on the collective experience of nearly 50 participants in this work, which is summarized in this report. \nFirst of all, we now feel that useful methodologies are available for technology assessment and that more adequate ones can be developed through practice. Second, our experiences show that task forces of experts specifically constituted for particular technology assessments can accumulate data and develop insight on the potential impacts of technology on society. Third, our preliminary work shows that such task forces can propose a variety of national strategies for modulating the effects of technology or society, thereby providing the legislator with a better base for his judgments on the role of government in influencing technology.\nThe National Academy of Public Administration's report, A Technology Assessment System for the Executive Branch , noted that assessment at that time had only dealt with narrow first-order effects within the assessing agency's scope of interest, and only technical and economic second-order effects. The report advocates a wider, systemic, and more complex perspective approach to technology assessments: \nSimply stated, technology assessment is the evaluation of the impacts of new, developing, or established technologies, including, but not limited to, those which the Federal Government may support or regulate\u00e2\u0080\u00a6. Most assessments of the consequences of introducing a technology are incomplete, if not superficial. Commonly, they include few first-order consequences outside the assessing agency's program interests or statutory responsibility, and only technical and economic analyses of second-order consequences. Good assessments should consider the interactions of population, environment, technology, society, and the economy.\nThe House Subcommittee on Science, Research, and Development also requested a report from the Legislative Reference Service (LRS, later the Congressional Research Service) of the Library of Congress, which was delivered in 1971. The report, Technical Information for Congress, included the following description of technology assessment:\nBefore, during, and after the building of a technological system, it is necessary to identify and study the consequences of its operation. The objective is to improve the management of the total technological society, including the minimizing of consequences which are unintended, unanticipated, and unwanted. Assessment includes forecasting and prediction, retroactive evaluation, and current monitoring and analysis. Measurements involve non-economic, subjective values as well as direct, tangible quantifications. Above all, assessment requires that catastrophic consequences of each proposed new technology be foreseen and avoided before the new technology becomes entrenched in the socioeconomic complex of human organization.\nDuring this period, other organizations offered their views of technology assessment. In December 1971, The Futurist, a bi-monthly magazine with articles on technological, societal, and public policy trends, offered this definition: \n[Technology assessment is] a reasoned response to the stress that a rapidly changing and expanding technology puts on our complex and increasingly industrialized, urbanized, and densely populated society. It attempts to make the process of coping with technological development more systematic and rational. Technology assessment can be viewed as a mixture of early warning signals and visions of opportunity. Or as a device for protecting man from his own technological creativity. Or as a formal mechanism for allocating scientific resources, setting technological priorities, and seeking more benign alternatives for technologies already in use. Or as an attempt to control and direct emerging technologies so as to maximize the public benefits while minimizing public risks.\nIn the act establishing OTA in 1972 (P.L. 92-484), Congress implicitly defined technology assessment in its findings and declaration of purpose for the agency: \nAs technology continues to change and expand rapidly, its applications are large and growing in scale and increasingly extensive, pervasive, and critical in their impact, beneficial and adverse, on the natural and social environment. Therefore, it is essential that, to the fullest extent possible, the consequences of technological applications be anticipated, understood, and considered in determination of public policy on existing and emerging national problems....\n[I]t is necessary for Congress to equip itself with new and effective means for securing competent, unbiased information concerning the physical, biological, economic, social, and political effects of such applications; and utilize this information, whenever appropriate, as one factor in the legislative assessment of matters pending before the Congress, particularly in those instances where the Federal Government may be called upon to consider support for, or management or regulation of, technological applications.\nIn 1973, the Congressional Research Service, in response to a request from the House Subcommittee on Science, Research, and Development of the Committee on Science and Astronautics, prepared Science Policy: A Working Glossary . This glossary, published as a committee print, included the following definition for technology assessment:\nA generalized process for the generation of reliable, comprehensive information about the chain of technical, social, economic, environmental, and political consequences of the substantial use of a technology, to enable its effective social management by decisionmakers. Initially advanced as an instrument to provide advice to political decisionmakers, the concept has been increasingly accepted as a policy service within corporate management of private businesses.\nIn one of its first reports, Requirements for Fulfilling a National Materials Policy , published in August 1974, the Office of Technology Assessment stated its mandate as being directed to\nprovide early indication of the probable benefits and adverse impacts of technology and to develop other coordinate information which assists the Congress. Among other specific functions the OTA is charged with identifying impacts of technology, ascertaining cause and effect relationships, identifying alternate technological methods, identifying alternate programs, comparing the impacts of alternate programs, presenting analysis to appropriate legislative bodies, and identifying areas where additional research or data collection is required.\nIn 1975, the American Bar Association's Section of Science and Technology held a program on \"Technology Assessment\u00e2\u0080\u0094Legal and Policy Implications\" at the organization's annual meeting. In his opening statement, the chair of the section, Ronald A. May, relied on the definition of technology assessment used in a survey conducted on behalf of the National Science Foundation:\nTechnology Assessment is \"the process of identifying actual or potential secondary effects of a technological development (or of a set of interrelated technological developments) on social, political, economic, and\/or environmental values or institutions.\"\nIn his remarks, May posed the question: What does technology assessment mean for lawyers? In response to this question, May noted that\nTen times as many [technology assessments] that were studied in this survey were \"problem initiated\" as opposed to \"technology initiated.\" In other words, only one out of ten [technology assessments] had been done because somebody developed a new technology and decided they wanted to assess its impact. Stated conversely, in nine out of ten [technology assessments] there was a problem, and the technology was studied on that account. Lawyers are problem solvers, so this is significant.\nMay also observed that while technology assessments were performed for the purpose of influencing executive decisions in corporations and to influence agency and legislative decisionmakers, \"very little [technology assessment] was done to influence judicial decision-making.\"\nIn 1995, during the period in which Congress was considering whether to discontinue funding for OTA, one critic reflected back to the time leading up to the establishment of OTA, noting concerns held by some that technology assessments would become a tool to stifle innovation and technological commercialization. Alan Porter, director of the Georgia Tech Technology Policy and Assessment Center, noted both the ambiguity of the term technology assessment and those concerns: \nIt should not shock us that two general, widely used, and ambiguous terms\u00e2\u0080\u0094'technology' and 'assessment'\u00e2\u0080\u0094when combined, do not yield a singular meaning. Nonetheless, we can track and even, perhaps, make sense of the usage of 'technology assessment'. The initiation of [technology assessment] in the late 1960s in the USA engendered lively discussion along two distinct streams. The more direct sought to devise an effective policy analysis mechanism to help the U.S. Congress better cope with executive branch proposals. The other, philosophical in bent, concerned the broad roles of technology in society, seeking to help society better manage technology. Both streams struck fear in those committed to technology-based free enterprise, as expressed in charges that TA meant 'technology arrestment.' \nIn a 1970 House Subcommittee on Science, Research, and Development field hearing to explore the relationship between technology assessment and environmental problems, one academic critic asserted that technology assessment as proposed by subcommittee chairman Representative Emilio Daddario was \"conceptually impossible\" and that instead market forces should be used to guide and control technology:\nI feel I cannot let pass unchallenged the assumption that technology assessment of the type described [by the chairman] is a useful or even a harmless exercise, or is, indeed, possible\u00e2\u0080\u00a6. I am not suggesting a less ambitious role for Congress because I think the impact of technology on society is unimportant, but precisely because I think it is extremely important\u00e2\u0080\u0094so important in fact that it should be not left to the Congress of the United States to assess and control technology.\u00e2\u0080\u00a6 \nThe first problem confronting anyone who attempts technology assessment is that it can't be done. It is conceptually and practically impossible to determine what the impact of any particular technological gadget will be, let alone evaluate these effects and find benefit\/cost or benefit\/risk ratios. Even if our foresight were as good as our hindsight it would be impossible\u00e2\u0080\u00a6. The world, and especially human societies, are just too complex and interrelated for anyone, or any committee, to determine the direct and derivative effects of technology, even in the past\u00e2\u0080\u00a6. Everybody knows, of course, that technology assessment is at best a very difficult task; I am suggesting it is more than difficult, it is conceptually impossible\u00e2\u0080\u00a6. \n[However,] technology can be and has been guided and controlled, by social institutions which encourage its development and application in socially desirable ways. The primary social institution which has guided technology has been the market\u00e2\u0080\u00a6. On the whole, this system has worked very well, without the need for any official body to assess all the long-term effects of each new technological process as it appeared.\nMore recent definitions of technology assessment are also varied and echo the same themes present in the definitions from the 1960s and 1970s.\nAppendix B. Selected Trends and Factors That May Contribute to a Perceived Need for Technology Assessment\nA variety of reports published in 2019, together with proposals by some Members of Congress and others outside of Congress, have asserted that Congress needs a bolstered technology assessment capability to inform its policy decisions. This section describes selected trends and factors that may contribute to this perspective, including the rapid pace of technological change, the globalization of R&D, the role of science and technology (S&T) in the U.S. economy, the role of S&T in national security, the increasing complexity of technology, the advent of new information and communications technologies, and the role of S&T in other aspects of public policy. The role of new and powerful technologies in industry, national security, society, and the global balance of power may have important implications for congressional policy decisions, including policies related to their development and application, as well as in preventing, mitigating, and remediating potential adverse effects.\nRapid Pace of Technological Change\nTechnology\u00e2\u0080\u0094the application of scientific and other knowledge for practical purposes\u00e2\u0080\u0094is advancing rapidly, and by some measures it is growing at an accelerating pace. This growth is fueled, in part, by increased public and private investments in R&D. A variety of technologies have seen rapid growth\u00e2\u0080\u0094magnetic data storage, DNA sequencing, wired and wireless data transmission technologies\u00e2\u0080\u0094some continuing this growth over multiple decades. For example, as illustrated in Figure B-1 , the number of transistors on a microchip since 2001 has grown exponentially. While this chart only shows data since 1971, the rapid growth can be traced back to the invention of the integrated circuit. Similarly, Figure B-2 shows rapid growth in the number of human genome base pairs that can be sequenced per dollar. (Note: Figure B-1 and Figure B-2 show growth on a logarithmic scale where each increment on the y-axis represents a 10-fold increase. A logarithmic scale is often used when analyzing a large range of data.)\nCountries are aggressively pursuing R&D directed at goals such as innovation, competitiveness, economic growth, wealth creation, productivity improvements, national security, and quality of life. Companies are pursing R&D for innovations that yield new and better products and processes, market advantage, and cost reductions, enabling them to serve new and existing markets and increase their profitability. Since OTA was defunded, total global gross expenditures on research and development (GERD) have grown rapidly. In 2017 total GERD was $1.9 trillion, more than 3.9 times its level in 1996 ($504 billion), measured in current purchasing power parity dollars. Measured in constant dollars, the real purchasing power of global R&D increased more than 150% between 1996 and 2017. (See Figure B-3 .)\nThese growing global investments in R&D are delivering new technologies, products, and services with potentially substantial societal implications. Some of these advances are evolutionary\u00e2\u0080\u0094offering incremental improvements on the technologies, products, and services already in use\u00e2\u0080\u0094while other advances are revolutionary with the potential, according to some analysts, to disrupt markets, companies, industries, occupations, and the balance of economic and military power. \n Figure B-4 shows the number of utility patents (\"patents for inventions\") granted by the U.S. Patent and Trademark Office each year from its establishment in 1790 to 2015, another metric illustrating rapid growth in the development of new technology. It took more than 200 years for USPTO to issue its 5 millionth patent; 27 years later, on June 19, 2018, the USPTO issued its 10 millionth patent. \nWhile there is consensus on the rapid growth in technology, not all agree that the pace of technological change is accelerating. For example, considering technological change through the lens of technology adoption, one information technology expert notes that\nThe time it takes for a new technology to be used in 50 percent of U.S. homes has long been used as a comparative adoption benchmark. By this standard, both radio and television were accepted faster than personal computers or mobile phones. More importantly, most Internet of Things (IoT) technologies\u00e2\u0080\u0094Fitbits, smart watches, 3D printers\u00e2\u0080\u0094are being adopted even more slowly.\nGlobalization of Research and Development\nThe United States' share of global R&D expenditures fell from 69% in 1960 to 28% in 2017 as other countries increased their R&D investments, both public and private, some quite substantially. In recent years, China has accounted for a large share of global R&D growth. Between 1996 and 2016, China increased its investments from $14.2 billion to $451.2 billion (measured in current PPP dollars), an increase of more than 3,000%, to become the world's second largest funder of R&D, behind only the United States. (See Table B-1 .) During the same period, U.S. R&D grew 158%. In constant 2010 PPP dollars, between 1996 and 2017 China's \nR&D investment grew by 2,279% while investment by the U.S. in R&D measured in constant 2010 PPP dollars grew by 86%.\nIn addition to developing new technologies, nations around the world are adopting and deploying these technologies to meet their economic, social, and military objectives. This development, adoption, and deployment may have significant implications for not only their own countries, but for the United States as well. On the one hand, for example, the adoption of these technologies could increase the prosperity of other countries, creating potential new markets for American products and services. On the other hand, the indigenous development of technological capabilities in countries other than the United States and its allies may limit the United States' ability to control access to military technologies and may reduce the influence of the United States in the establishment of standards for the ethical and safe use of new technologies. The United States might also lose its technology leadership in key fields, long considered a key component in the strength of the U.S. economy.\nRole of Science and Technology in the U.S. Economy\nEconomists have long maintained that advances in science and technology play an important role in U.S. and global economic growth, productivity, job creation, and standard of living. These benefits flow from factors such as new and improved products, improvements in manufacturing technologies, the reorganization of work, and enabling and improving services. For example, S&T discovery has played an important role in extracting and exploiting America's energy resources\u00e2\u0080\u0094through the advancement of fracking, horizontal drilling, and sonic imaging technologies used in oil and gas production\u00e2\u0080\u0094and in reducing the cost and improving the performance of alternative energy sources such as solar and wind.\nRole of Science and Technology in National Security\nScience and technology have played a central role in U.S. national security and military strength\u00e2\u0080\u0094from the weapons systems developed during World War II (e.g., nuclear weapons, radar, sonar, microelectronics) to those developed during the Cold War period and after (e.g., advanced nuclear weapons, intercontinental ballistic missiles (ICBMs), multiple independently targetable reentry vehicles (MIRVs), satellites, stealth fighter and bomber aircraft, nuclear-powered naval vessels, precision targeting, and information- and network-centric systems for intelligence, surveillance, and reconnaissance). Military strategists and analysts anticipate future U.S. defense capabilities are likely to rely heavily on advances in leading-edge technologies such as artificial intelligence, autonomy, nanotechnology, advanced computing and communications, augmented reality, and hypersonics.\nIncreasing Complexity of Technology\nInnovation has become increasingly multidisciplinary. Some of the most promising fields involve the intersection of two or more powerful technologies, such as artificial intelligence and autonomy (e.g., driverless cars, package delivery by drones); high-speed computing, big data, and biotechnology (e.g., personalized medicine, synthetic biology, epidemiology, identifying the relationships between genes and particular diseases); and sensors and the internet (e.g., supply chain management and optimization, health self-monitoring, persistent scientific observation). The marriage of disparate technologies may lead to powerful and unanticipated new technologies with widespread societal implications. \nRole of Science and Technology in Other Aspects of Public Policy\nScience and technology also play key roles in many other aspects of public policy. For example, biomedical R&D contributes to the development of new drugs and treatments for illness, disease, and other medical issues. Advances in science and technology in the biomedical field may contribute to human longevity, healthiness, and quality of life. Consequently, they may have implications for a wide array of federal programs. \nSimilarly, advances in science and technology in a variety of fields may contribute to meeting a wide range of public policy objectives: \nin agriculture, advances could contribute to ensuring national and global food and nutrition needs are met; in transportation, advances may help to save lives and reduce the environmental impacts of automobiles, trucks, trains and other modes of transportation; in energy, advances may help to make energy sources less costly and more abundant, to cost-efficiently tap renewable sources of energy, and to reduce the environmental impacts of its use; advances in understanding weather and climate may help reduce the loss of lives, the cost of property damage, and the time required for recovery; in criminal justice, advances may help to quickly and more accurately identify criminals and to prevent the prosecution of the innocent; and in industrial applications, advances may contribute to economic growth and job creation. \nAt the same time, advances in science and technology can also raise complex societal, ethical, and legal challenges with which legislators grapple. \nAppendix C. OTA\/Technology Assessment-Related Legislation in the 107 th -116 th Congresses\n116 th Congress\nThe House Select Committee on the Modernization of Congress voted out recommendations that included \"reestablishing and restructuring an improved Office of Technology Assessment.\" This specific recommendation was not included in the recommendations included in the Moving Our Democracy and Congressional Operations Towards Modernization Resolution ( H.Res. 756 ) which was passed by the House on March 10, 2020. \nThe Legislative Branch Appropriations Act, 2020 ( H.R. 2779 ) would have provided $6.0 million in initial funding to reestablish the Office of Technology Assessment. The House Committee on Appropriations reported the bill on May 16, 2019, accompanied by H.Rept. 116-64 , which states\nAs requested by a number of Members of Congress, the Committee bill includes $6,000,000 in initial funding to reestablish the Office of Technology Assessment (OTA). This Legislative Branch agency was created in 1972 and operated until funding was discontinued in 1995. \nTo do its job in this modern era, Congress needs to understand and address the issues and risks resulting from a wide range of rapid technological developments such as cryptocurrencies, autonomous vehicles, gene editing, artificial intelligence, and the ever-expanding use of social media platforms, to give just a few examples. A re-opened OTA will play an important role in providing accurate, professional, and unbiased information about technological developments and policy options for addressing the issues those developments raise. In that role, OTA will complement the work of the Government Accountability Office in the area of science and technology. \nP.L. 116-94 , the Further Consolidated Appropriations Act, 2020, which included the Legislative Branch Appropriations Act, 2020, as Division E, was enacted December 20, 2019. The act did not include an appropriation for reestablishing OTA.\nOn September 19, 2019, Representative Mark Takano introduced H.R. 4426 , the Office of Technology Assessment Improvement and Enhancement Act. On the same day, Senator Thom Tillis introduced S. 2509 , a nearly identical bill with the same title. Both bills bill would amend OTA's statute in a variety of ways, including \nrenaming OTA as the Congressional Office of Technology (the office); directing that the work of the office \"be provided as expeditiously, effectively, and efficiently as possible while maintaining a forward-looking, holistic, and rigorous approach to the assessment of the impacts of technology\"; expanding office reporting to Congress from \"completed analysis\" to \"completed analyses, as well as preliminary findings of ongoing analyses\"; adding three additional duties of the office: \"provide information to Members and committees of Congress in the form of briefings, informal conversations, documents, and similar formats which may be provided expeditiously on the basis of existing research and staff expertise without the need for review by the Board; provide technical assistance to Members of Congress on legislation related to science and technology which may be provided expeditiously on the basis of existing research and staff expertise without the need for review by the Board; and, when requested, provide objective policy options to Members on how Members may achieve goals with respect to science and technology policy\"; expanding the list of who may initiate assessment activities to include any Member of Congress, including a Delegate or Resident Commissioner, and providing the office the authority to determine whether to undertake an assessment according to a number of specified criteria; requiring completed analyses be made available to the public, subject to certain restrictions; authorizing the director of the office to make limited term or temporary appointments scientists, engineers, and other technical and professional personnel on leave of absence from academic, industrial, or research institutions to work for the office; requiring the office to coordinate with CRS and GAO to avoid unnecessary duplication or overlapping of research activities; changing the authority for House and Senate appointments to the Technology Assessment Board to be made jointly by leaders of the majority and minority parties in each body; and requiring the TAB to hold at least one meeting each year at which Members of Congress may appear and present information to the TAB about any technology assessment activities the Members would like the TAB to undertake, and requiring an annual report by the TAB to the Subcommittees on the Legislative Branch of the Committees on Appropriations of the House of Representatives and Senate on the activities of the office during the year, including a description of the technology assessment activities undertaken during the year.\nH.R. 4426 was referred to the House Committee on House Administration; no further action had been taken at the time of this report. S. 2509 was referred to the Senate Committee on Rules and Administration; no further action had been taken at the time of this report.\n115 th Congress\nIn September 2018, H.Rept. 115-929 , accompanying the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), provided direction to both CRS and GAO on matters related to providing science and technology policy support and technology assessment to Congress. \nIn the report, Congress directed CRS to engage with the National Academy of Public Administration (NAPA) or another external organization to produce a report that identifies resources available to Congress on science and technology policy; assesses the need for a separate entity to provide nonpartisan advice on issues of science and technology to Congress; determines whether such an organization would duplicate services already available to Members. \nIn H.Rept. 115-929 , Congress also expressed its interest in GAO growing its current capabilities to provide expanded technology assessment capacity by reorganizing its technology and science function by creating a new more prominent office within GAO. Congress directed GAO to provide within 180 days a plan and timetable for how the new office could expand and enhance GAO's capabilities in scientific and technological assessments. \nOther amendments and resolutions introduced in the 115 th Congress also sought to provide funding to reestablish OTA or to affirm the need for its reestablishment:\nRepresentative Mark Takano introduced H.Amdt. 219 to H.R. 3219 , the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, on July 26, 2017. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the Architect of the Capitol's Capital Construction and Operations Account. The amendment was not agreed to. Representative Mark Takano introduced H.Amdt. 761 to H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, to reinstitute OTA, offset by funds from an administrative account within the Architect of the Capitol. The amendment was not agreed to.\nRepresentative Bill Foster introduced H.Res. 849, a resolution \"expressing the sense of the House of Representatives that the Office of Technology Assessment should be reestablished,\" on April 26, 2018, with 21 cosponsors. The resolution would have expressed the sense of the House of Representatives that \"the legislative process would greatly benefit from once again having an office dedicated to giving nonpartisan, technical advice to Congress; the Office of Technology Assessment represents a cost-effective improvement to the governance of the United States; and funding should be restored for the Office of Technology Assessment.\" The resolution was referred to the House Committee on Administration. No further action was taken.\nEarlier Congresses\nIn the 107 th -114 th Congresses, there were a number of efforts to reestablish OTA by authorizing or appropriating funding. Other legislative efforts have sought to express a \"sense of the House\" or \"sense of the Senate\" that OTA should be reestablished. A summary of each of these efforts is provided below, in reverse chronological order: \nIn the 114 th Congress, Representative Mark Takano introduced H.Amdt. 117 to H.R. 5325 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act, on June 10, 2016. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the Architect of the Capitol's Capital Construction and Operations Account. The amendment was not agreed to by the House, by a vote of 179-223.\nIn the 114 th Congress, Representative Bill Foster introduced H.Res. 605, a resolution \"expressing the sense of the House of Representatives that the Office of Technology Assessment should be reestablished,\" on February 4, 2016, with 14 cosponsors. The resolution would have expressed the sense of the House of Representatives that \"the legislative process would greatly benefit from once again having an office dedicated to giving nonpartisan, technical advice to Congress; the Office of Technology Assessment represents a cost-effective improvement to the governance of our country; and funding should be restored to the Office of Technology Assessment.\" The resolution was referred to the House Committee on Administration. No further action was taken.\nIn the 113 th Congress, Representative Rush Holt introduced H.Amdt. 649 to H.R. 4487 , the Legislative Branch Appropriations Act, 2015, on May 1, 2014. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the House Historic Buildings Revitalization Trust Fund. The amendment was not agreed to. In the 112 th Congress, Representative Rush Holt introduced H.Amdt. 711 to H.R. 2551 , the Legislative Branch Appropriations Act, 2012, on July 22, 2011. The amendment would have provided $2.5 million to reinstitute OTA, offset by funds from the House Historic Buildings Revitalization Trust Fund. The amendment was not agreed to. In the 110 th Congress, S. 1602 , the Clean, Reliable, Efficient and Secure Energy Act of 2007, was introduced by Senator Chuck Hagel on June 12, 2007. Title V, Subtitle C of the bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2007, and would have authorized appropriations of $25 million per year for OTA for FY2008 through FY2013. The bill was referred to the Senate Committee on Energy and Natural Resources. No further action was taken. In the 108 th Congress, H.R. 125 , a bill \"to reestablish the Office of Technology Assessment,\" was introduced by Representative Rush Holt on January 7, 2003, with 65 cosponsors. The bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2003, and would have authorized appropriations of $20 million per year for OTA for FY2004 through FY2009. The bill was referred to the House Committee on Science's Subcommittee on Space and Aeronautics. No further action was taken. In the 107 th Congress, H.R. 2148 , a bill \"to reestablish the Office of Technology Assessment,\" was introduced by Representative Rush Holt on June 13, 2001, with 87 cosponsors. The bill would have renamed the Technology Assessment Act of 1972 as the Office of Technology Assessment Reestablishment Act of 2001, and would have authorized appropriations of $20 million per year for OTA for FY2002 through FY2007. The bill was referred to the House Committee on Science's Subcommittee on Space and Aeronautics. No further action was taken.\nA CRS search of Congress.gov identified no legislation seeking to reestablish OTA during either the 105 th Congress or 106 th Congress.\nAppendix D. GAO Technology Assessments\n2019 \/2020\nArtificial Intelligence in Health Care: Benefits and Challenges of Machine Learning in Drug Development , GAO-20-215SP, December 20, 2019. (This product was reissued with revisions on January 31, 2020.)\nIrrigated Agriculture: Technologies, Practices, and Implications for Water Scarcity , GAO-20-128SP, November 12, 2019.\n2018\nCritical Infrastructure Protection: Protecting the Electric Grid from Geomagnetic Disturbances , GAO-19-98, December 19, 2018.\nTechnology Assessment: Artificial Intelligence: Emerging Opportunities, Challenges, and Implications , GAO-18-142SP, March 28, 2018.\nChemical Innovation: Technologies to Make Processes and Products More Sustainable , GAO-18-307, February 8, 2018.\n2017\nMedical Devices: Capabilities and Challenges of Technologies to Enable Rapid D iagnoses of I nfectious D iseases , GAO-17-347, August 14, 2017.\nInternet of Things: Status and Implications of an Increasingly Connected W orld , GAO-17-75, May 15, 2017.\n2016\nTechnology Assessment: Municipal F reshwater S carcity: Using T echnology to I mprove D istribution S ystem E fficiency and T ap N ontraditional W ater S ources , GAO-16-474, April 29, 2016.\n2015\nTechnology Assessment: Water in the Energy Sector: Reducing Freshwater Use in Hydraulic Fracturing and Thermoelectric Power Plant Cooling , GAO-15-545, August 7, 2015.\nTechnology Assessment: Nuclear Reactors: Status and Challenges in Development and Deployment of New Commercial Concepts , GAO-15-652, July 28, 2015.\n2011\nTechnology Assessment: Neutron Detectors: Alternatives to Using Helium-3 , GAO-11-753, September 29, 2011.\nTechnology Assessment: Climate Engineering: Technical Status, Future Directions, and Potential Responses , GAO-11-71, July 28, 2011.\n2010\nTechnology Assessment: Explosives Detection Technologies to Protect Passenger Rail , GAO-10-898, July 28, 2010.\n2005\nTechnology Assessment: Protecting Structures and Improving Communications D uring Wildland Fires , GAO-05-380, April 26, 2005.\n2004\nTechnology Assessment: Cybersecurity for Critical Infrastructure Protection , GAO-04-321, May 28, 2004.\n2002\nTechnology Assessment: Using Biometrics for Border Security , GAO-03-174, November 15, 2002.","output":null}
{"id":"crs_96-708","pid":"crs_96-708_0","input":"\tIntroduction\n\nThis report is a brief summary of House and Senate procedures for reaching agreement on legislation. It discusses the provisions of House Rule XXII and Senate Rule XXVIII as well as other applicable rules, precedents, and practices. The report focuses on the most common and customary procedures. There are many exceptions, complications, and possibilities that are not addressed, and the House and Senate may modify or waive their procedures by unanimous consent or by other means.\n\n\tActing on the Same Bill\n\nThe House and Senate must pass the same bill or joint resolution, and they must reach full and precise agreement on its text before it is submitted to the President for his approval or veto. The same requirements apply to a concurrent resolution and a joint resolution proposing a constitutional amendment, although neither receives presidential action.\nAt some stage of the legislative process, therefore, the House must pass a Senate bill or the Senate must pass a House bill. The simplest way of meeting this requirement is for one house to pass its own bill and send it to the \"other body,\" which then considers and passes it, with or without amendments. Frequently, however, House and Senate committees each develop their own bills on the same subject. In these cases, one house often debates and amends the bill reported by its committee but then amends and passes the corresponding bill that the other chamber has already passed.\nFor example, after the House passes a bill, it frequently takes up a bill on the same subject that it has already received from the Senate. The House then amends the Senate bill by striking out the text passed by the Senate (striking out all after the enacting clause) and replacing it with the text of the House bill it has just passed. The House then passes the amended Senate bill. In this way, the House passes two bills with exactly the same text, but the Senate bill is the one likely to become law because both houses now have passed it, although with different provisions. Much the same thing could happen in the Senate. After considering its own bill, the Senate, by unanimous consent, could take up and pass the House bill after amending it with the text of the Senate-passed bill. Because this action would take unanimous consent in the Senate, however, the Senate might choose instead to begin consideration of the similar House bill. The floor manager could offer as the first amendment to the House bill a full-text substitute consisting of the text of the Senate bill.\nThis process is usually routine, but it can become more complicated. For instance, the Senate may pass one bill on several related matters before the House passes two bills of its own that address the same subjects. After the House passes its two bills, it may take up the one Senate bill and replace the text of that bill with the texts of both of its own bills. In other instances, the House and Senate may confront political and procedural situations that make it convenient for them to include their versions of legislation on one subject as amendments to some third bill on an unrelated subject that serves as a convenient \"vehicle.\" Such arrangements can be necessary because the House and Senate cannot begin the formal process of resolving their policy differences until these differences are embodied as amendments by one house to the version of the same bill as passed by the other.\n\n\tAmendments Between the Houses\n\nAfter one house passes a bill and the other then passes it with amendments, the House and Senate may attempt to resolve the differences between their positions. When confronted with a major bill, the two houses have historically created a conference committee for this purpose. However, a conference may not be necessary if they can reach an agreement through informal negotiations and an exchange of amendments between the houses.\nThe amendments of one house to a bill from the other may be amended twice as the bill is sent (\"messaged\") back and forth between the House and Senate. Suppose, for example, that the Senate passes a House bill with amendments. The House can accept (concur in) the Senate amendments, in which case the differences are resolved. Alternatively, the House can amend the Senate amendments (concur in the Senate amendments with amendments). These House amendments are first degree amendments between the houses. The Senate can then accept (concur in) the House amendments to the Senate amendments, which would produce agreement. Or the Senate can concur in the House amendments to the Senate amendments with further Senate amendments, which are amendments in the second degree.\nAt this stage, the House can concur in the most recent Senate amendments, but it cannot propose new House amendments to them because they would be third degree amendments, which are not permitted. (Of course, exactly the same process can occur in reverse if the House passes a Senate bill with amendments.) In both chambers, the prohibition on third degree amendments between the houses can be waived. The House might do this by special rule, suspension of the rules, or unanimous consent. In the Senate, unanimous consent is necessary to agree to an amendment in the third degree, unless the House has already waived the rule, in which case further degrees of amendment are permitted in the Senate.\nIf the House and Senate adamantly defend their last amendments, they can send the bill back and forth several more times. In the unlikely event that neither house retreats from its last position or is willing to discuss a compromise in conference, the bill ultimately dies. It cannot be shuttled back and forth indefinitely. \nThis process rarely results in stalemate, because the two houses either reach agreement or decide to submit their differences to a conference committee. However, an exchange of amendments sometimes takes the place of a conference. Once the two houses pass their versions of the same bill, the members and staff of the House and Senate committees of jurisdiction often meet informally to compare the two versions and discuss a compromise. If they reach an agreement that other concerned Representatives and Senators also accept, the House can, for example, concur in the Senate amendment with a House amendment that embodies the negotiated agreement. If the Senate then accepts (concurs in) this House amendment, the House and Senate have resolved their differences through the informal equivalent of a conference committee.\n\n\tConsidering Amendments from the Other House\n\nHouse amendments to a Senate bill (or House amendments to Senate amendments to a House bill) are privileged for floor action by the Senate. This means there is no debate on whether to take up the House amendment. Instead, a Senator, most often the majority leader, typically requests that a House amendment be laid before the Senate. Motions to dispose of the House amendments\u2014such as motions to concur or to concur with amendments\u2014are debatable and, therefore, subject to filibusters. It is possible for the majority leader to move that the Senate concur in the House amendment and then propose motions that preempt all other available motions. This is often referred to as \"filling the tree\" on a motion to concur. If the majority leader can garner the necessary support to end debate on the motion to concur (60 Senators, assuming no vacancies), then both further amendment to the House amendment and extended debate can be avoided. The Senate sometimes arranges to consider a House amendment by unanimous consent.\nLike the Senate, the House sometimes acts on Senate amendments by unanimous consent. Until the House officially disagrees to Senate amendments to a House bill (or Senate amendments to House amendments to a Senate bill), these amendments are usually not privileged for consideration on the House floor. No motion is in order to concur in the Senate amendments, with or without amendments. When there is little or no controversy, the House often accepts or amends the Senate amendments by unanimous consent. Otherwise, the House can usually do so only through a motion to suspend the rules or under a special rule recommended by the Rules Committee and adopted by the House. A motion that is privileged at this stage is a motion to disagree to the Senate amendments and go to conference, but this motion must be made at the direction of the committee that originally reported the bill to the House.\nBoth houses cannot consider the same bill at the same time, because the House or Senate can act only if it has the \"papers.\" The papers are comprised of the official copy of the bill as passed by the house in which it originated, the official copies of amendments by either house, and the messages by which each house informs the other of the actions it has taken. After one house acts on a bill or amendments from the other, it returns all the papers with an accompanying message describing its action. Thus, the House and Senate always act in sequence as custody of the papers changes hands.\n\n\tGoing to Conference\n\nBefore a conference committee is created to resolve disagreements between the two houses, the House and Senate must each state disagreement over a bill, either by disagreeing to the amendments of the \"other body\" or by insisting on its own amendments. So long as one house concurs in the amendments of the other and proposes its own amendments, there is no formal disagreement. But at any point during an exchange of amendments between the House and Senate, either house can propose that they can go to conference instead.\nThe two houses usually decide in one of two ways to establish a conference committee. When the Senate passes a House bill with amendments, for example, it can immediately insist on its amendments and request a conference with the House. The House almost always agrees to the conference, although it need not do so\u2014for example, it could simply agree to the Senate amendments instead. At other times, however, when the Senate passes a House bill with amendments, it may merely send back the bill and the amendments in the hope that the House will accept the Senate's amendments, making a conference unnecessary. If the House does not accept the amendments, it can disagree to them and request a conference. The Senate normally then insists on its amendments and agrees to the conference, after which it informs the House and returns the papers. Of course, the equivalent of either sequence of events may occur after the House passes a Senate bill with amendments.\nBoth chambers sometimes agree by unanimous consent to the necessary procedural steps to send a measure to conference. In the House, if there is an objection to the unanimous consent request, then a privileged motion can be made, at the direction of the committee(s) of jurisdiction, to disagree to the Senate amendment (or insist on the House amendment) and request (or agree to) a conference with the Senate.\nIf unanimous consent cannot be reached in the Senate, then a motion can be made to authorize a conference committee, which is subject to debate under regular Senate rules. If a cloture motion to end debate is filed on this motion, however, it matures after just two hours of debate. If three-fifths of the Senate agrees to invoke cloture, then the Senate could immediately vote to approve the motion to authorize a conference. No further debate of the motion would be in order.\n\n\tAppointing and Instructing Conferees\n\nEach house usually appoints its conferees (also known as managers) immediately after deciding to go to conference. The Speaker appoints House conferees. The Senate frequently decides, by unanimous consent, to authorize the presiding officer to appoint \"the managers on the part of the Senate.\" The Senate could also empower the presiding officer to appoint conferees, or appoint conferees directly, through the motion to authorize a conference, discussed above. The chairman and ranking minority member of the committee or subcommittee that reported the bill are almost always conferees. They also play a major part in deciding who else is appointed. The committee or subcommittee leaders usually prepare a list of conferees from their chambers that the Speaker normally accepts and the presiding officer of the Senate always accepts. The party leaders may also become involved in selecting conferees, especially if the bill is particularly important, if it was reported by two or more committees, or if amendments to the bill from the other house touch the jurisdiction of more than one committee.\nMost conferees are members of the committee that reported the bill. In the case of a bill that involves the jurisdiction of more than one committee, members of each committee are often appointed as conferees with authority only to negotiate an agreement with respect to the subjects or provisions of the bill that fall within the jurisdiction of their committees. Thus, some members may be designated as conferees for purposes of the entire bill while others are appointed only to address a specific section or title. Representatives may also be appointed as conferees for limited purposes when the Senate proposes a nongermane amendment that is within the jurisdiction of another House committee. In addition, the Speaker may appoint other Representatives who, for example, offered important floor amendments. The list of conferees generally reflects the party balance in each house.\nThe House and Senate do not have to appoint the same number of managers, and they frequently do not. House conferees vote as a delegation, as do Senate conferees, and a majority of each delegation must sign the conference report. Thus, three Representatives have the same voting power in conference as 30 Senators. Each house is likely to appoint a larger number of conferees when the bill involves the jurisdiction of more than one of its standing committees. \nA Representative or Senator may move to instruct the conferees from his or her chamber immediately after that house agrees to go to conference but just before the conferees are appointed. For example, the House can instruct its managers to insist on the House position on a particular amendment, or the Senate can instruct its managers to recede to the House position on another amendment. However, instructions to conferees are never binding; no point of order lies against a conference report that is inconsistent with House or Senate instructions to its conferees. The House can also instruct its conferees if they do not report within 45 calendar days and 25 legislative days after being appointed (or 36 hours after being appointed during the last six days of a session).\n\n\tConference Rules and Reports\n\nConference committee meetings are open to the public unless the conferees vote to close them, and the House must vote to authorize its conferees to do so. Both chambers also have guidelines concerning conference meetings, generally encouraging frequent meetings with open discussions, but these guidelines are often waived or in some cases are not procedurally enforceable. \nBeyond these guidelines, there are virtually no House or Senate rules governing conference meetings. Conferees select their own chairman and usually work without formal rules on quorums, proxies, debate, amendments, and other procedural matters. Conferences are negotiating forums, and the two chambers allow conferees to decide for themselves how best to conduct their negotiations. It is most common that a conference committee holds a single public meeting, sometimes for members to offer opening statements only.\nHowever, the House and Senate have important, and roughly the same, rules governing what decisions conferees can make. Conference committees are established to resolve disagreements between the House and Senate over their versions of the same bill. Therefore, the authority of conferees is limited to matters in disagreement. As a general rule, they may not change a provision on which both houses agree, nor may they add anything that is not in one version or the other. Furthermore, conferees are to reach agreements within the \"scope\" of the differences between the House and Senate positions. For example, if the House appropriates $10 million for some purpose and the Senate amends the bill by increasing the appropriation to $20 million, the conferees exceed their authority if they agree on a number that is less than $10 million or more than $20 million.\nIt is much harder to determine the scope of the differences when they are qualitative, not quantitative. Also, conferees have more latitude under some circumstances than under others. Under a previous practice, when one house would pass a bill and the other would then pass it with a series of separate amendments\u2014each making a change in a different provision of the bill\u2014these amendments were usually numbered, and it was relatively easy for the conferees to determine the scope of the differences over each amendment. This is generally not true, however, under modern practice when the Senate passes a House bill (or the House passes a Senate bill) with an amendment in the nature of a substitute that totally replaces the text of the bill. In this situation, which arises nearly all of the time, there is only one amendment in conference\u2014for example, a Senate substitute for the House version of a bill. The two versions of the bill can take very different approaches to the same subject, making it difficult for the conferees to isolate every point of agreement and disagreement and to identify the scope of each disagreement. Under these circumstances, the conferees may write their own conference substitute, so long as it is a germane modification of the House and Senate versions.\nIf a conference agreement exceeds the scope of the differences or deals with a matter that is not in disagreement, the conference report is subject to a point of order when the House or Senate considers it. The House, however, typically protects a conference report against points of order by adopting a resolution reported by the Rules Committee waiving the applicable rules. The Senate, meanwhile, interprets the authority of its conferees generously, especially when they develop a conference substitute. Furthermore, the Senate can waive its rule with a three-fifths vote of Senators duly chosen and sworn (60 Senators if there are no vacancies).\nThe authority of Senate conferees is further limited by Senate Rule XLIV, paragraph 8. Under this rule, a Senator can raise a point of order against discretionary and mandatory spending provisions of a conference report if they constitute \"new directed spending provisions,\" or what are sometimes called \"air drops.\" Paragraph 8 defines a \"new directed spending provision\" as follows:\nany item that consists of a specific provision containing a specific level of funding for any specific account, specific program, specific project, or specific activity, when no specific funding was provided for such specific account, specific program, specific project, or specific activity in the measure originally committed to the conferees by either House.\nThe Senate can waive these restrictions on the content of conference reports by a three-fifths vote of Senators duly chosen and sworn (60 Senators assuming no vacancies).\nWhen the conferees reach full agreement, their staffs prepare a conference report that states how they propose to resolve each of the disagreements. Accompanying the report itself is a joint explanatory statement (also known as the statement of managers), which describes the various House and Senate positions and the conferees' recommendations in more detail. A majority of the House managers and a majority of the Senate managers must sign both the conference report and the joint explanatory statement. House rules require that House conferees be given an opportunity to sign the conference agreement at a set time and place. At least one copy of the final conference agreement must be made available for review by House managers with the signature sheets. Each chamber then debates and votes on the conference report in turn.\n\n\tFloor Action on Conference Reports\n\nAt the conclusion of a successful conference, the papers usually change hands. The conferees from the house that requested the conference bring the papers into conference and then turn them over to the conferees from the other house. Thus, the house that agreed to the conference normally acts first on the conference report. However, this is a practice that is not required by House or Senate rules.\nThe Senate usually takes up a conference report by unanimous consent, although a Senator can make a nondebatable motion to consider it. The report may be called up at any time after it is filed, but it is not in order to vote on the adoption of a conference report unless it has been available to Members and the general public for at least 48 hours before the vote. (This requirement can be waived by three-fifths of Senators duly chosen and sworn or by joint agreement of the majority and minority leaders in the case of a significant disruption to Senate facilities or to the availability of the internet.) Under Senate rules, a report is considered to be available to the general public if it is posted on a congressional website or on a website controlled by the Library of Congress or the Government Publishing Office.\nWhen considered on the Senate floor, a conference report is debatable under normal Senate procedures; it is subject to extended debate unless the time for debate is limited by unanimous consent or cloture or if the Senate is considering the report under expedited procedures established by law (such as the procedures for considering budget resolutions and budget reconciliation measures under the Budget Act). Paragraph 8 of Senate Rule XXVIII states that, if time for debating a conference report is limited (presumably by unanimous consent), that time shall be equally divided between the majority and minority parties, not necessarily between proponents and opponents of the report.\nA point of order may be made against a conference report at any time that it is pending on the Senate floor (or after all time for debate has expired or has been yielded back if the report is considered under a time agreement). If a point of order is sustained against a conference report on the grounds that conferees exceeded their authority, either by violating the \"scope\" rule (Rule XXVIII) or the prohibition against \"new directed spending provisions\" (paragraph 8 of Rule XLIV), then there is a special procedure to strike out the offending portion(s) of the conference recommendation and continue consideration of the rest of the proposed compromise.\nUnder the procedure, a Senator can make a point of order against one or more provisions of a conference report. If the point of order is not waived (see below), the presiding officer rules whether or not the provision is in violation of the rule. If a point of order is raised against more than one provision, the presiding officer may make separate decisions regarding each provision. After all points of order raised under this procedure are disposed of, the Senate proceeds to consider a motion to send to the House, in place of the original conference agreement, a proposal consisting of the text of the conference agreement minus the provisions that were ruled out of order and stricken. Amendments to this motion are not in order, and debate is limited only if it had been limited on the conference report. In short, the terms for consideration of the motion to send to the House the proposal without the offending provisions are the same as those that would have applied to the conference report itself.\nIf the Senate agrees to the motion, the altered conference recommendation is returned to the House in the form of an amendment between the houses. The House then has an opportunity to act on the amendment under the regular House procedures for considering Senate amendments discussed in earlier sections of this report.\nSenate rules also create a mechanism for waiving these restrictions on conference reports. Senators can move to waive points of order against one or several provisions, or they can make one motion to waive all possible points of order under either Rule XXVIII or Rule XLIV, paragraph 8. If the motion to waive garners the necessary support, the Senate is effectively agreeing to keep the matter that is potentially in violation of the rule in the conference report. \nIn the House, the conference report cannot be considered unless it has been available in the Congressional Record or on the House document repository website for 72 hours. Copies of the report and the statement must also be available to Representatives for at least two hours before they consider it. These availability requirements are sometimes waived by a rule reported by the Rules Committee, and they do not apply during the last six days of a session. Typically, the House calls up a conference report under the terms of a special rule that protects the report against one or more points of order if the Rules Committee reports and the House adopts a resolution waiving the applicable rules.\nThe House debates a conference report under the one-hour rule, with control of the hour equally divided between the two parties. However, if both floor managers support the report, a Representative opposed to it may claim one-third of the time for debate. At the end of the first hour, the House normally votes to order the previous question, which precludes additional debate. If Representatives could make points of order against a report, sometimes the House first considers and agrees to a resolution, recommended by its Rules Committee, that protects the report by waiving the points of order.\nConference reports are not amendable. Each report is a compromise proposal for resolving a series of disagreements; the House prevails on some questions, the Senate on others. If the House and Senate were free to amend the report, they might never reach agreement. At the end of debate, therefore, each house votes on whether to agree to the report as a whole. However, the house that considers the report first also has the option of recommitting it to conference. But when one chamber acts on the report, it automatically discharges its conferees. As a result, the other house cannot vote to recommit, because the conference committee has been disbanded.\nIf the House and Senate agree to the conference report, the bill is enrolled (printed on parchment in its final form) and presented to the President for his approval or disapproval.\n\n\tAdditional Resources\n\nThe report is based upon the original author's interpretation of the rules and published precedents of the two houses and an analysis of the application of these rules and precedents in recent practice (see \"Acknowledgements\"). Readers may wish to study the provisions of House and Senate rules and examine the applicable precedents\u2014especially in the sections on \"Senate Bills,\" \"Amendments Between the Houses,\" and \"Conferences Between the Houses\"\u2014in House Practice: A Guide to the Rules, Precedents and Procedures of the House and the corresponding sections on \"Amendments Between Houses\" and \"Conferences and Conference Reports\" in Riddick's Senate Procedure (Senate Document No. 101-28). There is also more detailed information on this subject in CRS Report 98-696, Resolving Legislative Differences in Congress: Conference Committees and Amendments Between the Houses , and CRS Report R41003, Amendments Between the Houses: Procedural Options and Effects .","output":null}
{"id":"gao_GAO-19-711T","pid":"gao_GAO-19-711T_0","input":"\tBackground\n\nThe Coast Guard owns or leases more than 20,000 facilities consisting of  various types of buildings and structures. The Coast Guard\u2019s shore  infrastructure is organized into five product lines and 13 asset types,  known as asset lines. For example, within its shore operations asset line,  the Coast Guard maintains over 200 stations along U.S. coasts and  inland waterways to carry out its search and rescue operations, as well as  other missions such as maritime security.\nMuch of the Coast Guard\u2019s infrastructure is vulnerable to the effects of  extreme weather and can be costly to repair or replace after major  storms. From December 2005 through June 2019, the Coast Guard  received about $2 billion in supplemental appropriation funds to, among  other things, rebuild or relocate 15 facilities damaged by hurricanes.  During this time, the Coast Guard relocated facilities further inland or to  higher ground, upgraded facilities to be more resilient, and designed new  facilities with features to protect them from natural disasters. For  example, after being damaged by Hurricane Ike in 2008, the Coast Guard  relocated a regional facility in Houston, Texas further inland to help  protect the new facility from extreme weather. The facility was also  designed to withstand wind speeds of up to 115 miles per hour. In  February 2017, the Coast Guard\u2019s Civil Engineering program also issued  guidance intended to increase the likelihood that new or recapitalized  buildings would be designed to withstand natural disasters, and to enable  the Coast Guard to better manage risks to its operations and personnel,  among other things.\n\n\tAlmost 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\n\nWe found in February 2019 that the condition of the Coast Guard\u2019s shore  infrastructure was deteriorating and almost half of it was past its service  life\u2014resulting in (1) recapitalization and new construction and (2)  deferred maintenance backlogs of at least $2.6 billion as of 2018. In  2018, the Coast Guard graded its overall shore infrastructure condition  as a C minus based on criteria it derived from standards developed by  the American Society of Civil Engineers. Table 1 shows information about  the number of assets, replacement value, service life of, and condition  grades assigned by the Coast Guard for each of its asset lines for fiscal  year 2018.\nThe aging and deteriorating condition of the Coast Guard\u2019s shore  infrastructure has led to at least $2.6 billion in deferred construction  projects and maintenance backlogs. With almost half of its infrastructure  past its service life, and given recent Coast Guard funding requests for its  shore infrastructure, it will take many years for the agency to address  these backlogs. For example, in 2018 the Coast Guard estimated that it  would take almost 400 years to address just the $1.774 billion  recapitalization and new construction backlog\u2014assuming an overall 65- year service life and that funding would continue at the fiscal year 2017  appropriations level. This time frame estimate excludes the Coast  Guard\u2019s $900 million deferred depot-level maintenance backlog. Table 2  provides information on the Coast Guard\u2019s two shore infrastructure  backlogs as of August 2018.\nNevertheless, the size and estimated costs of the Coast Guard\u2019s backlogs  may be understated. We found in February 2019 that the Coast Guard\u2019s  estimated costs did not include hundreds\u2014or the majority\u2014of the  projects on the recapitalization and new construction backlog. For  example, we reported that there were 205 projects on the backlog without  cost estimates. Officials explained that they had not prepared cost  estimates for these projects because they were in the preliminary stages  of development.\n\n\tCoast Guard Has Taken Initial Steps toward Improving Its Management of Its Shore Infrastructure\n\nOur previous reports have identified various steps the Coast Guard has  taken to begin to improve how it manages its shore infrastructure. Some  of the steps the Coast Guard has taken align with leading practices for  managing public sector backlogs and key practices for managing risks to  critical infrastructure, including identifying risks posed by the lack of timely  investment, identifying mission-critical facilities, disposing of unneeded  assets, and beginning an assessment of shore infrastructure  vulnerabilities. Specifically, the Coast Guard has:  Identified risks posed by lack of timely investment. In February  2019, we found that the Coast Guard had a process to identify,  document, and report risks to its shore infrastructure in its annual  shore infrastructure reports for fiscal years 2015 through 2018.  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. The Coast Guard met this leading practice  to identify risk in general terms\u2014for example, in terms of increased  lifecycle costs, or risk to operations.\nIdentified mission-critical and mission-supportive shore  infrastructure. In February 2019, we found that since at least 2012,  the Coast Guard had 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 depot level maintenance  expenditure decisions. These tiers\u2014which range from mission- critical to mission-supportive assets\u2014were incorporated into 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, Coast Guard 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.\nAssessed selected buildings for vulnerabilities. We issued a  report today that discusses the Coast Guard Civil Engineering  program\u2019s efforts to conduct a vulnerability assessment of its owned  and occupied buildings, which the Coast Guard initiated in 2015 and  aims to complete in 2025. The Coast Guard calls this infrastructure  review the Shore Infrastructure Vulnerability Assessment. The focus  of Phase I of this assessment, completed in 2019, was to determine  the vulnerability of certain occupied buildings to 10 natural disasters.  Further, the assessment results are intended to assist with  contingency planning by identifying which Coast Guard facilities are  likely to remain operational after a natural disaster.\nDuring Phase I of this assessment, completed in 2019, the Coast  Guard analyzed 3,214 buildings, almost 16 percent of its  infrastructure, for vulnerabilities to disasters such as floods,  earthquakes, and hurricanes. The analysis identified Coast Guard- wide infrastructure vulnerabilities to coastal risks such as shoreline  loss, coastal erosion and earthquakes, as well as tsunami risks on the  West Coast of the United States, Alaska, Guam, and Hawaii, and  immediate and serious flood risks in Puerto Rico and the Gulf and  East Coasts. The Phase I report recommended that Coast Guard  units and contingency planners consider these vulnerabilities when  preparing contingency plans or making capital investments. The  Coast Guard has also initiated a follow up effort involving structural  analyses for buildings it believes to be more susceptible to damage  from earthquakes and wind. Officials involved said their aim is to  complete this effort in 2025.\n\n\tCoast Guard Has Not Fully Applied Leading Practices and Key Risk Management Steps in Managing its Shore Infrastructure\n\nThe Coast Guard has taken actions to begin to improve its shore  infrastructure management. However, as we previously reported, the  Coast Guard has not fully applied leading practices and key risk  management steps to improve its shore infrastructure management.  Specifically, we found, among other things, that the following actions  could help improve the Coast Guard\u2019s shore infrastructure management  efforts:\nEmploy models for predicting the outcome of investments and  analyzing tradeoffs. In February 2019, we found that a 2017 Coast  Guard Aviation Pavement Study employed a model that found that the  Coast Guard could more efficiently prioritize investment in aviation  pavement. A subsequent Coast Guard aviation pavement plan  recommended actions to use the study results and potentially save  $13.8 million. However, we found that the Coast Guard had not fully  implemented its own recommended actions to achieve the cost  savings.\nAdditionally, we found that while a similar analytical approach to  efficiently prioritizing investments in aviation pavement could be  applied to all of the shore infrastructure asset lines, the Coast Guard  had not applied the approach to other asset lines. By not employing  similar models across its asset lines for predicting the outcome of  investments, analyzing tradeoffs, and optimizing decisions among  competing investments, the Coast Guard is missing opportunities to  potentially identify and achieve cost savings across other asset lines.  We recommended that the Coast Guard employ models for its asset  lines that would predict the investment outcomes, analyze tradeoffs,  and optimize decisions among competing investments. The Coast  Guard agreed with our recommendation but as of August 2019 had  not addressed it. The Coast Guard stated that it 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. We will continue to monitor its actions.\nDispose of unneeded assets. In October 2017, we found that  disposing of unneeded assets, such as closing unnecessarily  duplicative boat stations, based on a sound analytical process,  could potentially generate $290 million in cost savings over 20  years. Specifically, the Coast Guard identified 18 unnecessarily  duplicative boat stations with overlapping coverage that could be  permanently closed without negatively affecting the Coast Guard\u2019s  ability to meet its mission requirements, including its 2-hour search  and rescue response standard. In 2017, the Coast Guard affirmed  that its leadership believes the study remains valid, but as of  September 2019 it has not closed any stations. Figure 1 depicts the  extent of the Coast Guard\u2019s overlapping boat and air station search  and rescue coverage, as identified by the Coast Guard, some of  which the Coast Guard determined to be unnecessarily duplicative.\nIn February 2019, we found that 5 of the 18 boat stations  recommended for closure had projects listed on the Coast Guard\u2019s  current project 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 such stations but was unable to  due to congressional intervention, and subsequent legislation  prohibiting closures.\nIn October 2017, we recommended that the Coast Guard establish  and implement 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. In February 2019,  we further recommended disposing of unneeded assets to more  efficiently manage resources and better position the Coast Guard and  Congress to address shore infrastructure challenges. The Coast  Guard agreed with our recommendations. As of September 2019, the  Coast Guard reported that it was considering changes in the  operational status of several stations, such as closing the stations  during the winter months when they conduct few, if any, search and  rescue cases. The Coast Guard estimated that it will continue to  consider changes until March 2020. These are positive steps, but we  continue to believe that it is important for the Coast Guard to dispose  of unneeded assets. Given the Coast Guard\u2019s competing acquisition,  operational, and maintenance needs, and its existing $1.774 billion  project backlog of recapitalization and new construction projects,  these actions may help to mitigate some of its resource challenges.  We will continue to monitor the Coast Guard\u2019s efforts to implement  these recommendations.\nReport shore infrastructure project backlogs accurately. In  February 2019, we found areas in which the Coast Guard could  increase budget transparency for shore infrastructure by accurately  reporting project backlogs and costs in Congressionally-required  plans. Specifically, we found that the Coast Guard had not provided  accurate information to Congress necessary to inform decision- makers of the risks posed by untimely investments in maintenance  and repair backlogs. For example, the Coast Guard had not  provided complete information to Congress in its Unfunded Priorities  Lists of shore infrastructure projects, including information about  tradeoffs among competing project alternatives, as well as the  impacts on missions conducted from shore facilities in disrepair. We  also found that Coast Guard budget requests related to shore  infrastructure for fiscal years 2012 through 2019 generally did not  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.\nWe also found that the Coast Guard had not provided accurate  information about its requirements-based budget targets for shore  infrastructure in its budget requests. According to Coast Guard  officials, a requirements-based budget is an estimate of the cost to  operate and sustain its shore infrastructure portfolio of assets over the  lifecycle of the asset, from initial construction or capital investment  through divestiture or demolition. Further, we found that Coast  Guard recapitalization targets showed a far greater need than was  reflected in the appropriations it requested from fiscal years 2012  through 2019. Specifically, Coast Guard targets for recapitalization of  shore assets indicated the Coast Guard needs $290 to $390 million  annually for its recapitalization efforts. However, its budget requests  for fiscal years 2012 through 2018 have ranged from about $5 million  to about $99 million annually.\nWe recommended that the Coast Guard include supporting details  about competing project alternatives and report tradeoffs in  Congressional budget requests and related reports. Without such  information about the Coast Guard\u2019s budgetary requirements, the  Congress will lack critical information that could help to prioritize  funding to address the Coast Guard\u2019s shore infrastructure backlogs.  While the Coast Guard agreed with our recommendation, in August  2019 officials reported that they will continue to develop budgets as  the agency has done but will include additional information in future  required reports to Congress. We will continue to monitor these  actions.\nFully implement DHS\u2019s Critical Infrastructure Risk Management  Framework. In September 2019, we found that the Coast Guard has  taken some steps to improve the resilience of its shore infrastructure  by rebuilding storm-damaged facilities and initiating a vulnerability  assessment, but its processes to improve shore infrastructure  resilience are not fully aligned with the five steps DHS has identified  for critical infrastructure risk management (DHS Critical Infrastructure  Risk Management Framework). The five steps include: (1) setting  goals and objectives, (2) identifying critical infrastructure, (3)  assessing and analyzing risks and costs, (4) implementing risk  management activities, and (5) measuring the effectiveness of actions  taken.\nWe found that the Coast Guard is not positioned to provide decision  makers with complete details of which infrastructure facilities are  critical, and the type of information the DHS Critical Infrastructure Risk  Management Framework recommends for making cost effective risk  management decisions. The Coast Guard identified occupied  buildings that may be important to operations and assessed their  vulnerability through its Shore Infrastructure Vulnerability Assessment  process, but this process did not identify all shore infrastructure  assets that are critical to its missions\u2014such as aircraft runways\u2014or  screen them for all vulnerabilities, such as flooding. Similarly, we  found that while the Coast Guard identified almost 800 buildings that  may be vulnerable to tornadoes and another 1,000 buildings  vulnerable to hurricanes, it has not analyzed the potential  consequences, such as economic losses, costs for rebuilding, and  impact on mission, should this infrastructure suffer damage from  those vulnerabilities.\nWithout a complete understanding of both the vulnerabilities of its  infrastructure and the consequences to its mission operations if its  infrastructure is damaged, the Coast Guard risks questionable  recapitalization investments for improving resilience when selecting  projects to fund. Such an understanding is especially important given  its existing project backlogs of at least $2.6 billion. The five steps of  the DHS Critical Infrastructure Risk Management Framework are  intended to guide decision making and prioritize actions to more  effectively achieve desired outcomes. Therefore, in September 2019  we recommended that the Coast Guard implement risk management  processes that more fully align with the five key steps outlined in  DHS\u2019s Critical Infrastructure Risk Management Framework to better  guide its shore infrastructure investment decisions. The Coast Guard  agreed with our recommendation. It stated that it plans to make  progress towards implementing the recommendation while developing  and implementing its Component Resilience Plan, in accordance with  the recently mandated DHS Resilience Framework. It intends to  complete these efforts by the end of 2021. The Coast Guard also  intends to develop, by July 2020, goals and objectives for measuring  the effectiveness of actions taken to identify resilience readiness gaps  and resource needs. We will continue to monitor these efforts.\nChairman Maloney, Ranking Member Gibbs, and Members of the  Subcommittee, this completes my prepared statement. I would be happy  to respond to any questions you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff members have any questions about this testimony,  please contact me 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. In addition to the contact  above, Dawn Hoff, Assistant Director; Andrew Curry, Analyst-in-Charge;  Peter Haderlein; Landis Lindsey; Calaera Powroznik, and Molly Ryan  made key contributions to this testimony. Other staff who made key  contributions to the reports cited in the testimony are identified in the  source products.\nThis 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.","output":null}
{"id":"gao_GAO-20-421T","pid":"gao_GAO-20-421T_0","input":"\tBackground\n\n\t\tAviation Maintenance Workforce\n\nDifferent aviation industry employers have distinct workforce needs and  may require workers with specific skillsets depending on the type of work  performed. The workforce includes FAA-certificated mechanics and  repairmen, as well as non-certificated workers.\nFAA-certificated mechanics inspect, service, and repair aircraft  bodies (airframe) and engines (powerplant), and only they can  approve an aircraft for return to service. It can take between 1 and 3  years to obtain the required education or training to become  certificated.\nFAA-certificated repairmen service aircraft components and must  be recommended for certification by their employer to perform specific  tasks such as welding or painting. It can take more than a year to  obtain the required experience or training to become certificated. A  repairman certificate is only valid at the employer for which it was  issued.\nNon-certificated aviation maintenance workers include individuals  who are supervised by certificated mechanics or repairmen in  performing repair work.\n\n\tFederal Data Reveal Some Demographic and Employment Information on Certificated Mechanics and Repairmen\n\nExisting federal data shed light on key workforce characteristics such as  the number of FAA-certificated mechanics and repairmen, their age, sex,  and education. Specifically:\nAs of December 2018, about 295,000 individuals held a mechanic  certificate and about 35,000 held a repairmen certificate.\nThe median age of FAA-certificated mechanics and repairmen was 54  years old, according to our analysis of FAA data.\nThree percent of all aviation maintenance certificate holders were  women as of December 2018.\nAttending AMT school was the most common pathway certificated  individuals used to qualify for the FAA tests to become mechanics.\nExisting federal data also provide some information on employment  characteristics such as the supply of certificated workers. Specifically,  FAA certificated about 8,600 mechanics and repairmen on average each  year for 2014 through 2018 (see fig. 1). BLS data project an annual  average of 11,800 job openings in the United States from 2018-2028 for  aircraft mechanics and service technicians due to growth and replacement, which include job openings for certificated and non- certificated workers.\nThere are, however, certain limitations to existing federal data. For  example, neither FAA nor BLS collects data on the race or ethnicity of  certificated individuals. In addition, FAA officials said the number of  certificated individuals likely overestimates the number of them working in  the aviation industry. It is unknown how many of the approximately  330,000 certificate holders are retired, deceased, or working in other  industries. Furthermore, BLS data indicate 136,900 individuals were  employed in the aircraft mechanics and service technicians occupation in  2018, but it is not clear how many of those jobs were filled by FAA- certificated workers.\nThere are also limitations to determining employment characteristics such  as pay for certificated workers, specifically. BLS publishes some data on  pay for aircraft mechanics and service technicians, such as average  hourly and annual wages. However, the occupational classification  system BLS and other federal statistical agencies use for aircraft  mechanics and service technicians does not distinguish between FAA- certificated and non-certificated workers, making it difficult to determine  employment characteristics such as pay for certificated workers,  specifically. This is in part because workers are classified by the work  they perform and not necessarily by certification or education, according  to occupational classification system principles. BLS officials said they  collected wage and employment data for certificated workers separate  from non-certificated workers in employer surveys conducted between  2000 and 2012, but stopped collecting these data in part because  employers inconsistently reported them.\nEmployers we interviewed, including air carriers and repair stations, had  differing perspectives on potential growth in demand for aviation  maintenance workers; some said they were experiencing difficulty finding  enough workers to meet their needs, while others said they were not  experiencing difficulty. Employers we interviewed for our 2014 report also  expressed varying levels of difficulty filling vacancies and recruiting  individuals for certain aviation professions, including aviation  maintenance workers. Small and medium-sized employers in particular  cited some challenges to hiring due to the wage they offered. Some  stakeholders we interviewed for our recent report voiced concerns about  the potential for a labor shortage. In addition to these views, two of the  three selected labor market indicators (unemployment rate and wage  earnings) we reviewed from 2013 through 2018 were consistent with  difficulties in hiring aircraft mechanics and service technicians, while the  other indicator (employment) was not.\n\n\tGovernment and Industry Programs Support the Workforce, but FAA Lacks Information That Could Advance Its Workforce Development Efforts\n\nSeveral federal agencies such as DOD, DOL, VA, Education, and the  Department of Transportation administer grants or programs that support  individuals pursuing aviation maintenance careers or facilitate  coordination among different stakeholders to support them. For example:\nDOD\u2019s Military Services\u2019 Credentialing Opportunities On-Line  (COOL) program. This program provides funding for service  members to obtain professional credentials related to their military  training and helps them translate their military experience into civilian  occupations.\nDOL\u2019s Registered Apprenticeship Program. DOL awards grants to  support Registered Apprenticeship Programs\u2014 employer-driven  training opportunities that combine on-the-job learning with related  classroom instruction. The program facilitates coordination among  different stakeholders such as industry, states, and educational  institutions to support apprenticeships and employment opportunities.\nIn addition, FAA established an Aviation Workforce Steering Committee in  February 2019, in part to coordinate efforts across FAA to address  various workforce related provisions included in the FAA Reauthorization  Act of 2018. Additional examples of federal grants or programs that  support this workforce can be found in our report. The report also  includes examples of states, industry employers, and AMT schools  coordinating or partnering to support the workforce including developing  career grants and military pathway programs.\nDespite some of FAA\u2019s recent efforts in support of this workforce, we  found that FAA does not routinely analyze, collect, or coordinate with  other stakeholders on certain data related to workforce development.\nFAA\u2019s strategic plan includes an objective on promoting the development  of a robust aviation workforce, and its Aviation Workforce Steering  Committee charter emphasizes providing diverse populations, including  youth, women, and minorities, with clear pathways into aviation careers to  expand the talent pool from which both government and industry may  recruit. However, neither the strategic plan nor the steering committee  charter provides specific information on how FAA plans to select and  measure any efforts it undertakes related to these objectives. Without  routinely analyzing its own data or leveraging others\u2019 data, FAA may not  have certain information it needs to track or ensure progress toward its  workforce development goals.\nWe identified several areas in which improved data analysis, collection, or  coordination could assist FAA in measuring progress and understanding  how to target its resources in support of its workforce related objectives.  For example, FAA could use the demographic or pathway data it already  collects to identify patterns or relationships (such as the trend in female  certificate holders by pathway), which could be useful information as FAA  aims to increase opportunities for women to pursue aviation maintenance  careers. FAA could also use existing AMT school data (such as  enrollment or mechanic test pass-rate data) to analyze nationwide trends  or aggregate information across AMT schools to better understand the  AMT school pathway as a whole.\nIn our 2020 report that issued last week, we recommended that the  Aviation Workforce Steering Committee, as part of its ongoing efforts,  take steps to use existing FAA data and coordinate with other federal  agencies to identify and gather the information it needs to measure  progress and target resources toward its goal of promoting a robust,  qualified, and diverse aviation maintenance workforce. FAA agreed with  our recommendation.\n\n\tRevisions to FAA\u2019s Decades-Old Mechanic Curriculum Requirements and Its Mechanic Testing Standards Are Ongoing\n\nEven as FAA\u2019s strategic plan states the agency\u2019s focus on promoting the  development of a skilled aviation maintenance workforce to integrate new  technologies, the agency has acknowledged that the current curriculum  requirements for AMT schools and mechanic testing standards are  outdated. FAA officials, employers, and AMT School officials we  interviewed said the current curriculum requirements do not emphasize  commonly used modern aircraft technologies, such as avionics and  composite materials. Over the years, FAA has attempted several times to  revise curriculum requirements for AMT schools through the rulemaking  process, and efforts to revise these requirements are ongoing through  this process. FAA is also currently updating the testing standards for  mechanics.\nFAA officials have noted several challenges to updating the curriculum  requirements including competing demands at the department level and  the extent of comments FAA has received from stakeholders in response  to proposed changes. In October 2015, FAA published a notice of  proposed rulemaking (NPRM) with the stated goal of updating the existing  AMT school curriculum. FAA issued a supplemental NPRM in April 2019  that expanded the scope of the NPRM it issued in October 2015.  Comments on the supplemental NPRM were due in June 2019. As of  October 2019, FAA officials said they were in the process of reviewing the  comments. FAA officials told us that a final rule will be published some  time toward the end of 2020.\nIn a separate effort outside of the rulemaking process, FAA is currently  updating the testing standards for mechanics. FAA has acknowledged  that current mechanic testing standards are also outdated. As a result,  aviation stakeholders have stated the mechanic tests include outdated or  irrelevant questions. For example, the practical test may include projects  on wood airframes and fabric coverings, which are not common to  modern commercial aircraft.\nAn FAA official noted that any delay in finalizing the rule would likely  result in a corresponding delay to finalizing the testing standards.  Delaying the release of the updated mechanic testing standards could  result in the prolonged use of outdated or irrelevant questions on the  mechanic tests. FAA officials said that once finalized and implemented,  the updated curriculum requirements for AMT schools and the mechanic  testing standards for individuals should be mostly aligned.\nChairman Larsen, Ranking Member Graves, and members of the  Subcommittee, this completes my prepared remarks. I look forward to  answering any questions you may have.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this statement, please  contact me at (202) 512-2834 or krauseh@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 Betty Ward-Zukerman, Assistant Director, Vashun  Cole, Chelsa Gurkin, Ellie Klein, Meredith Moore, Justin Reed, Andrew  Von Ah, and Chris Woika.\nThis 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.","output":null}
{"id":"gao_GAO-20-418","pid":"gao_GAO-20-418_0","input":"\tBackground\n\nIn June 2018, DOD\u2019s Chief Management Officer established the  Community Services Reform Task Force to perform a business case  analysis to determine whether consolidating the defense resale  organizations would result in efficiencies. The task force conducted its  work from July 2018 through November 2018, during which it collected  financial and other data from the four resale organizations and conducted  workshops with subject matter experts from the resale organizations. In  November 2018, the military departments were given an opportunity to  review the business case analysis, provide comments, and indicate  whether they concurred with the analysis.\nIn its business case analysis, the task force recommended consolidating  the four defense resale organizations into a single organization. The  task force stated that consolidation would eliminate duplication that  currently exists across the resale organizations and increase the  competitiveness, or financial viability, of defense resale, which has seen  sales declines in recent years. Specifically, the task force recommended  that a single chief executive officer or director be responsible for leading  the organization and report to a single board of directors. The task force  also recommended that separate leadership positions for commissary  operations and exchange operations be established, and that a chief  administrative officer manage the business functions that are common to  the current resale organizations, such as information technology (IT),  human resources, marketing, and finances. Figure 1 shows the task  force\u2019s recommended organizational chart for the consolidated resale  organizations.\nThe task force estimated that the time frame for consolidating the four  defense resale organizations would be 5 years for implementation, and  that consolidation would result in \u201cnet savings\u201d (i.e., estimated savings  minus estimated costs) ranging from about $690 million to $1.3 billion  during the first 5 years, followed by annual net savings of approximately  $390 million to $670 million every year thereafter. Specifically:\nEstimated savings: The task force estimated that consolidating the  four defense resale organizations would result in savings in three  areas: (1) reduction of the cost of goods sold in the commissaries and  the exchanges; (2) reduction of the cost of goods and services that  are not sold but are necessary for operating stores (e.g., plastic  shopping bags and custodial services); and (3) reduction of payroll  costs by eliminating redundant personnel. According to the task  force, consolidation would result in estimated savings of $1.4 billion to  $2.1 billion over the first 5 years, followed by annual savings of $470  million to $750 million.\nEstimated costs: The task force estimated that consolidating the  defense resale organizations would result in costs from four areas: (1)  development of new, common IT systems; (2) severance pay for  separating employees and retention bonuses to incentivize  employees to remain; (3) operation of a transformation management  office, supported by private contractors, to implement the  consolidation; and (4) costs to convert DeCA to a non-appropriated  fund organization. According to the task force, consolidation would  result in estimated costs of $700 million to $810 million over the first 5  years, followed by annual costs of $80 million.\nDOD\u2019s Chief Management Officer in March 2019 and the Deputy  Secretary of Defense in August 2019 both approved the results of the  business case analysis and directed that plans be made for consolidation,  pending congressional action to remove the statutory prohibition on  consolidating the commissary and exchange systems.\n\n\tDOD\u2019s Business Case Analysis Supporting Defense Resale Consolidation May Not Provide Reliable Savings and Cost Estimates\n\nThe task force may have overestimated the expected savings from  reducing the \u201ccost of goods sold\u201d (i.e., the cost of purchasing products  that are resold in commissaries or exchanges) and underestimated the  expected costs from IT consolidation and headquarters relocation.\n\n\t\tDOD\u2019s Task Force May Have Overestimated the Expected Savings to Be Achieved from Reducing the Cost of Goods Sold\n\nThe task force estimated that most of the savings (i.e., about 70 percent  annually) to be achieved from consolidating the four defense resale  organizations would result from reducing the cost of goods sold.  According to the task force\u2019s business case analysis, retailers often pay  different costs for identical products, and mergers are an opportunity for  retailers to compare costs across a larger combined organization and  make decisions that maximize savings. In the case of a consolidated  defense resale organization, the task force stated in its business case  analysis that savings could be achieved by implementing what the task  force called category management reforms and by obtaining the lowest  cost for identical products sold by both commissaries and exchanges.  Task force officials added that one board of directors and one chief  executive officer overseeing the consolidated resale organization would  be more likely to achieve savings than the current, individual boards of  directors and chief executive officers of the resale organizations.\nGAO-18-151SP.\nDeCA and one or more exchange organization, or\nTwo or more of the exchange organizations (and not DeCA).\nIn addition to overlap in identical products sold, task force officials told us  that savings from category management reforms are dependent, in part,  on the amount of overlap in vendors that sell products to the resale  organizations. Specifically, task force officials stated that there are  opportunities to reduce cost of goods sold through negotiations with  vendors that sell items to both DeCA and the exchange organizations.  For example, task force officials stated that the consolidated organization  could negotiate better prices with a vendor that sells family-size items to  DeCA and single-size items to the exchange organizations, even though  those items are not identical.\nIndustry Benchmarks  The industry benchmarks used by the task  force are based on proprietary data gathered  and owned by Boston Consulting Group  based on its experience working with mergers  and category management reforms in the  private sector retail industry. These  benchmarks were presented as a percentage  of cost of goods sold; specifically, the task  force estimated that savings from obtaining  the lowest cost for identical items were from 1  to 1.5 percent of the cost of goods sold, and  savings from category management efforts  were from 2.5 to 4 percent of the cost of  goods sold. We did not review and evaluate  the underlying data that were used to develop  the proprietary benchmarks.\nBased on this information, the task force calculated the estimated savings  that would result from reducing the cost of goods sold by multiplying the  total cost of goods sold for all four resale organizations in fiscal year 2017  ($9.5 billion) by industry benchmarks developed by Boston Consulting  Group (see sidebar for more information on these benchmarks). This  calculation showed an estimated annual savings of $329 million to $517  million from reducing the cost of goods sold.\nHowever, additional information from the task force suggests this savings  estimate may be overstated because there is limited overlap in the  products DeCA sells (i.e., groceries and household goods) and the  products the exchange organizations sell (i.e., goods and services similar  to retail stores). According to the task force, about $2.2 billion of DeCA\u2019s  cost of goods sold in fiscal year 2017 were for products also sold by at  least one of the exchange organizations, which is equivalent to about 23  percent of the total cost of goods sold for the four resale  organizations. This differs from the data provided in the business case  analysis, which stated that 62 percent of the total cost of goods sold was  for identical products sold by two or more resale organizations; however,  that figure also includes products sold by two or more exchange  organizations and not DeCA (we further discuss product overlap among  the exchange organizations below). Given the more limited product  overlap between DeCA and the exchange organizations, it is unclear  whether using the total cost of goods sold for all four resale organizations  as the basis for estimating savings was appropriate.\nAdditionally, the business case analysis did not fully identify the amount  of vendor overlap that exists between DeCA and the three exchange  organizations, but the data that were provided in the business case  analysis suggest that limited vendor overlap exists. Specifically, the  business case analysis provided data for 10 vendors that sell to the  defense resale organizations, but those vendors represent less than 20  percent of the cost of goods sold to DeCA and the exchange  organizations in fiscal year 2017. Further, only 5 of the 10 vendors  identified in the business case analysis sold goods to both DeCA and the  exchange organizations, and their cost of goods sold accounted for about  10 percent ($972 million) of the total cost of goods sold for the four resale  organizations ($9.5 billion). Based on these data, the extent of vendor  overlap between DeCA and the exchange organizations\u2014and, as a  result, how much can be saved through category management reforms by  consolidating DeCA and the exchange organizations\u2014is unclear.\nAlthough the task force stressed the importance of a conservative  estimate in both its business case analysis and in meetings with us, our  assessment of the assumptions and methodology for estimating savings  from the cost of goods sold found that a more conservative approach  could have been used to better ensure estimated savings were not  overstated. For example, one method could have been to multiply the  benchmarks by the cost of goods sold for just the three exchange  organizations (about $5.5 billion in fiscal year 2017, per the task force), as  data provided by the task force indicate that about 67 percent of the cost  of goods sold for the exchange organizations in fiscal year 2017 were for  identical products sold by at least two exchange organizations. Another  method, which task force officials suggested after we shared our  concerns about their methodology, could have been to multiply the benchmarks by the cost of goods sold for the exchange organizations,  plus the portion of DeCA\u2019s cost of goods sold that overlaps with at least  one exchange organization (about $2.2 billion in fiscal year 2017, per the  task force). Either method would be more conservative than the one  adopted in the business case analysis and would yield a savings estimate  that is about 20 to 40 percent lower, but would be more consistent with  the task force\u2019s assertion that consolidation savings are dependent on the  amount of overlap among the merging organizations.\nDOD policy states that an economic analysis should base its analysis of  benefits on facts and data whenever possible. Additionally, our  Assessment Methodology for Economic Analysis states that an economic  analysis should examine the effects of an action by considering relevant  alternatives and justifying what the world would be like under each  alternative; describe and justify the analytical choices, assumptions, and  data used; and assess how plausible adjustments to each important  analytical choice and assumption affect the estimates of savings.\nEnsuring that the estimates for cost of goods savings are accurate is  particularly important, as they account for approximately 70 percent of the  task force\u2019s overall savings estimate from consolidation. However, the  task force did not fully identify and analyze in its business case analysis  how many identical products are sold by both DeCA and the exchange  organizations or how many vendors sell products to both DeCA and the  exchange organizations. According to task force officials, they did not  provide data on product overlap between DeCA and the exchange  organizations because it would not change their savings methodology or  estimate, and they did not provide more information on vendor overlap  because of the proprietary nature of that data. However, the amount of  product and vendor overlap that exists across the four resale  organizations will have a direct effect on the amount of savings to be  achieved from consolidation, as acknowledged by the task force.\nWithout the task force reassessing the approach it used to estimate  savings from the cost of goods sold and, if necessary, making  adjustments to those estimates, decision makers in DOD and Congress  may lack confidence in the reliability of the task force\u2019s savings estimates  in the business case analysis and will not have complete information as  they consider defense resale consolidation.\n\n\t\tDOD\u2019s Task Force May Have Underestimated the Expected Costs of Consolidating the Four Defense Resale Organizations\n\nBased on our analysis of the business case analysis, we found that  DOD\u2019s task force may have underestimated the expected costs of  consolidating the four defense resale organizations in two areas: (1) the  development of new, common IT systems and (2) the location of a new  headquarters for the consolidated organization.\n\n\t\t\tTask Force May Have Underestimated the Cost of Consolidating Defense Resale Organizations\u2019 IT Systems\n\nThe task force estimated in its business case analysis that most of the  costs (i.e., about 50 percent annually) of consolidating the four defense  resale organizations will result from developing new, common IT systems  to support the consolidated organization. In the business case analysis,  the task force stated that it worked with the four resale organizations to  calculate a cost estimate of $292 million to $352 million for developing  five types of IT systems that are needed for the consolidated  organization: merchandising, store inventory management, financial  management and general ledger, transportation and logistics, and  ecommerce.\nAccording to the business case analysis, the task force\u2019s cost estimates  for developing new, common IT systems for the consolidated organization  were to be based on data provided by the resale organizations on recent  or projected costs for replacing similar systems or performing major  upgrades to existing systems, when available. For example, the task  force\u2019s estimate for the merchandising system was approximately $115  million, which the business case analysis stated is based on a $35 million  estimate provided by AAFES, a $23.5 million estimate provided by  NEXCOM, a $15 million estimate provided by MCCS, and a $41 million  estimate provided by DeCA.\nHowever, the task force\u2019s cost estimate for IT consolidation may be  understated because it is based, in part, on less expensive minor IT  system upgrades and partial replacements, according to the resale  organizations. Based on our analysis of information provided to us by the  resale organizations, about $140 million (about 40 percent) of the overall  IT cost estimate was based on what the resale organizations described  as minor upgrades or partial replacements.\nSpecifically, while MCCS confirmed the cost estimates attributed to them  in the business case analysis were for total IT system replacement costs,  the other three resale organizations\u2014AAFES, NEXCOM, and DeCA\u2014 disagreed with the task force\u2019s characterization that all the data used to  calculate IT system estimates represented costs for replacements or  major upgrades. AAFES told us that the cost estimates cited in the  business case analysis for its merchandising, financial management and  general ledger, and transportation and logistics systems reflected minor  upgrades of specific modules within the overall systems, and the cost to  replace or upgrade the entire system would be significantly higher.  NEXCOM stated that the cost estimates for upgrading its merchandising,  store inventory management, and financial management and general  ledger systems were for minor upgrades, not replacements or major  upgrades, as stated by the task force. DeCA told us that the estimate for  replacing its store inventory management system only represented 1 year  of costs, even though DeCA plans to incur replacement costs through at  least 2022.\nAccording to the task force, the task force and the resale organizations  agreed on the methodology for estimating IT costs, and the subject matter  experts from the resale organizations provided the cost data used in the  business case analysis. However, based on information provided by the  resale organizations, it appears that the task force may not have always  based its cost estimate on replacement or major upgrade costs\u2014 consistent with the key assumption that new IT systems would be  developed for the consolidated resale organization\u2014but, rather, used  minor upgrade or partial replacement costs in some cases. Specifically,  task force officials told us they believed the estimates provided by the  resale organizations were too high to be minor upgrades or partial  replacements, based on their understanding of IT requirements for resale  operations.\nFurther, task force officials stated that their overall IT cost estimate was  likely overstated, not understated. For example, they stated that their  estimate is higher than what is typically spent for a private sector  consolidation of similar size. However, the task force stated that it did  not use private sector IT cost estimates in its business case analysis  because it determined that public sector IT costs would likely be higher  than private sector IT costs. Additionally, task force officials told us that  some planned spending on existing IT systems by the four resale  organizations would not be necessary as a result of consolidation.  However, the business case analysis does not quantify how much future  spending could be reduced or factor those reductions into the IT cost  estimate.\nAccording to the GAO Cost Estimating and Assessment Guide, cost  estimates are developed based on assumptions that are defined to  establish the baseline conditions the estimate will be built from.  Additionally, our Assessment Methodology for Economic Analysis states  that an economic analysis should define an appropriate baseline that  represents the best assessment of what the world would be like under  that alternative. Thus, estimating costs that reflect the baseline  conditions is a key step in developing a sound cost estimate.\nAdditionally, we have previously reported that federal IT investments  frequently fail or incur cost overruns and schedule slippages. As such, high-quality data are imperative for ensuring proper management and  oversight of IT investments. The task force\u2019s IT cost estimate is  particularly important, as it represents about 50 percent of the total  estimated costs for defense resale consolidation. Until the task force  consults with the resale organizations to reassess the methodology for  estimating IT costs, decision makers in DOD and Congress may not have  a reliable and complete understanding of the estimated costs for the  implementation of new, common IT systems, which is information DOD  and Congress need as they consider defense resale consolidation.\n\n\t\t\tDOD\u2019s Task Force Did Not Provide a Cost Estimate for Relocating the Four Defense Resale Organizations to a New Headquarters Location\n\nAccording to the task force, there would be costs associated with  relocating AAFES, NEXCOM, MCCS, and DeCA to a new headquarters  location, to include relocating existing personnel, hiring new personnel,  and obtaining real estate. Although no relocation options were presented  in the business case analysis, task force officials told us there are multiple  options for where to locate the headquarters of a consolidated resale  organization. One option cited by the task force would be to create a new  headquarters in the Washington, DC, area, which would be the most  expensive option, as it would likely involve acquiring new real estate and  hiring personnel in a high-cost region. Another option cited by the task  force would be to locate all exchange operations and staff at the existing  AAFES headquarters in Dallas, TX, and maintain commissary operations  and staff at the existing DeCA headquarters at Fort Lee, VA. This option  would likely be less expensive, as personnel and available real estate are  already present at both locations. In January 2020, task force officials  also told us that an even less expensive option they might consider is  maintaining commissary and exchange headquarters staff at their current  locations, but having personnel work for the consolidated organization,  rather than for DeCA or the exchange organizations.\nDespite the potential for relocation costs, the task force did not include a  range of cost estimates for different relocation options in its business  case analysis. According to task force officials, relocation cost estimates  were not included because the headquarters location has not been  chosen, and costs will vary widely depending on the chosen location.  While actual relocation costs will depend on the chosen headquarters  location, this fact does not prevent the task force from presenting a range  of cost estimates in advance of that decision being made. Task force  officials also said that including relocation cost estimates would not have  changed the conclusion of the business case analysis. However, without  a range of relocation cost estimates, we were unable to assess the effect  of relocation costs on the conclusion of the business case analysis.\nDOD policy states that an economic analysis should quantify the costs  associated with each alternative under consideration whenever possible  so that they may be included in the economic analysis calculation.  Additionally, our Assessment Methodology for Economic Analysis states  that an economic analysis should quantify the important costs, where  feasible, to inform decision makers about the economic effects of a  proposed action. Without developing and providing a range of relocation  cost estimates from the least expensive option to the most expensive,  decision makers in DOD and Congress will not be fully informed about the  costs of consolidation, which is necessary information for deciding  whether to consolidate the four defense resale organizations.\n\n\tMilitary Departments Officially Concurred with the Business Case Analysis, but DOD Did Not Share Their Accompanying Comments with Congress\n\nThe military departments officially concurred with the task force\u2019s  business case analysis for consolidating the four defense resale  organizations. However, the military departments also provided written  comments that detailed concerns with fundamental aspects of the  business case analysis, to include: the use of proprietary industry  benchmarks; estimated savings, costs, and timeline of the consolidation;  and the proposed governance structure for the new resale organization.  In an April 2019 report to Congress that summarized the business case  analysis, DOD stated that the military departments agreed with the  consolidation. However, the report did not disclose the military  departments\u2019 comments and concerns on the business case analysis,  which are relevant as Congress considers defense resale consolidation.\nIn their written comments, the military departments either stated concerns  about the consolidation or included critical comments from the exchange  organizations\u2014all of which opposed the consolidation. Specifically:\nThe Army concurred with the business case analysis but noted that  funding for morale, welfare, and recreation programs must be  preserved or increased as a result of the consolidation. In addition,  the Army\u2019s comment letter included as an attachment written  comments from AAFES, which expressed opposition to the  consolidation and detailed concerns with the business case analysis.  For example, AAFES stated that the business case analysis relied on  unverifiable, proprietary industry benchmarks that overstated the  benefits of consolidation, underestimated the costs and time to  consolidate, and did not account for recent efforts by the resale  organizations to reduce costs by collaborating on a purchasing  alliance.\nThe Air Force also concurred with the business case analysis, but  noted in its comments that mergers and acquisitions have historically  cost more, taken longer, and saved less than originally expected. As a  result, the Air Force recommended that a phased implementation plan  be followed to guard against financial risk. The Air Force also stated  that morale, welfare, and recreation funding currently provided by the  exchanges should be maintained while opportunities are examined to  reduce the need for appropriated funding.\nThe Navy initially non-concurred with the business case analysis in  December 2018. In its comment letter, the Navy stated that the task  force\u2019s analysis was flawed beyond repair and included comments  from NEXCOM and MCCS that also opposed consolidation. For  example, the exchanges\u2019 comments stated that the expected cost  savings were overstated, that potential inefficiencies from  consolidation were not discussed, and that the resale organizations  could achieve cost savings through greater collaboration without the  need for consolidation. NEXCOM and MCCS also stated concern that  the task force\u2019s savings projection relied heavily on unverifiable  industry benchmarks. In addition, MCCS expressed concern that  consolidation could result in unexpected costs from separating  exchange operations from the rest of MCCS operations, which also  include the Marine Corps\u2019 morale, welfare, and recreation and family  programs. In January 2019, the Navy changed its position to concur  subject to several significant comments and clarifications, and  attached a letter detailing comments and concerns similar to those it  submitted with its original non-concurrence in December 2018.\nOfficials from the resale organizations further articulated their concerns  about the business case analysis when they met with us. For example,  resale officials told us they are concerned that savings are overstated,  that costs are understated, and that the proprietary benchmarks used by  the task force are unverifiable or may not be applicable to the public  sector. Exchange officials also stated that they are worried about the  effect of consolidation on morale, welfare, and recreation funding  generated by the exchanges. Specifically, exchange officials are  concerned that exchange revenue currently used for morale, welfare, and  recreation programs could be used to pay for consolidation expenses or  to reduce the amount of appropriated funds allocated to the  commissaries.\nDespite the concerns detailed in the comments from the military  departments and resale organizations, DOD did not include them in its  April 2019 report to Congress summarizing the results of the business  case analysis. The National Defense Authorization Act for Fiscal Year  2019 required DOD to include in its report the recommendations of the  Secretaries of the military departments regarding the plan to consolidate  the defense resale organizations. When we asked the task force why  DOD did not provide Congress with the comments and concerns cited by  the military departments and the resale organizations, officials stated that  they were advised by DOD\u2019s Office of General Counsel not to include the  comments because they contained information that may have disclosed  DOD\u2019s deliberative process.\nTask force officials also stated that the savings, cost, and timeline  estimates in the business case analysis were conservative, and that the  proprietary industry benchmarks are based on years of experience by  Boston Consulting Group and similar to those cited by prior studies.  Regarding the purchasing alliance formed by the resale organizations to  reduce their cost of goods sold, task force officials stated they do not  believe such efforts to reduce costs will be sustained without a single  chief executive officer and board of directors to ensure those efforts  continued, as recommended in the business case analysis. Finally, the  task force stated in the business case analysis that any savings achieved  from consolidation could be used to increase morale, welfare, and  recreation funding or reduce appropriations used to fund DeCA, and that decisions on how to allocate savings will be made by the proposed board  of directors.\nAccording to task force officials, some of the concerns articulated by the  military departments and the exchanges could be motivated by a general  opposition to consolidation. However, without a more complete reporting  of the military departments\u2019 perspectives on consolidation and the task  force\u2019s response to those comments, Congress may be unaware of the  views various organizations within DOD have regarding the business  case analysis, which is relevant information as Congress considers  defense resale consolidation. Moreover, fully reporting the comments and  concerns could strengthen trust and collaboration among the task force,  military departments, and resale organizations on any future resale  reforms.\n\n\tConclusions\n\nFour defense resale organizations currently operate about 240  commissaries (operated by DeCA) and 2,500 exchange facilities  (operated by AAFES, NEXCOM, and MCCS) worldwide to provide  reduced-priced groceries and retail goods and services to DOD  servicemembers, their families, and retirees. DeCA operations are funded  in part by appropriations, which have totaled approximately $1.3 billion in  recent years. By law the commissary and exchange organizations must  be operated separately. In November 2018, a DOD task force completed  a business case analysis and concluded that consolidating the four  defense resale organizations into a single organization would result in  several hundred million dollars in annual cost savings. However, we  found that the task force\u2019s projected savings from reducing the cost of  goods sold may be overestimated, and that projected costs for IT  development and headquarters relocation may be underestimated.  Further, while the military departments concurred with the task force\u2019s  recommendation to consolidate, DOD did not fully share their comments  and concerns about the business case analysis with Congress. DOD\u2019s  proposed consolidation will cost several hundred million dollars, take  years to implement, and involve multiple DOD organizations. Given the  cost and complexity of the proposed defense resale consolidation, DOD  can ensure that Congress has the reliable information it needs to consider  consolidation by reviewing and updating savings and cost estimates and  sharing comments and concerns from the military departments.\n\n\tRecommendations for Executive Action\n\nWe are making the following four recommendations to DOD.\nThe Secretary of Defense should ensure that the DOD Chief  Management Officer direct the task force to reassess its approach to  estimating savings from cost of goods sold\u2014to include reassessing its  use of the cost of goods sold for all four defense resale organizations  rather than, for example, just for the three exchange organizations\u2014and  make any necessary adjustments to its savings estimates for  consolidation and provide that updated information to Congress.  (Recommendation 1)\nThe Secretary of Defense should ensure that the DOD Chief  Management Officer direct the task force, in consultation with the resale  organizations, to reassess its methodology for estimating IT costs of  consolidation, and make any necessary adjustments to its range of IT  cost estimates and provide that updated information to Congress.  (Recommendation 2)\nThe Secretary of Defense should ensure that the DOD Chief  Management Officer direct the task force to develop a range of cost  estimates for relocating the defense resale organizations, and adjust its  range of cost estimates for consolidation and provide that updated  information to Congress. (Recommendation 3)\nThe Secretary of Defense should ensure that the DOD Chief  Management Officer provide additional written information to Congress on  the comments and concerns from the military departments and resale  organizations on the task force\u2019s November 2018 business case analysis,  as well as the task force\u2019s response to those comments and concerns.  (Recommendation 4)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to DOD for review and comment. In its  comments, reproduced in appendix III and summarized below, DOD  concurred with the first three recommendations and did not concur with  the fourth recommendation. DOD also provided technical comments,  which we incorporated as appropriate.\nDOD stated in its letter that it continues to firmly believe that consolidation  of above-store operations of DeCA and the military exchanges is the right  path forward and that it intends to move forward with this effort. DOD also  requested that we consider the first three recommendations as  implemented, based on information provided in the letter and as detailed  below.\nRegarding the first recommendation for the task force to reassess  its approach to estimating savings from cost of goods sold\u2014to  include reassessing its use of cost of goods sold by all four  defense resale organizations rather than, for example, just the  three exchange organizations\u2014and make any necessary  adjustments to its savings estimates for consolidation and provide  that updated information to Congress, DOD stated that it had  reassessed its approach and found that there is significant overlap  and, therefore, savings opportunity in products sold by DeCA and  the exchanges. DOD also provided revised savings estimates that  exclude DeCA\u2019s cost of goods sold from its methodology that  show net savings ranging from $309 million to $739 million in the  first 5 years of consolidation, followed by $255 million to $457  million per year thereafter. These figures are about 44 percent to  55 percent lower than the business case analysis\u2019s estimate for  the first 5 years and about 32 to 35 percent lower per year  thereafter. By providing these revised savings estimates, we  believe that DOD has addressed the intent of the  recommendation.\nWith regard to the second recommendation for the task force to  reassess its methodology for estimating IT costs of consolidation,  and make any necessary adjustments to its range of IT cost  estimates and provide that updated information to Congress, DOD  stated that the task force followed up with AAFES, NEXCOM, and  DeCA to get an update on the cost estimates these entities  expressed concern about to us. However, according to DOD,  those resale organizations were unable to provide alternate data  to use in place of the numbers in the business case analysis. DOD  further stated in its letter that because no alternative data were  provided, the department will continue to use the estimate in the  business case analysis and will reengage with the resale  organizations to develop more detailed IT design plans and make  any necessary updates to the IT cost estimates as integration  planning moves forward. As DOD develops its more detailed IT  design plans and associated cost estimates, we will follow up with  the department, including the resale organizations, to determine  whether this recommendation has been addressed.\nIn commenting on the third recommendation for the task force to  develop a range of cost estimates for relocating the defense  resale organizations, and adjust its range of cost estimates for  consolidation and provide that updated information to Congress,  DOD provided three possible courses of action, along with  corresponding cost estimates. These possible courses of action,  from least expensive to most expensive, are: (1) maintain  operations at all four existing locations (no cost); (2) maintain  commissary operations at DeCA headquarters, perform all  exchange functions at AAFES headquarters, and close the  NEXCOM and MCCS headquarters (one-time costs of $5.5 million  and recurring annual costs of $1.3 million); and (3) create a new  headquarters to perform all commissary and exchange operations  near Washington, D.C. (one-time costs of $19.6 million and  recurring annual costs of $19.7 million). DOD stated that  consolidation would still result in financial benefits, even if the  department chooses the most costly of these courses of action. By  providing these cost estimates, we believe that DOD has  addressed the intent of the recommendation.\nWhile we have determined that DOD has met the intent of the first and  third recommendations, we also note that, in its comment letter, the  department questioned some aspects of our analysis and conclusions  regarding the first three recommendations. We stand by our analysis and  conclusions and offer the following response:\nDOD stated in its comment letter that modifying the business case  analysis\u2019s approach to cost of goods savings would result in an  incorrect use of benchmarks and go against industry best practice.  For example, DOD stated that estimating savings by using the  cost of goods sold for just the three exchange organizations, or for  the three exchange organizations plus a portion of DeCA, would  be flawed. However, as noted in our report, the latter method was  recommended to us by task force officials when we raised  concerns about the accuracy of the task force\u2019s savings estimates  in the business case analysis. In addition, multiplying the  benchmarks by the cost of goods sold for the exchange  organizations, as opposed to for all four resale organizations,  would be more consistent with the assertion in the business case  analysis that consolidation savings are dependent on the overlap  among the merging organizations.\nDOD questioned the accuracy of some of our figures in the report  by providing different data on product and vendor overlap between  DeCA and the exchange organizations. However, this information  was not included in the task force\u2019s business case analysis or  offered to us during the course of our audit. In addition, when we  asked for supporting documentation that would allow us to  validate the new figures, DOD did not provide any.\nDOD stated in its comments that excluding all or including only a  portion of DeCA\u2019s cost of goods sold implies that there is no  opportunity to achieve savings between DeCA and the  exchanges. Our report does not make this assertion, but rather  offers a methodology that would result in a more conservative  savings estimate, consistent with the data presented in the  business case analysis and provided by task force officials, to  better ensure that estimated savings were not overstated.\nAs noted above, DOD did not concur with the fourth recommendation for  the department\u2019s Chief Management Officer to provide additional written  information to Congress on the comments and concerns from the military  departments and resale organizations on the task force\u2019s November 2018  business case analysis, as well as on the task force\u2019s response to those  comments and concerns. DOD stated in its written response to our report  that the department considered all the comments submitted in its  decision-making process and that all of the military department  secretariats agreed with above-store consolidation, despite their  comments on the business case analysis. DOD further stated that the  military department comments regarding the business case analysis were  shared with congressional committee professional staff, and DOD  suggested in its letter that this recommendation be closed.\nHowever, DOD\u2019s written response did not provide information on which  comments were shared, whether those comments were communicated in  writing or orally, or which committee or committees received information  on the comments. In their written comments on the business case  analysis, the military departments detailed concerns with fundamental  aspects of the analysis, to include: the use of proprietary industry  benchmarks; estimated savings, costs, and timeline of consolidation; and  the proposed governance structure for the new resale organization. We  continue to believe that implementing this recommendation would help  ensure that Congress has the full information it needs as it considers  defense resale consolidation and would also help strengthen trust and  collaboration among the various DOD stakeholders involved in defense  resale, particularly given their role in any consolidation, should one occur.  We will follow up with DOD as part of our regular recommendation follow- up process.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; and the Secretaries of the Army,  Air Force, and Navy. In addition, the report is available at no charge on  our website at https:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Prior GAO Work on Commissaries and Exchanges\n\nThe National Defense Authorization Act for Fiscal Year 2016 mandated  that the Department of Defense (DOD) report on DOD\u2019s plan to achieve  budget neutrality for commissaries and exchanges\u2014which DOD  interpreted as ending the use of appropriated funding\u2014and included a  provision for us to assess DOD\u2019s report. In November 2016, we found  that DOD\u2019s May 2016 report did not provide a plan for achieving budget  neutrality. DOD reported that it would not be able to eliminate fully the  use of appropriated funds for defense resale, but the department did not  provide detailed information supporting that conclusion. Instead, the  report stated that DOD expected to achieve $2 billion in cost savings over  a 5-year period from fiscal year 2017 through fiscal year 2021. However,  we found that the report did not include any assumptions, methodology,  or specific time frames related to initiatives that would lead to these  savings. We recommended that DOD provide information to Congress to  support its conclusion about budget neutrality and develop a plan for  achieving reductions to defense resale appropriations. DOD concurred  with our recommendations, but as of February 2020 had not addressed  them.\nIn March 2017, we reported on DOD\u2019s commissary operations, including  the extent to which the Defense Commissary Agency (DeCA) had  assurance that it was maintaining the desired savings rate for its  customers. DeCA\u2019s desired savings rate\u2014which at the time of our March  2017 report was 30 percent and is now 23.7 percent\u2014shows how much a  customer can expect to save on grocery purchases at a commissary in  comparison to purchases at other local grocery stores. We found that  DeCA lacked reasonable assurance that it was maintaining its desired  savings rate for commissary customers because of weaknesses in its  methodology for calculating the savings rate. For example, the  methodology did not use a random sample of overseas commissaries or  account for seasonal and geographic variations in item prices. We also  found that DeCA\u2019s business model departed from practices generally  employed by commercial grocery stores. For example, DeCA did not  assess the contribution of the sale of each product to a given store\u2019s total  sales in determining which products to sell, and it had not conducted cost- benefit analyses for its use of stocking and custodial service contracts or  product distribution options across all commissaries. We recommended  that DOD (1) address limitations identified in its savings rate  methodology; (2) develop a plan with objectives, goals, and time frames  to improve efficiency in product management; and (3) conduct  comprehensive cost-benefit analyses for service contracts and  distribution options. As of February 2020, DOD had addressed the first  two recommendations but had not addressed the third recommendation.\n\nAppendix II: Assessment of the Department of Defense\u2019s (DOD) Business Case Analysis on Defense Resale Consolidation\n\nWe assessed DOD\u2019s business case analysis on consolidating the four  defense resale organizations against the five key elements of an  economic analysis, as described in our Assessment Methodology for  Economic Analysis (see table 1).\n\nAppendix III: Comments from the Department of Defense\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nElizabeth A. Field, (202) 512-2775 or fielde1@gao.gov  In addition to the contact named above, Suzanne Perkins (Assistant  Director), Geoffrey Peck (Analyst-in-Charge), Pedro Almoguera, Noah  Gerber, Mae Jones, Matthew Kienzle, Amie Lesser, Felicia Lopez, and  Jeanne Sung made key contributions to this report.","output":null}
{"id":"crs_R46077","pid":"crs_R46077_0","input":"\tOverview\n\nLocal governments have traditionally played an important role in regulating cable television systems. Operators required municipal permission to place their cables above or beneath streets and other publicly owned land and to mount the cables on telephone\/and or utility poles. Cities negotiated with cable operators over the services their systems would provide, including channels dedicated to public, educational, or government programming (PEG), and the payment of franchise fees. In exchange, the cable operators often received de facto exclusive local franchises to offer video distribution services. That changed in 1984, when Congress required local governments to allow competition. In the mid-2000s, as telephone companies (known as \" telcos \") sought to obtain their own video services franchises, state governments got involved to streamline the franchising process, in several instances preempting municipalities' authority. The states applied these laws to incumbent cable operators as well as to new entrants, to ensure legal parity.\nAs technological developments and changes in business strategies and consumer behavior have reshaped the telecommunications industry, the Federal Communications Commission (FCC) has taken several steps to limit local regulatory authority over cable and telco video service providers. Many of these regulatory changes have caused controversy. Some local governments assert that, among other things, the FCC's actions will limit their ability to protect the public interest and deprive them of revenue.\nThis report examines the evolving relationship between federal, state, and local regulators and identifies related policy issues that may be of interest to Congress.\n\n\tRegulation of Video Services\n\nCable television began operating in the 1940s as a means to receive broadcast signals in areas with trees or mountains that interfered with over-the-air signal transmission. Initially, municipalities, rather than states, made most decisions related to awarding cable franchises. As cable television developed, some states began to regulate the terms included in a cable franchise, or required state review or approval of a franchise agreement. The term local franchising authorities (LFAs) refers to municipal and\/or state government entities that offer and negotiate video franchises. Today, agreements between LFAs and video service providers typically include provisions concerning the availability of channels for PEG programming; the amount of money due to the LFA in franchise fees, including in-kind contributions; and the rates charged to subscribers.\n\n\t\tDevelopments Prior to 1984\n\nThe Communications Act of 1934 (referred to in this report as the Communications Act) created the FCC, but did not specifically set forth the FCC's authority to regulate cable. However, the U.S. Supreme Court found in 1968 that the agency's authority was sufficiently broad to do so. The FCC issued comprehensive regulations governing cable systems and cable franchising authorities in 1972. The FCC's rules directed cable operators to offer PEG services and LFAs to cap franchise fees.\n\n\t\t\tFranchise Agreement Terms and Conditions\n\nIn the early days of cable television, a municipal government seeking to bring cable to its residents would, through a request for proposals, spell out the requirements that a cable operator would have to meet to win the franchise. Cable companies would bid against one another for the chance to wire the municipality. Renewal of an existing franchise might entail additional requirements. \n\n\t\t\t\tPEGs\n\nIn 1972, the FCC directed cable operators to dedicate one channel for public access, one channel for educational use, and one channel for local government use by a certain date, and to add channel capacity if necessary to meet the requirement. Two years later, however, the commission reconsidered its stance, stating, \nDemands are being made not only for excessive amounts of free equipment but also free programming and engineering personnel to man the equipment. Cable subscribers are being asked to subsidize the local school system, government, and access groups. This was not our intent and may, in fact, hamper our efforts at fostering cable technology on a nationwide scale. Too often these extra equipment and personnel demands become franchise bargaining chips rather than serious community access efforts. We are very hopeful that our access experiment will work.... We do not think, however, that simply putting more demands on the cable operator will make public access a success. Access will only work, we suspect, when the rest of the community assumes its responsibility to use the opportunity it has been provided.\nAlthough the U.S. Supreme Court later struck down the FCC's rules requiring cable operators to set aside channels for PEGs, PEG access requirements became commonplace in local franchise agreements by the early 1980s. Congress encouraged this development. According to a 1984 report from the House Committee on Energy and Commerce\nPublic access channels are often the video equivalent of the speaker's soapbox or the electronic parallel to the printed leaflet. They provide groups and individuals who generally have not had access to the electronic media with the opportunity to become sources of information in the electronic marketplace of ideas. PEG channels also contribute to an informed citizenry by bringing local schools into the home, and by showing the public local government at work. \n\n\t\t\t\tFranchise Fees\n\nIn addition to requiring cable system owners to obtain a franchise before operating, municipalities also required cable system owners to pay a franchise fee . In its 1972 Cable Order, the FCC stated,\n[M]any local authorities appear to have extracted high franchise fees more for revenue-raising than for regulatory purposes. Most fees are about five or six percent, but some have been known to run as high as 36 percent. The ultimate effect of any revenue-raising fee is to levy an indirect and regressive tax on cable subscribers. Second, and of great importance to the Commission, high local franchise fees may burden cable television to the extent that it will be unable to carry out its part in our national communications policy.... We are seeking to strike a balance that permits the achievement of federal goals and at the same time allows adequate revenues to defray the costs of local regulation.\nTo accomplish this balance, the FCC capped the franchise fees at 3%-5% of a cable operator's revenues from subscribers. For fees greater than 3% of an operator's subscriber revenues, the FCC required a franchising authority to submit a showing that the specified fee was \"appropriate in light of the planned local regulatory program.\"\n\n\t\t\t\tRates Charged to Subscribers\n\nWhen cable television first developed as essentially an antenna service to improve over-the-air broadcast television signal reception in rural and suburban areas, many municipalities regulated the rates charged to subscribers. The municipalities viewed rate regulation, tied to the systems' use of public streets, as a means of preventing cable operators from charging unreasonably high rates for what they viewed as an essential service. \nIn the 1972 Cable Order, the FCC required franchising authorities to specify or approve initial rates for cable television services regularly furnished to all subscribers and to institute a program for the review and, as necessary, adjustment of rates. In 1976, the FCC repealed those rules and instead made LFA regulation of rates for cable television services optional. In 1974, the FCC preempted LFAs from regulating rates for other so-called \"specialized services,\" including \"advertising, pay services, digital services, [and] alarm systems.\" \n\n\t\tFederal Regulatory Actions\n\n\t\t\t1984 Cable Act\n\nIn the Cable Communications Policy Act of 1984 ( P.L. 98-549 , referred to in this report as the 1984 Cable Act), Congress added Title VI to the Communications Act to give the FCC explicit authority to regulate cable television. The 1984 Cable Act established the local franchising process as the primary means of cable television regulation. The act did not diminish state and local authority to regulate matters of public health, safety, and welfare; system construction; and consumer protection for cable subscribers.\nCongress enacted the 1984 Cable Act the same year that American Telephone and Telegraph Company (AT&T), which had an effective monopoly over most telecommunications services, spun off its regional operating companies as part of the settlement of a federal antitrust suit. The 1984 Cable Act generally prohibited telcos from providing video services in the same regions where they provided voice services. This prohibition prevented the former AT&T companies from competing with cable operators in communities where they controlled the local telephone system. \n\n\t\t\t\tFranchise Fees and PEGs\n\nThe 1984 Cable Act confirmed the power of state and municipal governments to include requirements for PEGs, facilities and equipment, and certain aspects of program content within franchise agreements. It delineated federal limits on franchise fees, and restricted the FCC's power to regulate the amount of franchise fees or the use of funds derived from those fees. \nThe law permits franchising authorities to charge franchise fees, but limits such fees to no more than 5% of the cable operators' gross revenues from \"cable services.\" For the purposes of calculating gross revenues, the FCC included revenues from advertising and home shopping commissions, in addition to revenues from video service subscriptions. Subsequently, as described in \" FCC Actions Affecting State and Local Video Service Franchising Terms and Conditions ,\" defining the costs that are subject to the 5% statutory limit on franchise fees became a point of repeated controversy.\nThe 1984 Cable Act allows local franchising authorities to enforce any PEG access requirements in a franchise agreement. Such terms and conditions can include providing video production facilities and equipment, paying capital costs related to PEG facilities beyond the 5% franchise fee cap, and paying costs associated with support of PEG channel use. In addition, the 1984 Cable Act permitted LFAs to require cable operators to designate channels for PEGs on institutional networks (I-Nets) provided for public buildings and other nonresidential subscribers. \n\n\t\t\t\tRate Regulation\n\nSection 623 of the 1984 Cable Act (47 U.S.C. \u00c2\u00a7543) prohibits federal, state, or local franchising authorities from regulating the rates of cable operators that are \"subject to effective competition,\" as defined by the FCC. The 1984 Cable Act directs the FCC to review its standards for determining effective competition periodically, taking into account developments in technology. \n\n\t\t\tRedefining Effective Competition\n\nIn 1985, the FCC determined that cable systems generally were subject to \"effective competition\" if they operated in an areas where three or more broadcast television signals were either \"significantly viewed\" by residents or transmitted with acceptable signal quality (as defined by the FCC) to the cable systems' franchise areas. In accordance with the timetable set by the 1984 Cable Act, the \"effective competition\" rule became effective on December 29, 1986. This rule effectively deregulated cable prices in most communities. \nIn 1991, the FCC adopted a new definition of \"effective competition.\" The FCC deemed effective competition to exist if either:\n1. six unduplicated broadcast signals were available to the cable operator's franchise area via over-the-air reception, or 2. another multichannel video service, such as a satellite service, was available to at least 50% of homes to which cable services were available (homes passed), and was subscribed to by 10% of the cable operator's homes passed. \nUnder this more restrictive definition, most systems were still subject to effective competition and therefore not subject to rate regulation. \n\n\t\t\t1992 Cable Act\n\nIn the Cable Television Consumer Protection and Competition Act of 1992 ( P.L. 102-385 , referred to here as the 1992 Cable Act), Congress stated the policy goal of relying on market forces, to the maximum extent feasible, to promote the availability of a diversity of views and information through cable television and other video distribution media. Congress emphasized the importance of protecting consumer interests where cable systems are not subject to effective competition, and of ensuring that cable operators do not have undue market power vis-\u00c3\u00a0-vis video programmers and consumers. \n\n\t\t\t\tNew Entrants in Video Programming Distribution Markets\n\nThe 1992 Cable Act revised Section 621(a)(1) of the Communications Act to codify restraints on local franchise authorities' licensing activities. While local authorities retained the power to grant cable franchises, the law provided that \"a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise.\" Congress gave potential entrants a judicial remedy by enabling them to commence an action in a federal or state court within 120 days after a local authority refused to grant them a franchise. \n\n\t\t\t\tRate Regulation\n\nIn addition, Congress made it easier for local authorities to regulate cable rates by adopting a more restrictive definition of \"effective competition\" than the FCC's. Pursuant to these changes, local authorities may not regulate cable rates if at least one of the following four conditions is met:\n1. fewer than 30% of the households in the franchise area subscribe to a particular cable service; 2. within the franchise area, a. at least two unaffiliated multichannel video programming distributors (MVPDs) each offer comparable video programming to at least 50% of the households in the franchise area, and b. at least 15% of households subscribe to an MVPD other than the largest one; 3. an MVPD owned by the franchising authority offers video programming to at least 50% of the households in the franchise area; or 4. a telephone company offering local voice services (known as a \"local exchange carrier\" [LEC]) or its affiliate, \"(or any multichannel video programming distributor using the facility of such carrier or its affiliate)\" carries comparable video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator that is providing video service in that franchise area.\nCongress directed the FCC to publish a survey of cable rates annually.\n\n\t\t\t1996 Telecommunications Act\n\nEven as the 1992 Cable Act took effect, a combination of technological, economic, and legal factors was enabling the convergence of the previously separate telephone, cable, and satellite broadcasting industries. Digital technology, particularly the ability to compress digital signals, enabled both direct broadcast satellite (DBS) services and cable operators to offer dozens of channels. In 1993, the telephone company Bell Atlantic successfully challenged, on First Amendment grounds, the 1984 ban on cross-ownership of telephone and cable companies in the same local market. In the meantime, several cable operators sought to gain economies of scale by consolidating local systems into regional systems. \nIn the Telecommunications Act of 1996 ( P.L. 104-104 ), Congress permitted LECs to offer video services and cable operators to offer voice services. Because laws and regulations pertaining to cable systems were quite different from those pertaining to LECs, the prospect of greater competition between those two types of providers led Congress to revisit video market regulation. Moreover, Section 601 rescinded the 1982 consent decree that required the breakup of AT&T, thereby allowing LECs to consolidate further by subsequently merging with long-distance service providers and each other.\nThe act stipulated that cable operators do not need to obtain approval of local authorities that regulate their video services in order to offer \"telecommunications services,\" such as voice services. The Senate Commerce Committee noted that these changes did not affect existing federal or state authority with respect to telecommunications services. It stated that the committee intended that local governments, when exercising their authority to manage their public rights of way, regulate telecommunications services provided by cable companies in a nondiscriminatory and competitively neutral manner. \nCongress used the term \"open video systems\" (OVS) in the 1996 Telecommunications Act (\u00c2\u00a7653) to describe LECs that soughtto compete with cable operators. The act explicitly exempted OVS service from franchise fees and other 1992 Cable Act requirements, including the requirement to obtain a local franchise. In 1999, the U.S. Court of Appeals for the Fifth Circuit interpreted the provision to mean that, while the federal government could no longer require OVS operators to obtain a local franchise, state and local authorities could nevertheless do so. \n\n\tState vs. Local Franchising of Video Services\n\nIn 2003, several telephone companies, most notably Southwestern Bell Company (now AT&T) and Verizon, began constructing fiber networks designed to bring consumers advanced digital services, including video. AT&T and Verizon branded these services as \"U-Verse\" and \"FiOS,\" respectively. Neither company launched video services under the OVS rules, claiming that federal requirements and potential local franchise requirements were too costly. \nIn 2006, a federal district court in California dismissed AT&T's claims that municipalities were violating federal law by attempting to exercise franchise authority over the company's video services. The court declined, however, to rule on whether video delivered over internet protocol, the technology used by LECs, met the federal definition of a cable service. Two bills introduced that year in the 109 th Congress, H.R. 5252 and S. 2686 , would have declared that video service enabled via internet protocol is subject only to federal regulation. Congress did not vote on either bill. \n\n\t\tState-Level Franchising Authority\n\nAs the LECs sought to enter the video distribution market, they pursued statewide reforms to speed their entry, rather than seeking franchises in individual municipalities. The LECs' competitors, the incumbent cable operators, contended that state-level franchising would present new entrants with fewer obligations than cable companies had faced when they entered the market, specifically the obligation to build networks serving all parts of a community. \nIn 2005, Texas became the first of several states to replace local franchising with a state-level regime for video service providers, with the express purpose of facilitating entry by new competitors. As Table 1 illustrates, many other states have since either replaced municipal franchising with state-level franchising or offered providers a choice.\n\n\tFCC Actions Affecting State and Local Video Service Franchising Terms and Conditions\n\nSince 2007, the FCC has repeatedly revisited the authority of states and LFAs to franchise and regulate video service providers. This process culminated in two orders issued in 2019. One (the \"2019 LFA 3 rd R&O\") sharply limits state and local authority over products offered by video service providers other than video programming. The other order (the \"2019 Effective Competition Order\") determined that AT&T's streaming service, AT&T TV NOW, meets the LEC test component of Congress's effective local competition definition and therefore provides effective competition to a local cable operator. \n\n\t\t2007 Order Addressing Local Franchising of New Entrants\n\nIn 2007, the FCC found that the local franchising process constituted an unreasonable barrier to new entrants in the marketplace for video services and to their deployment of high-speed internet service. The FCC adopted rules and guidance covering cities and counties that grant cable franchises. However, the agency stated that it lacked sufficient information regarding whether to apply the rules and guidance to state governments that either issued franchises at the statewide level or had enacted laws governing specific aspects of the franchising process. Consequently, the FCC stated that while it would preempt local laws, it would not preempt state laws covering video franchises.\n\n\t\t\tFranchise Fee Cap\n\n\t\t\t\tIn-Kind Contributions Unrelated to Cable Services Included in Cap\n\nThe FCC determined that unless certain specified costs, fees, and other compensation required by LFAs are counted toward the statutory 5% cap on franchise fees, an LFA's demand for such fees represents an unreasonable refusal to award a competitive franchise to a new entrant. In addition, the FCC found that some LFAs had required new entrants to make \"in-kind\" payments or contributions that are unrelated to the provision of cable services. The FCC stated that any requests by LFAs for in-kind contributions that are unrelated to the provision of cable services by a new competitive entrant are subject to the statutory 5% franchise fee cap.\n\n\t\t\t\tPayments Made to Support PEG Operations Included in Cap\n\nThe FCC contended that disputes between LFAs and new entrants over LFA-mandated contributions in support of PEG services and equipment could lead to unreasonable refusals by LFAs to award competitive franchises. It determined that costs related to supporting the use of PEG access facilities, including but not limited to salaries and training, are subject to the 5% cap, but that capital costs \"incurred in or associated with the construction of PEG access facilities\" are excluded from the cap. \n\n\t\t\tTreatment of Nonvideo Services by LFAs\n\nThe FCC stated that the LFAs' jurisdiction over LECs and other new entrants applies only to the provision of video services. Specifically, it stated that an LFA cannot use its video franchising authority to attempt to regulate a LEC's entire network beyond the provision of video services.\n\n\t\t\tAdditional Findings Regarding \"Unreasonable\" LFA Actions\n\nIn addition, the FCC found that the following LFA actions constitute an unreasonable refusal to award video franchises to new entrants:\n1. failure to issue a decision on a competitive application within the time frames specified in the FCC's order; 2. refusal to grant a competitive franchise because of an applicant's unwillingness to agree to \"unreasonable\" build-out requirements; and 3. denying an application based upon a new entrant's refusal to undertake certain obligations relating to PEGs and I-Nets. \n\n\t\t\tCourt Ruling\n\nIn 2008, the U.S. Court of Appeals for the Sixth Circuit upheld the FCC's rules.\n\n\t\t2007 and 2015 Orders Addressing Local Franchising of Incumbent Cable Operators\n\nIn November 2007, the FCC issued a Second Report and Order that extended the application of several of these rules to local procedures to renew incumbent cable operators' franchises. Specifically, the FCC determined that the rules addressing LFAs' franchise fees, PEG and institutional network obligations, and non-cable-related services and facilities should apply to incumbent operators. It concluded, however, that FCC rules setting time limits on LFAs' franchising decisions and limiting LFA build-out requirements should not apply to incumbent cable operators. \nSeveral LFAs petitioned the FCC to reconsider and clarify its Second Report and Order. In 2015, the FCC issued an Order on Reconsideration in which it set forth additional details about its rules with the stated purposes of promoting competition in video services and accelerating broadband deployment. Following the 2015 Order on Reconsideration, the following policies were in place.\n\n\t\t\tCity and County LFAs Only\n\nThe FCC clarified that its rules and regulations on franchising applied to city and county LFAs only, not to state-level laws or decisions. The FCC stated that it lacked sufficient information about the state-level franchising process, and suggested that if parties wished the agency to revisit this issue in the future, they should provide evidence that doing so would achieve Congress's policy goals. \n\n\t\t\tFranchise Fee Cap\n\n\t\t\t\tIn-Kind Contributions Unrelated to Cable Services Included in Cap\n\nThe FCC included in-kind contributions from incumbent cable operators that were unrelated to the provision of video services within the statutory 5% franchise fee cap. Likewise, the FCC found that payments made by cable operators to support PEG access facilities are subject to the 5% cap, unless they fall under the FCC's definition of \"capital costs\" associated with the construction of PEG facilities. The FCC made in-kind contributions related to cable services subject to the cap on franchise fees for new entrants as well as for cable incumbents.\n\n\t\t\tTreatment of Nonvideo Services by LFAs\n\nThe FCC determined that LFAs' jurisdiction to regulate incumbent cable operators' services is limited to video services, and does not include voice or data services.\n\n\t\t\tFindings Applicable to New Entrants, but Not Incumbents\n\nIn addition, the FCC found the following LFA actions do not per se constitute an unreasonable refusal to award video franchises to cable incumbents, although they did for new entrants:\n1. denying an application based upon an incumbent's refusal to undertake certain obligations relating to PEGs and institutional networks; 2. failure to issue a decision on a competitive application within the time frames specified in the FCC's order; and 3. refusal to grant a competitive franchise because of an applicant's unwillingness to agree to unreasonable build-out requirements. \n\n\t\t\tCourt Ruling\n\nIn 2017, the U.S. Court of Appeals for the Sixth Circuit addressed challenges by LFAs to the 2007 Second Report and Order and the 2015 Order on Reconsideration. The court found that the FCC had made sufficiently clear that its rules only apply to city and county LFAs and did not bind state franchising authorities.\nIt determined that the FCC had correctly concluded that noncash contributions could be included in its interpretation of \"franchise fee\" subject to the 5% limit. However, the court held that the FCC had neither explained why the statutory text allowed inclusion of in-kind cable-related contributions within the 5% cap nor defined what \"in-kind\" meant. It found that the FCC offered no basis for barring local franchising authorities from regulating the provision of \"non-telecommunications\" services by incumbent cable providers. It directed the FCC to set forth a valid statutory basis, \"if there is one,\" for applying its rule to the franchising of cable incumbents. The court used the term \"non-telecommunications\" service rather than \"non-video\" or \"non-cable\" service, differing from the distinctions the FCC made with respect to LFAs' authority. \n\n\t\t2019 FCC Rulemaking\n\nThe FCC responded to the court's directives in 2018, and once again proposed rules governing the franchising of cable incumbents. On August 1, 2019, the FCC adopted its Third Report and Order (R&O). The FCC stated that its rules would ensure a more level playing field between new entrants and incumbent cable operators and accelerate deployment of \"advanced telecommunications capability\" by preempting local regulations that \"impose an undue economic burden\" on video service providers. \nThe FCC stated that the franchise fees rulings are prospective. That is, video operators may count only ongoing and future in-kind contributions toward the 5% franchise fee cap after September 26, 2019, the effective date of its rules. To the extent franchise agreements conflict with the FCC's rules, the agency encourages the parties to negotiate franchise modifications within a \"reasonable timeframe,\" which it states should be120 days in most cases. Under the new regulations:\nThe FCC oversees state franchising authorities for the first time. Cable-related in-kind contributions from both new entrants and incumbent cable operators are \"franchise fees\" subject to the 5% cap, with limited exceptions. Such contributions include any nonmonetary contributions related to the provision of video services by incumbent cable operators and LECs as a condition or requirement of a local franchise agreement. Examples include free and discounted cable video service to public buildings; costs in support of PEG access facilities other than capital costs; and costs associated with the construction, maintenance, and service of an I-Net. For purposes of calculating contributions toward the 5% franchise fee cap, video providers and LFAs must attach a fair market value to cable-related in-kind contributions, but the FCC declined to provide guidance on how to calculate fair market value. The definition of PEG \"capital costs\" subject to the 5% cap includes equipment purchases and construction costs, but does not include the cost of installing the facilities that LFAs use to deliver PEG services from locations where the programming is produced to the cable headend. Requirements that cable operators build out their systems within the franchise area and the cost of providing channel capacity for PEG channels may not be included under the 5% cap. Franchise authorities may not regulate nonvideo services offered over cable systems by incumbent cable operators. The services covered by this prohibition include broadband internet service, business data services, and Voice over Internet Protocol (VoIP) services. \"[S]tates, localities, and cable franchising authorities are preempted from charging franchised cable operators more than five percent of their gross revenue from cable [video] services.\" Thus, LFAs may not include nonvideo service revenues when calculating the 5% cap. \nThe communities of Los Angeles, CA, Portland, OR, and Eugene, OR, have filed a petition with the U.S. Court of Appeals for the Ninth Circuit challenging the FCC's rules. The Ninth Circuit has consolidated the various appellate court challenges, and in November 2019, granted an FCC motion to transfer the now-consolidated petition to the U.S. Court of Appeals, Sixth Circuit.\n\n\tPotential Impact of FCC Rules\n\n Table 1 , as well as the following two tables, illustrate how the FCC's rules could potentially affect the franchising process in several states. The FCC's decision to extend its franchising rule to state governments for the first time will subject each of the states listed in the first three columns of Table 1 (i.e., those that issue franchises at the state-level in all or some circumstances) to the FCC's rules. Moreover, the FCC's rules will cover states that oversee municipal franchises via either statute or state-level agencies. Thus, the FCC's franchising rules will affect more video service providers, viewers, and municipal governments than ever before. \n\n\t\tTrade-Offs Between In-Kind Cable-Related Contributions and General Funds\n\nBecause the FCC is including cable-related in-kind contributions in its definition of franchise fees subject to the 5% cap, some states and municipalities may need to make a trade-off. \nSpecifically, as Table 2 illustrates, several states require or allow LFAs to require video service providers to offer free and\/or discounted video service to public buildings, support of PEG services (other than capital costs), and support of I-Nets. Affected states and municipalities may need to reevaluate the trade-off between in-kind cable-related contributions and general fund revenues. Note that Ohio and Wisconsin prohibit both PEG and I-Net contribution requirements, while Idaho prohibits I-Net contribution requirements.\n\n\t\tEvaluation of Provider Revenues Subject to Franchise Fee Cap\n\n\t\t\tVideo-Related Revenues\n\nAs Table 3 illustrates, some states define \"gross revenues\" more narrowly than the FCC, excluding, for example , revenues from advertising and home shopping commissions. In those states, as well as others in which municipal LFAs define gross revenues more narrowly than the FCC, PEGs may be able to continue to receive cable-related, in-kind contributions without reducing the monetary contributions they receive, while remaining within the 5% cap. As described in \" Franchise Fees and PEGs ,\" the FCC has included revenues from advertising and home shopping commissions, in addition to revenues from video service subscriptions, in its definition of \"gross revenues.\" LFAs that use similar definitions of \"gross revenues,\" including those subject to state regulation, may already charge the maximum amount of franchise fees permitted by the FCC. Others, however, exclude these sources, and may therefore have more flexibility when evaluating whether or not to continue their cable-related in-kind contributions. \nMoreover, some states specifically exclude other items when calculating providers' revenue bases that are subject to the franchise fees. Several exclude government fees and\/or taxes passed on to subscribers, while Missouri excludes fees and contributions for I-Nets and PEG support from its calculation. The FCC has not specifically addressed whether franchise authorities may include these items in their revenue base calculation. Thus, these states may also have more flexibility when evaluating whether to change video franchises' terms and conditions.\n\n\t\t\tNonvideo Revenues\n\nMany states already exclude nonvideo revenues from the calculation of provider revenues subject to the franchise fee cap. New York, however, describes the gross revenues of a video provider subject to the franchising fees as including, among other things, \"carrier service revenue.\" This section of the New York statute does not define \"carrier service revenue.\" A current dispute between New York City and Charter Communications (d\/b\/a Spectrum) for service within Brooklyn concerns whether \"carrier service revenue\" received from \"additional provided services\" may be subject to franchise fees. The FCC's new rules may affect the outcome of this dispute.\nMoreover, in July 2019, the New York State Public Service Commission approved a settlement of a complaint that Charter has failed to comply with a requirement in its franchise agreement to expand high-speed service. Under the settlement, Charter may continue operating within the state, if it expands its high-speed internet service infrastructure to 145,000 residents in Upstate New York and invests $12 million in providing high-speed internet services to other areas of the state. If Charter contends that the FCC's rules preempt these provisions, it could seek to renegotiate the settlement.\nThe FCC cited a decision by the Supreme Court of Oregon in City of Eugene v. Comcast as an example of states and localities asserting authority to impose fees and requirements beyond their authority. In the decision, the court upheld a local government's 7% license fee on revenue from broadband services provided over a franchised cable system. Thus, while states and municipalities may regulate both video and voice services of telcos, they may only regulate video services of cable operators. \n\n\t\t\tOutlook for State and Municipal Franchise Fees\n\nIf a state or municipality may charge franchise fees to cable operators and telcos only with respect to video services, the total amount of fees received is likely to decrease over time. As Figure 1 indicates, the total number of U.S. households subscribing to cable and telco video services has declined over the past 10 years. In 2010, about 70.8 million households subscribed to either a cable operator or a telco, compared with about 60.1 million households in 2019. In place of cable, more households have elected to rely on video provided over broadband connections or broadcast transmission. \nFor cable operators in particular, this substitution of alternative sources of programming has led to the pursuit of revenue from nonvideo services, such as voice and high-speed data. In 2010, video services represented about 63% of total cable industry revenue, whereas in 2019 video represented 46% of total industry revenue ( Figure 2 ). Pursuant to the FCC's proposed rules, these other sources of revenue are not subject to LFAs' jurisdiction. In addition, the U.S. Court of Appeals for the Eighth Circuit held that a cable operator's voice services are not a telecommunications service, and therefore not subject to state regulation. In October 2019, the U.S. Supreme Court denied the Minnesota Public Utility Commission's petition hear the case.\nIn Missouri, the City of Creve Coeur and other municipalities filed a class action lawsuit against satellite operators DIRECTV, DISH Network, as well as online streaming services Netflix Inc., and Hulu LLC, claiming that the companies must pay a percentage of gross receipts from video services to the municipalities where they do business, pursuant to Missouri's Video Services Providers Act. The state law allows Missouri's political subdivisions to collect up to 5% of gross receipts from providers of video programming and requires providers to register before providing service in the state, according to court documents. The municipalities claim the defendants have not paid the required amounts.\nOther localities may follow suit. A bill before the Illinois General Assembly would impose a 5% tax (rather than a \"franchise fee\") on the video service revenues of direct broadcast satellite operators and online video services for the right to provide services to Illinois residents. Similarly, a bill before the Massachusetts House of Representatives would impose a 5% fee on revenues earned by streaming video services. Massachusetts would split the money collected from the fees between the state's general fund (20%), municipalities (40%), and PEG programmers (40%). If receipts from cable franchise fees continue to erode, more states and municipalities may respond by seeking alternative revenue sources. \n\n\t\tPreemption of Rate Regulation\n\nIn 2014, Congress enacted the Satellite Television Extension and Localism Act Reauthorization Act (STELA Reauthorization Act; P.L. 113-200 ). Section 111 of the act directed the FCC to develop a streamlined process for the filing of \"effective competition\" petitions by small cable operators within 180 days of the law's enactment. A cable company filing such a petition bears the burden of proof to demonstrate that it faces effective competition for its video services.\nThe FCC responded in 2015 by adopting a rebuttable presumption that cable operators are subject to effective competition. As a result, the FCC prohibited franchising authorities from regulating basic cable rates unless they can demonstrate that the cable system is not subject to effective competition. The FCC stated that the change in its effective competition definition was justified by the fact that direct broadcast satellite service was available as an alternative video services provider throughout the United States. \nLater in 2015, the FCC found that LFAs in two states, Massachusetts and Hawaii, demonstrated that cable systems in their geographic areas were not subject to effective competition, and permitted them to continue to regulate the rates of the basic tiers of cable services. However, in September 2018, Charter Communications (Charter), a cable provider, asked the FCC to find that AT&T's DIRECTV NOW, a streaming service that AT&T has since rebranded as AT&T TV NOW, provides effective competition to cable systems in Kauai, HI, and 32 Massachusetts communities. In October 2019, the FCC agreed and issued an order granting Charter's petition, finding for the first time that an online streaming service affiliated with a LEC meets the LEC test in Congress's definition of effective competition. \nThe FCC found that \n[AT&T TV NOW] need not itself be a LEC and AT&T need not offer telephone exchange service in the franchise areas.... There is no requirement ... that a LEC provide telephone exchange service in the same communities as the competing video programming service. \nThus, if even AT&T TV NOW's subscribers rely on internet service from Charter to receive AT&T TV NOW's programming, the FCC considers AT&T TV NOW to be a competitor to Charter with respect to the distribution of video programming. According to the FCC, \nCongress adopted the LEC test because LECs and their affiliates \"are uniquely well-funded and well-established entities that would provide durable competition to cable,\" and not because [Congress was] focused on facilities-based competition.\nMeanwhile, some localities have enacted legislation with the goal of reducing prices consumers pay for video services. A 2019 Maine law would require video service providers to offer networks and programs on an a la carte basis instead of offering subscribers only bundles of channels. Several cable operators, broadcasters, and content providers have sued to overturn the law. In January 2020, a federal judge blocked the implementation of the law as the parties prepare for trial.\n\n\tConsiderations for Congress\n\nThese regulatory developments and industry trends raise several potential issues for Congress to consider.\nFirst, Congress could consider whether the FCC's interpretation of the Communications Act is consistent with the policy goals set forth in Section 601 of the Communications Act (47 U.S.C. \u00c2\u00a7521) and Section 706 of the Telecommunications Act. Specifically, Congress could explore the extent, if any, to which state and local regulations designed to promote the availability of PEG programming and I-Nets. \nSecond, Congress could evaluate whether to create regulatory parity with respect to local regulation of nonvideo services of cable and telcos. While states and municipalities may regulate both video and voice services of telcos, they may only regulate video services of cable operators. Congress could address regulatory parity by either deregulating traditional telcos' nonvideo services or regulating cable operators' nonvideo services.\nThird, as the FCC and local governments include online video providers in their definitions of video providers for the purposes of evaluating competition and\/or imposing franchise fees, Congress could clarify whether these actions achieve its stated policy goals. For example, if, in contrast to the FCC's interpretation of the LEC test for effective competition, Congress intends to include only facilities-based video services in its definition of video service competition, it could delineate the definition in communications laws. Likewise, as online video services become more prevalent and states and municipalities target them for franchise fees, Congress could specify the authority, if any, to regulate them.\nFinally, while the FCC has determined that competition among video programming distribution services has eliminated the need for rate regulation of the basic tier of cable services, Maine enacted a law to enable consumers to pay only for video programming they choose, in lieu of bundles of channels. In the past, some Members of Congress have proposed statutory changes to require video programming distributors to offer individual channels to consumers in addition to bundles of channels, and Congress could consider revisiting this issue, or alternatively clarifying that states and local governments lack authority to enact such laws.","output":null}
{"id":"gao_GAO-20-180","pid":"gao_GAO-20-180_0","input":"\tBackground\n\n\t\tNNSA\u2019s Missions and Organization\n\nNNSA largely executes its missions at eight sites that comprise the  nuclear security enterprise and that are managed by seven M&O  contractors. These eight sites are  three national security laboratories\u2014Lawrence Livermore National  Laboratory in California, Los Alamos National Laboratory in New  Mexico, and Sandia National Laboratories in New Mexico and other  locations;  four nuclear weapons production plants\u2014the Pantex Plant in Texas,  the Y-12 National Security Complex in Tennessee, the Kansas City  National Security Complex in Missouri, and tritium operations at  DOE\u2019s Savannah River Site in South Carolina; and  the Nevada National Security Site, formerly known as the Nevada  Test Site.\nAs shown in figure 1, each of NNSA\u2019s eight sites has specific  responsibilities within the nuclear security enterprise. NNSA also  executes portions of its missions across several other DOE sites, such as  the Pacific Northwest National Laboratory in Washington and the Oak  Ridge National Laboratory in Tennessee. At this time, NNSA\u2019s common  financial reporting efforts are focused on the eight sites, as required by  the National Defense Authorization Act for Fiscal Year 2017.\nNNSA\u2019s sites are owned by the federal government but managed and  operated by M&O contractors. According to DOE, the use of M&O  contracts is supported by an underlying principle: the federal government  employs highly capable companies and educational institutions to  manage and operate government-owned or -controlled scientific,  engineering, and production facilities because these companies and  educational institutions have greater flexibility than the government in  bringing scientific and technical skills to bear. As we previously found, an  M&O contract is characterized by, among other things, a close  relationship between the government and the contractor for conducting  work of a long-term and continuing nature.\nTo support its missions, NNSA is organized into program offices that  oversee the agency\u2019s numerous programs. For example, the Office of  Defense Programs oversees the B61-12 Life Extension Program, and  the Office of Defense Nuclear Nonproliferation oversees the Nuclear  Smuggling Detection and Deterrence Program. NNSA\u2019s program offices  are\nDefense Nuclear Nonproliferation;\nSafety, Infrastructure, and Operations;\nDefense Nuclear Security;\nCounterterrorism and Counterproliferation; and\nNaval Reactors.\nMission-related activities are primarily overseen by these program offices,  which are responsible for integrating the activities across the multiple  sites performing work. NNSA field offices, co-located at the sites, oversee  the day-to-day activities of the contractors as well as mission support  functions such as safety.\n\n\t\tCost Accounting Requirements and Methods of Accounting for and Tracking Costs\n\nNNSA is subject to different cost accounting requirements than its seven  M&O contractors. NNSA is required to follow Managerial Cost Accounting  Standards. The principal purpose of Managerial Cost Accounting  Standards is to determine the full cost of delivering a program or output to  allow an organization to assess the reasonableness of this cost or to  establish a baseline for comparison. The standards state that federal  agencies should accumulate and report the costs of their activities on a  regular basis for management information purposes. The standards also  state that agencies should allow flexibility for agency managers to  develop costing methods that are best suited to their operational  environment. Such information is important to Congress and to NNSA  managers as they make decisions about allocating federal resources,  authorizing and modifying programs, and evaluating program  performance. Separate standards\u2014referred to as federal Cost  Accounting Standards\u2014govern how NNSA\u2019s M&O contractors structure  and account for their costs. Federal Cost Accounting Standards provide  direction for the consistent and equitable distribution of a contractor\u2019s  costs to help federal agencies more accurately determine the actual costs  of their contracts and the contractor\u2019s costs associated with specific  projects and programs.\nTo comply with federal Cost Accounting Standards, M&O contractors  classify costs as either direct or indirect when they allocate these costs to  programs. Direct costs are assigned to the benefitting program or  programs. Indirect costs\u2014costs that cannot be assigned to a particular  program, such as costs for administration and site support\u2014are to be  accumulated, or grouped, into indirect cost pools. The contractor is to  estimate the amount of indirect costs to distribute to each program  (accumulated into indirect cost pools) and make adjustments by the end  of the fiscal year to reflect actual costs. The contractor is then to distribute  these costs proportionally across all programs based on a rate in  accordance with the contractor\u2019s cost allocation model. The final program  cost is the sum of the total direct costs plus the indirect costs distributed  to the program.\nIn implementing these allocation methods, federal Cost Accounting  Standards provide contractors with flexibility regarding the extent to which  they identify incurred costs directly with a specific program and how they  collect similar costs into indirect cost pools and allocate them among  programs. Therefore, different contractors may allocate similar costs  differently because the contractors\u2019 cost allocation models differ\u2014that is,  a cost classified as an indirect cost at one site may be classified as a  direct cost at another. Because each contractor can allocate similar  indirect costs differently and contractors may change the way they  allocate indirect costs over time, it is difficult to compare contractors\u2019  costs among sites and accurately calculate total program costs when  work for a program is conducted at multiple sites.\nThe seven NNSA M&O contractors and NNSA\u2019s program offices account  for and track costs differently. We previously found that NNSA\u2019s M&O  contractors have historically developed their own processes to manage  and track costs for work at each site even when their work contributes to  the same program. These processes have generally differed from the  ones NNSA program offices have developed to describe the scope of its  programs. This makes it difficult for NNSA and others to track and  compare costs for analogous activities across programs, contractors, and  sites. For example, in May 2018, we found that NNSA\u2019s work breakdown  structure for the B61-12 Life Extension Program and its $7.6 billion cost  estimate (at that time) did not include $648 million in activities that were  undertaken by other NNSA programs, such as research and  development, test and evaluation activities, and infrastructure elements.\nLeading practices for developing work breakdown structures state that a  work breakdown structure should include all activities that contribute to a  program\u2019s end product, and should not treat contributing activities  separately.\nDOE\u2019s and NNSA\u2019s financial management and accounting system\u2014the  Standard Accounting and Reporting System (STARS)\u2014provides budget  execution, financial accounting, and financial reporting capabilities for the  department. STARS is also integrated with other agency systems for  procurement, funds distribution, travel, and human resources. The M&O  contractors\u2019 financial systems must be able to directly provide cost reports  to NNSA\u2019s financial management system. The primary source of cost  data contained in STARS comes from summary-level cost reports  provided by M&O contractors, which they report for NNSA\u2019s  appropriations at the budget and reporting code level. Program offices  access STARS financial data through the DOE Office of the Chief  Financial Officer\u2019s integrated data warehouse. While financial data  collected through STARS represent DOE\u2019s official financial data, the data  are not detailed and therefore may not satisfy the information needs of  NNSA\u2019s program offices. For example, STARS financial data do not  differentiate labor costs from other programmatic costs, nor do they  provide detailed information about the costs of activities that contribute to  program costs. In addition, according to M&O contractor representatives,  if one M&O contractor provides funding to another contractor, such as to  conduct testing, NNSA does not have the ability in STARS to identify that  funding was transferred.\nIn the absence of an automated managerial cost accounting system that  collects data from financial systems and relevant operating systems to  consistently and uniformly produce useful cost information, NNSA\u2019s  program offices developed various systems, tools, and spreadsheets to  track relevant cost information. Specifically, NNSA\u2019s program offices  separately collect cost information from M&O contractors that is more  detailed than costs reported through STARS. Collecting these data  requires M&O contractors to map, or \u201ccrosswalk,\u201d their cost data to the  work breakdown structures of one or more of NNSA\u2019s program offices.  Some program offices collect financial data through ad hoc data calls,  rather than regular data calls. Some tools the program offices use include  program management systems or spreadsheets designed to meet each  program office\u2019s programmatic, budgetary, and project requirements. For  example, the Office of Defense Programs built the Enterprise Portfolio  Analysis Tool in 2007 to capture financial data from the M&O contractors  for its programs.\nAlso, in 2007, officials from the Office of Defense Nuclear Nonproliferation  developed a program management system designed to integrate and  manage data such as scope, schedule, budget, and cost at the program  level with greater detail than the data in STARS. The Office of Safety,  Infrastructure, and Operations later adopted this system and called it the  G2 program management system. M&O contractors use the G2 system  to upload crosswalks of financial data for those program offices\u2019 work  breakdown structures after the costs were incurred. This process allows  M&O contractors to report detailed financial data to the respective  program offices every month. The process to track cost information is  different for each program office and depends on the tool used and the  information collected. However, for all program offices the process to  track cost information is in addition to the financial reporting that M&O  contractors provide for STARS (see fig. 2).\n\n\t\tNNSA\u2019s Approach to Implementing Common Financial Reporting\n\nTo implement common financial reporting and standardize financial  reporting by the M&O contractors across programs and sites, NNSA is  pursuing an approach in which the agency collects M&O contractors\u2019  financial data in a common reporting framework using an NNSA-wide  data reporting and analysis tool. M&O contractors produce crosswalks of  their financial data and submit the data to NNSA using a data reporting  and analysis tool called CostEX. NNSA then stores the reported financial  data in the DOE Office of the Chief Financial Officer\u2019s integrated data  warehouse. The Office of Defense Programs has used this process to  collect financial data from the M&O contractors for its programs since  fiscal year 2017. NNSA implemented this process for the broader  common financial reporting effort in fiscal year 2018. Figure 3 illustrates  NNSA\u2019s data management process for common financial reporting.\nTo implement common financial reporting, NNSA established a common  reporting framework using agreed-upon work breakdown structures and  common cost elements and definitions. However, in January 2019, we  found that NNSA did not establish a common work breakdown structure  for all of the participating program offices, although the agency had  established 22 common cost elements and definitions. Specifically, the  Offices of Defense Programs, Emergency Operations, Defense Nuclear  Security, and Counterterrorism and Counterproliferation used NNSA\u2019s  common work breakdown structure, while the Offices of Safety,  Infrastructure, and Operations and Defense Nuclear Nonproliferation  used their own programmatic work breakdown structures.\nThe M&O contractors crosswalk their internal financial data into a work  breakdown structure for each of the participating program offices (either  NNSA\u2019s common work breakdown structure or a programmatic work  breakdown structure) using common cost elements and definitions. The  M&O contractors\u2019 business systems capture their financial data at a more  detailed level than is needed for common financial reporting. Each M&O  contractor tracks financial data for its site based on how it manages the  work using projects, tasks, and expenditure types. For example, M&O  contractors collect time and attendance data from their employees based  on the number of hours spent working on a project for the pay period. The  M&O contractors aggregate this information across multiple employees to  report on labor costs for a project. When the M&O contractors prepare  their data for common financial reporting, site managers identify the  component(s) of the applicable work breakdown structure and cost  elements with which the project aligns and crosswalk their financial data  to the NNSA structure using professional judgment. Figure 4 shows an  example of how an M&O contractor crosswalks its financial data into an  NNSA work breakdown structure in CostEX.\nAfter the M&O contractors submit their financial data in CostEX, NNSA  performs data quality and accuracy checks of the M&O contractors\u2019 data,  referred to as \u201cdata validation\u201d and \u201cdata reconciliation.\u201d NNSA performs  data validation using CostEX, which automatically checks each row for  data quality\u2014such as confirming that the correct contractor is entering  data for the site\u2014and formatting based on 45 validation checks. CostEX  identifies data that do not pass the validation check as errors and rejects  them, and the M&O contractor corrects and resubmits the data until it  passes the validation check. NNSA performs data reconciliation with  STARS using CostEX at the budget and reporting code level. CostEX  extracts STARS data for selected budget and reporting codes and  compares it with the data the M&O contractors submitted for common  financial reporting. CostEX identifies data that differ from the STARS data  by more than $1 as an error and rejects the data, and the M&O contractor  corrects and resubmits the data until it passes the reconciliation check.  According to NNSA officials, it is important for the agency to perform  these data validation and reconciliation checks prior to accepting the  M&O contractors\u2019 financial data to ensure data quality.\n\n\tNNSA Made Progress toward Implementing Agency-Wide Common Financial Reporting but Faces Challenges in Fully Implementing the Effort\n\nNNSA has made progress toward implementing common financial  reporting across the nuclear security enterprise since our last report in  January 2019, but it faces challenges in fully implementing the effort. We  identified seven steps related to NNSA\u2019s efforts to implement common  financial reporting in our January 2019 report: (1) identifying an approach  and developing a tool to implement common financial reporting, (2)  developing a policy, (3) establishing common cost elements and  definitions, (4) identifying and reporting costs for programs of record and  base capabilities, (5) implementing a common work breakdown structure,  (6) collecting financial data from the M&O contractors, and (7) publishing  and analyzing data. To date, the agency has completed three steps but  has not yet completed four others, as shown in table 1. As required by the  National Defense Authorization Act for Fiscal Year 2017, NNSA is to  implement common financial reporting by December 23, 2020, to the  extent practicable.\nNNSA\u2019s progress to implement common financial reporting in these seven  steps since our January 2019 report is described below:  Identify an approach and develop a tool to implement common  financial reporting. NNSA identified an approach and developed a tool  to implement common financial reporting prior to our January 2019 report.  NNSA continues to use CostEX to collect financial data from the M&O  contractors and stores the data in DOE\u2019s integrated data warehouse.\nDevelop a policy. NNSA developed a policy for common financial  reporting. NNSA began developing the policy in October 2016 and  approved it in February 2019.\nEstablish common cost elements and definitions. NNSA established  common cost elements and definitions prior to our January 2019 report.  An NNSA official said NNSA established the cost elements and  definitions based on data that the M&O contractors could readily provide  from their business systems. In fiscal year 2019, NNSA used the  established cost elements to collect the M&O contractors\u2019 data and added  a requirement for the contractors to report data on unpaid commitments.\nNNSA officials are considering adding cost elements in the future, such  as additional details on labor categories. NNSA is working with the M&O  contractors to ensure they can provide the additional data.\nIdentify and report costs for programs of record and base  capabilities. NNSA has not yet identified and reported costs for all  programs of record or costs for base capabilities. The National Defense  Authorization Act for Fiscal Year 2017 required NNSA to establish  definitions and methodologies for identifying and reporting costs for  programs of record and base capabilities as part of its efforts to  implement common financial reporting. According to the program director  for financial integration, NNSA establishes its programs of record in its  congressional budget justification and other documents to align with  agency appropriations, which include Weapons Activities, Defense  Nuclear Nonproliferation, and Federal Salaries and Expenses. Through  common financial reporting in fiscal year 2018, NNSA collected financial  data from the M&O contractors for $8.9 billion of $13 billion from these  appropriations. In May 2018, NNSA issued guidance that identified 25  base capabilities that the M&O contractors used to develop their site  strategic plans. We reviewed the M&O contractors\u2019 site strategic plans for  2018 and found that the contractors identified base capabilities for their  sites, but did not include information about the costs to maintain each  sites\u2019 base capabilities. NNSA is working to determine whether or how  to collect information on the cost of base capabilities through the M&O  contractor site strategic planning process in coordination with the  common financial reporting effort. We will continue to monitor NNSA\u2019s  progress in addressing this requirement.\nImplement a common work breakdown structure. NNSA has not yet  implemented a common work breakdown structure across the program  offices in the nuclear security enterprise, but plans to assess the  feasibility of implementing a common structure in fiscal year 2020. The  National Defense Authorization Act for Fiscal Year 2017 requires NNSA  to develop a common work breakdown structure as part of its efforts to  implement common financial reporting. In January 2019, we found that  NNSA decided not to pursue a common work breakdown structure.  Rather, NNSA collected financial data from the M&O contractors using a  common work breakdown structure for four program offices and used  different, programmatic work breakdown structures for two other program  offices. As we found in January 2019, these two offices did not want to  change their work breakdown structures to the common structure. For  example, the Office of Safety, Infrastructure, and Operations did not want  to change its work breakdown structure because it uses the structure for  scope, schedule, and risk management, in addition to budget and cost.  We recommended that NNSA implement a common work breakdown  structure across its participating program offices because without doing  so, NNSA could not ensure that its efforts would result in the collection of  reliable, enterprise-wide financial data that satisfies the needs of  Congress and enables NNSA to report the total costs of its programs. At  the time of that report, NNSA neither agreed nor disagreed with the  recommendation. The agency stated that it would continue to use its  current approach, while focusing on enhancing analysis and reporting to  provide comparative data across the enterprise. Once this was  completed, NNSA planned to assess the effectiveness of the approach  and evaluate what changes, if any, were necessary to the work  breakdown structures to meet the overarching objectives of common  financial reporting.\nIn May 2019, in response to our recommendation, NNSA changed its  approach and decided to conduct an assessment in fiscal year 2020 of  the feasibility of implementing a common work breakdown structure  across all participating program offices. To do so, NNSA plans to collect  M&O contractors\u2019 financial data in fiscal year 2020 using both the  common work breakdown structure for all program offices and\u2014 specifically for the Offices of Safety, Infrastructure, and Operations and  Defense Nuclear Nonproliferation\u2014the programmatic work breakdown  structures while it assesses the feasibility of a common work breakdown  structure. NNSA decided to take this approach to assess the potential  benefits while mitigating potential risks to the program offices that use the  data collected through the programmatic work breakdown structures to  oversee their programs. NNSA officials said that reporting the same data  using two different work breakdown structures will require additional  resources for the M&O contractors to prepare their data submissions,  which NNSA does not view as a long-term solution for common financial  reporting.\nNNSA planned to collect data using these two approaches in parallel  starting in November 2019 and make a decision on whether to implement  a common work breakdown structure across the nuclear security  enterprise in March 2020. NNSA plans to assess the feasibility of  implementing a common work breakdown structure using criteria such as  (1) whether using a common work breakdown structure reduces burden  on the M&O contractors, (2) how much it will cost NNSA to update other  program management systems, (3) whether NNSA can collect financial  data quickly enough to meet the needs of the program offices, and (4)  whether financial data collected using the common work breakdown  structure provides program offices with comparable data to support  existing program analysis.\nCollect financial data from M&O contractors. Since our January 2019  report, the M&O contractors submitted their financial data for fiscal years  2018 and 2019 for the participating program offices using CostEX.  However, NNSA and the M&O contractors faced challenges in collecting  accurate and consistent financial data for common financial reporting  across the nuclear security enterprise. Specifically, NNSA faced  challenges in (1) fully implementing its data validation and reconciliation  process, (2) collecting financial data from each M&O contractor for all of  the program offices, and (3) communicating information about changes in  a timely manner.\nFirst, NNSA faced challenges fully implementing its data validation and  reconciliation process for fiscal year 2018. NNSA designed CostEX to  automatically validate the M&O contractors\u2019 data to check data quality  and formatting and perform data reconciliation with STARS. However,  according to an NNSA official, for fiscal year 2018, the agency manually  reconciled the M&O contractors\u2019 fiscal year 2018 data with STARS to  identify and fix issues with the process prior to automation. For example,  an NNSA support contractor manually submitted and reconciled data for  one M&O contractor that manages two sites because the M&O contractor  submits combined data for the two sites into STARS, but NNSA collects  financial data for common financial reporting by site. For the fiscal year  2019 data collection effort, NNSA officials said they corrected the  submission issue and CostEX was able to automatically reconcile the  M&O contractors\u2019 data with STARS. Another M&O contractor\u2019s fiscal year  2018 financial data did not reconcile each month with STARS. NNSA  officials and representatives from the M&O contractor said the  reconciliation issue was due to timing differences between when the  contractor reported data into STARS and CostEX. Specifically, M&O  contractor representatives for the site said that when NNSA is delayed in  collecting data for common financial reporting in CostEX, the relationships  between the data reported into STARS and CostEX will have changed,  which may result in reconciliation errors. During that time, the site  changed how it tracked some of the data, which led to differences in how  the data were provided for STARS and common financial reporting, and  which caused the reconciliation errors. NNSA officials said they resolved  the issue with the M&O contractor for fiscal year 2019 and completed  data collection in October 2019.\nSecond, NNSA faced challenges in collecting data from each M&O  contractor for all of the participating program offices. Specifically, the  Office of Defense Nuclear Nonproliferation made ongoing changes to its  work breakdown structure templates throughout the fiscal year 2018 data  collection effort. This resulted in challenges for the M&O contractors when  reporting data for this program office. NNSA did not collect complete  fiscal year 2018 financial data for this office, in part because one of the  contractors had significant data validation and reconciliation errors,  resulting in data that NNSA could not validate and reconcile.\nThird, NNSA faced challenges in communicating information about  changes to the work breakdown structure in a timely manner to M&O  contractors. Leading project management practices emphasize the  importance of establishing and implementing change control processes,  which include reviewing and approving all change requests, documenting  the changes, and communicating the decisions. In fiscal years 2018 and  2019, not all NNSA programs consistently ensured that changes to the  work breakdown structure were approved, documented, or communicated  to the M&O contractors in a timely manner because NNSA had not  established and implemented a work breakdown change control process.  NNSA established aspects of such a process, in which program offices  submitted changes to the work breakdown structures to the financial  integration team so the team could upload the changes into CostEX and  notify the M&O contractors of the changes prior to their data submissions.  However, according to officials with the financial integration team, the  federal program managers did not always follow the process. Officials  with the financial integration team said that in some instances, the sites\u2019  program managers contacted the M&O contractors directly to request  changes to their work breakdown structures. The financial integration  team identified issues with the program offices\u2019 work breakdown  structures when the M&O contractors\u2019 data could not be validated and  reconciled. In such instances, the financial integration team contacted the  program managers to request the updated work breakdown structures for  CostEX. Further, the existing process does not include some aspects of  change control processes that are consistent with leading practices.\nApproving changes. Under the existing process, the financial  integration team does not check whether changes that federal  program managers submit to them have been reviewed and  approved, at a minimum, by program office management prior to  making changes to the work breakdown structures in CostEX. The  program director for financial integration said that they defer to the  program offices to ensure that program office management review  and approve changes to the work breakdown structure before the  program managers submit these changes to the financial integration  team.\nDocumenting changes. NNSA officials said that not all program  offices have tracked changes to their work breakdown structures over  time. NNSA\u2019s Office of Defense Programs has a process for tracking  changes to its work breakdown structure, but that process\u2014or a  similar process\u2014was not utilized consistently by all of NNSA\u2019s other  program offices. If the program offices do not track the changes to  their work breakdown structures over time, they cannot ensure the  data are comparable across fiscal years. According to officials, NNSA  built a tool in CostEX to track work breakdown structure changes  across fiscal years. NNSA officials said the tool was tested at the end  of fiscal year 2019 by the Office of Defense Programs. NNSA plans to  test using the tool to track changes for the other program offices in  fiscal year 2020.\nCommunicating decisions. NNSA did not always communicate  changes to the work breakdown structure to the M&O contractors in a  timely manner. Representatives from the seven M&O contractors  stated that they encountered challenges in submitting their data in  CostEX on multiple occasions throughout fiscal years 2018 and 2019  because federal program managers in some offices made frequent  changes to the work breakdown structures that often were not  communicated to the M&O contractors in a timely manner. When work  breakdown structures change, representatives from the seven M&O  contractors said they have to redo the crosswalk of their financial data  to the new work breakdown structures before they submit the data\u2014 this takes time and additional resources and may result in delayed  data submissions. Representatives from three of the M&O contractors  said the frequency of changes to the work breakdown structures  decreased for the fiscal year 2019 data collection effort, but  representatives from six M&O contractors said they continued to  encounter challenges when changes were made to the work  breakdown structures.\nWithout establishing and systematically implementing a work breakdown  structure change control process, NNSA will not be able to verify that, at a  minimum, program office management has approved changes to the work  breakdown structure or that these changes have been documented,  potentially leading to challenges in ensuring that the data are comparable  over time. Furthermore, NNSA cannot ensure that changes to the work  breakdown structures are communicated to the M&O contractors in a  timely manner, which results in contractors using additional time and  resources to address validation or reconciliation errors.\nPublish and analyze data. NNSA has published the M&O contractors\u2019  financial data for fiscal years 2018 and 2019, but NNSA has not  conducted agency-wide analysis of the data. The NNSA financial  integration team has a website for common financial reporting from which  the program offices can download financial data. However, an NNSA  official stated that agency-wide analysis of the data was not feasible for  fiscal years 2018 or 2019 because NNSA did not use a common work  breakdown structure for all participating program offices. In addition, an  NNSA official stated that the agency needs to collect at least 3 years of  data to produce useful NNSA-wide findings.\nSome of the NNSA program offices have started to analyze the financial  data collected through the common financial reporting effort. For  example, the Office of Defense Programs is using financial data collected  through common financial reporting for program evaluation and to make  budgetary decisions. In addition, an NNSA official from the Office of  Counterterrorism and Counterproliferation stated that the office has used  financial data from common financial reporting to identify and address  accounting issues, such as identifying previously unidentified unspent  funds carried over from prior fiscal years and redirecting these funds to  support program activities in fiscal year 2019. However, some of the  program offices have not used the data collected through common  financial reporting for various reasons. For example, officials from the  Office of Safety, Infrastructure, and Operations stated that the fiscal year  2018 data were not useful for analysis because they were not collected in  a timely manner. NNSA officials said they completed data validation and  reconciliation of the M&O contractors\u2019 fiscal year 2018 financial data in  February 2019\u2014nearly halfway through the following fiscal year\u2014making  the data late and not useful for that office\u2019s purposes. Additionally,  officials from the Office of Defense Nuclear Security stated that they have  not used the data collected through the common financial reporting effort  because they want to ensure that the data are accurate and consistent  before using it for decision-making.\n\n\tNNSA\u2019s Approach Provides Limited Assurance That Data Collected are Accurate and Consistent to Perform Agency-Wide Data Analysis\n\n\t\tNNSA Has Not Verified Whether Contractors Accurately Crosswalk Financial Data to Work Breakdown Structures\n\nAs discussed previously, M&O contractors crosswalk their financial data  into a reporting framework using work breakdown structures and common  cost elements and definitions, and they submit their data to NNSA using  CostEX. To help ensure the accuracy of the data, NNSA performs data  quality checks of the M&O contractors\u2019 financial data submitted using  CostEX. If NNSA cannot validate and reconcile the submitted data using  the agency\u2019s processes, it rejects and returns the data to the M&O  contractor to correct the errors. NNSA also provides the M&O  contractors with error reports from CostEX that they can use to identify  and correct errors.\nEach M&O contractor has established processes to check data quality  prior to submitting the data to NNSA in CostEX. For example,  representatives from all of the M&O contractors said they reviewed their  data for missing information and errors before submitting the data into  CostEX. In addition, all of the M&O contractors performed checks to  compare their data submissions for common financial reporting with their  STARS submissions before submitting the data into CostEX. After the  M&O contractors complete their internal data quality checks, they submit  their financial data into CostEX.\nAt most sites, M&O contractor representatives said the way their site  tracks financial data does not align with how NNSA requests the data be  reported in the work breakdown structure and cost elements. Officials  from NNSA\u2019s Office of Cost Estimating and Program Evaluation said that  because the M&O contractors do not track their financial data using  NNSA work breakdown structures, the contractors have to make  decisions using professional judgment as to how to crosswalk their  project costs, raising concerns that each M&O contractor may make  different decisions about how to allocate costs. The officials said this may  result in data that are not accurate or comparable for conducting agency- wide analysis.\nWe identified several limitations to the approach NNSA uses to collect  common financial data that could affect the accuracy and consistency of  the data:\nNNSA\u2019s data reconciliation process does not ensure M&O  contractors\u2019 financial data are accurate. M&O contractors identified  potential issues with using STARS for reconciliation to ensure data  accuracy. For example, two M&O contractors said that errors can  sometimes occur in their monthly STARS reporting. Errors in STARS  can be created when a number is mistyped or corrections are made to  purchase card or time sheet information. Once the M&O contractor  submits its data to STARS, errors cannot be corrected until at least  the following month. However, because the common financial  reporting data must reconcile with STARS, the M&O contractor has to  submit financial data into CostEX that includes the error. The program  director for financial integration said a process is in place for the M&O  contractors to identify any issues with STARS reporting and correct  their reported data in the future.\nMore significantly, some M&O contractors said they make changes to  their data before submitting it into CostEX to ensure that the data  reconcile. Specifically, representatives from two M&O contractors said  they compare their financial data for common financial reporting with  their STARS data submission. If data from the two systems do not  match for small dollar amounts, the contractors manually make  adjustments to the data for common financial reporting rather than  making the corrections in their business systems. The representatives  also said they do not notify NNSA officials of the manual changes.\nNNSA requires that financial data for common financial reporting  reconcile with STARS. Specifically, NNSA rejects M&O contractor  financial data that differs from the STARS data by more than $1.  According to federal standards for internal control, management  should define objectives clearly to enable the identification of risks  and define risks tolerances. For the fiscal year 2018 data collection  effort, NNSA documentation indicated that M&O contractors reported  financial data for $8.9 billion of costs and reconciled the data with their  STARS cost reporting to a total difference of $5.03. According to an  NNSA official, M&O contractors reported financial data for $10.2  billion of costs and reconciled the data with STARS to a total  difference of $8.97 for fiscal year 2019. However, NNSA has limited  assurance that the financial data provided internally reconcile as  required because the agency does not know the extent of changes  that M&O contractors made to ensure the data reconcile with STARS  or the potential effects of those changes on the accuracy of the data.  Assessing the extent to which M&O contractors make manual  changes to ensure reconciliation with STARS for common financial  reporting and determining the effect of these changes could provide  additional assurance that the financial data collected through common  financial reporting are accurately reported.\nM&O contractors crosswalk site projects and tasks to NNSA  work breakdown structures, resulting in the potential for  differences in how costs are allocated. Each M&O contractor  tracks financial data for its site based on how it manages the work  using projects and tasks, as allowed by federal Cost Accounting  Standards. When a site\u2019s projects and tasks do not align with NNSA\u2019s  work breakdown structure, site program managers identify the  component of the NNSA work breakdown structure with which the  project and tasks best align and crosswalk their financial data to the  NNSA structure using professional judgment. One site program  manager said it is sometimes challenging to identify which of their  internal projects and tasks aligns with the NNSA work breakdown  structure, especially when internal projects have similar names to  describe different project scopes. Another site program manager said  the site\u2019s projects and tasks closely align with the NNSA work  breakdown structure approximately 30 to 40 percent of the time, and  contractor representatives use professional judgment to crosswalk the  remaining 60 to 70 percent of their projects and tasks.\nTo create the crosswalk, site program managers consider which  NNSA program the project mostly supports. It can be difficult to  crosswalk the site data into NNSA\u2019s work breakdown structure,  especially for work that benefits multiple weapons programs. For  example, a site program manager said that the site\u2019s project to  develop inert material for NNSA\u2019s high explosives activities supports  multiple weapons programs. The site tracks that work as one project,  but NNSA\u2019s work breakdown structure requires that the costs be  reported across multiple programs. When M&O contractors make  decisions to crosswalk their financial data using professional  judgment, the contractors do not provide information to NNSA on how  the costs are allocated. By verifying this information, NNSA could  ensure that allocation decisions are made consistently across the  nuclear security enterprise.\nM&O contractors provided different financial data for the same  projects. M&O contractors continue to report financial data for some  program offices into multiple systems, including the G2 program  management system, WebPMIS, and spreadsheets. For fiscal year  2018, NNSA compared financial data that the M&O contractors  reported, for two NNSA program offices, into the G2 program  management system and the CostEX tool used for common financial  reporting and found differences between the data reported for the  same budget and reporting codes and levels of the work breakdown.  The program director for financial integration said he worked with the  program offices and identified the cause of the differences in the data.\nNNSA cannot ensure the accuracy of the data submitted for common  financial reporting because NNSA does not have an internal process to  verify whether M&O contractors crosswalk their financial data accurately  from their business systems to the NNSA work breakdown structure.  According to federal standards for internal control, management should  use quality information to achieve the agency\u2019s objectives. Under the  financial integration policy, the program director for financial integration is  responsible for executing a plan for NNSA to achieve enterprise-wide  financial integration to collect standardized financial management data;  increase transparency of financial accountability; and improve cost  analysis, comparability, and reporting consistency among programs and  M&O contractors. The program director for financial integration said that  verifying whether the M&O contractors properly crosswalk their data to  the work breakdown structure is an area in which the agency should  improve its common financial reporting effort. NNSA officials stated that  the common financial reporting effort does not have a process to validate  financial data that are more detailed than STARS and indicated that until  the agency has assurances the reported data are accurate, NNSA should  not use that more detailed data for agency decision-making. By  developing an internal process for NNSA to verify the M&O contractors\u2019  crosswalks, the agency will have better assurance that the data collected  through common financial reporting will produce accurate, enterprise- wide financial data that is comparable across the M&O contractors and  that satisfies the needs of Congress and other stakeholders. Further, this  would help address long-term issues with NNSA\u2019s ability to report the  total costs of its programs, in accordance with Managerial Cost  Accounting Standards.\n\n\t\tNNSA Has Not Verified Whether Contractors Accurately Crosswalk Financial Data to Cost Elements\n\nAs part of common financial reporting, M&O contractors crosswalk their  financial data to NNSA\u2019s cost elements. Cost elements capture discrete  costs of a particular activity of work and include direct costs such as labor  and equipment and indirect costs such as general and administrative  costs. In March 2018, NNSA established 22 cost elements and  definitions\u2014including 10 indirect cost elements\u2014that the M&O contractors use to report financial data. As we found in our January 2019  report, NNSA officials said this was a critical step toward implementing  common financial reporting because without common cost elements, the  agency was limited in its ability to report lower-level costs consistently  across programs and sites. In addition, having the M&O contractors  report financial data across common cost elements would allow NNSA to  improve its management of programs across the enterprise. NNSA  developed the cost elements and definitions in consultation with the M&O  contractors based on the data they could provide because officials said it  is important for the contractors to report accurate financial data using the  NNSA cost elements.\nM&O contractors manage their sites\u2019 financial data using expenditure  types to track the costs of their projects. These expenditure types capture  similar costs as the cost elements, but at a more detailed level, and are  specific to each individual M&O contractor based on how the contractor  manages its expenses. M&O contractors have flexibility to determine how  they structure their work and the expenditures they track in their financial  systems consistent with Cost Accounting Standards. Based on our review  of M&O contractor documents, M&O contractors varied significantly in the  number of expenditure types they tracked. For example, the M&O  contractor for one of the national laboratories tracked its financial data  using over 900 expenditure types, while another national laboratory used  around 50 expenditure types. NNSA officials said that the number of  expenditure types at the sites varies based on the nature of the work  performed at each site.\nMost of the M&O contractors cannot crosswalk their expenditures to  certain NNSA cost elements because of how they track costs in their  systems. Specifically, representatives from five of the M&O contractors  said they cannot accurately crosswalk their indirect expenditure types to  NNSA\u2019s indirect cost elements because their systems do not capture the  data in the way that NNSA wants these data reported. M&O contractors  have discretion to classify which costs are considered indirect, and costs  for similar activities can be allocated differently by each contractor. In  fiscal year 2018, NNSA\u2019s M&O contractors reported spending $3.5 billion  on indirect activities. Generally, in cases in which the M&O contractors  could not crosswalk their indirect costs to specific NNSA cost elements,  representatives from one of the M&O contractors said they allocated their  indirect costs to NNSA\u2019s cost elements using percentages, while others  said they reported data that did not adhere to the NNSA cost elements.\nBelow are examples of situations in which M&O contractors were not able  to accurately report expenditures into NNSA\u2019s indirect cost elements:\nRepresentatives from one M&O contractor said they could not  accurately report financial data for the general and administrative cost  element and site support from other overhead cost elements because  the site did not capture its data in that way. As a result, the M&O  contractor allocated its indirect costs using formulas and composite  rates, rather than reporting actual cost data to NNSA.\nRepresentatives from two M&O contractors said they could not  accurately report financial data across the site support and  infrastructure support cost elements because the structure of their  indirect cost pool did not allow them to track those expenditures  separately. As a result, representatives from one of the M&O  contractors said they reported all of their infrastructure expenditures to  the site support cost element.\nNNSA officials said they were aware of the M&O contractors\u2019 issues with  reporting their expenditure types using the NNSA cost elements. Although  M&O contractors are required to provide financial data using NNSA\u2019s cost  elements, the program director for financial integration said he was aware  that M&O contractors report some indirect costs for separate cost  elements to a single cost element in CostEX, meaning that they do not  accurately report some indirect costs based on NNSA\u2019s definitions.  Additionally, the financial integration team identified differences between  indirect cost data collected from the M&O contractors for common  financial reporting and data reported to another group in NNSA\u2019s Office of  Management and Budget. NNSA plans to conduct a review of the data  reported through the two efforts to determine the cause of the differences.  Officials from the Office of Safety, Infrastructure, and Operations stated  that it is important that the common financial reporting effort is able to  collect accurate information on M&O contractors\u2019 costs related to  infrastructure spending.\nNNSA is aware of the challenges its M&O contractors have with  accurately reporting their expenditure types against the NNSA cost  elements. However, NNSA cannot ensure that the agency collects  accurate financial data because NNSA does not have a process to verify  how the M&O contractors crosswalk their expenditure types to NNSA\u2019s  cost elements, consistent with the previously described information  quality standard under the federal standards for internal control and  NNSA\u2019s financial integration policy. M&O contractors reporting data  based on allocated\u2014as opposed to actual\u2014costs is not ideal because  NNSA cannot ensure that each M&O contractor is consistently applying  the allocation and because the data may not be standardized and  comparable across the sites, which affects the quality of the data. By  developing an internal process for NNSA to verify how the M&O  contractors crosswalk their expenditure types, the agency could better  ensure that the data collected through common financial reporting will  produce accurate financial data across the nuclear security enterprise  that satisfies the needs of Congress and other stakeholders. Further, this  would help address long-term issues with NNSA\u2019s ability to report the  total costs of its programs.\n\n\tConclusions\n\nNNSA continues to make progress toward implementing agency-wide  common financial reporting. However, NNSA faces challenges in fully  implementing the effort. For example, NNSA has not consistently ensured  that changes to the work breakdown structure are approved,  documented, and communicated to the M&O contractors in a timely  manner because NNSA has not established and implemented a change  control process for the changes. Without establishing and fully  implementing a work breakdown structure change control process, NNSA  will not be able to verify that the changes to the work breakdown structure  are approved by program office management, at a minimum; documented  and tracked for accurate data analysis and comparison over time; and  communicated to the M&O contractors on a timely basis.\nNNSA\u2019s approach to implementing common financial reporting relies on  M&O contractors to crosswalk their internal financial data into a common  reporting framework using a work breakdown structure and common cost  elements and definitions, with certain quality checks to help ensure the  accuracy of the data. However, NNSA has limited assurance that the  financial data that the M&O contractors provide for common financial  reporting are accurate because the agency does not know the extent of  the changes the M&O contractors make to the data so that the data  reconcile to the agency\u2019s accounting system or the potential effects of  these changes. By determining the extent of these changes and whether  these changes affect the accuracy of the data, NNSA could have greater  assurance that the financial data collected through common financial  reporting are accurate. Additionally, NNSA cannot ensure that M&O  contractors accurately crosswalk their financial data to either the NNSA  work breakdown structure or the common cost elements because NNSA  has not established processes to verify the information. By developing  internal processes that would allow NNSA to verify how the M&O  contractors crosswalk their data to the work breakdown structure and  common cost elements, NNSA could better ensure that the data collected  through common financial reporting will produce accurate enterprise-wide  financial data that is comparable across the M&O contractors and that  satisfies the needs of Congress and other stakeholders. Further, this  would help to address long-term issues with NNSA\u2019s ability to report the  total costs of its programs.\n\n\tRecommendations for Executive Action\n\nWe are making four recommendations to NNSA:  The Program Director for Financial Integration, with input from NNSA\u2019s  Office of Management and Budget and respective program offices, should  establish and implement a work breakdown structure change control  process for common financial reporting that ensures changes are  approved by program office management, at a minimum; documented;  and communicated to M&O contractors on a timely basis.  (Recommendation 1)\nThe Program Director for Financial Integration should assess the extent  to which M&O contractors make manual changes to their financial data to  reconcile with STARS and determine whether it has an effect on the  accuracy of the data collected for common financial reporting.  (Recommendation 2)\nThe Program Director for Financial Integration should develop and  implement an internal process for NNSA to verify how the M&O  contractors crosswalk financial data from their systems to the appropriate  NNSA work breakdown structure to ensure the reported data are accurate  and consistent. (Recommendation 3)\nThe Program Director for Financial Integration should develop and  implement an internal process for NNSA to verify that the M&O  contractors are consistently applying common cost element definitions at  their sites and across the nuclear security enterprise. (Recommendation  4)\n\n\tAgency Comments\n\nWe provided a draft of this report to NNSA for comment. In its written  comments, which are reproduced in appendix II, NNSA agreed with the  report\u2019s four recommendations and described actions it intends to take to  address them. NNSA also provided technical comments that we  incorporated into the report as appropriate.\nWe 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, this report is available at no charge  on the GAO website at http:\/\/www.gao.gov.\nIf 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 significant contributions  to this report are listed in appendix III.\n\nAppendix I: Status of GAO\u2019s January 2019 Recommendations to the National Nuclear Security Administration on Its Common Financial Reporting Effort\n\nIn our January 2019 report on the National Nuclear Security  Administration\u2019s (NNSA) efforts to implement common financial reporting,  we made seven recommendations. Table 2 describes NNSA\u2019s progress  to implement these recommendations, as of December 2019.\n\nAppendix II: Comments from the National Nuclear Security Administration\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the individual named above, key contributors to this report  included Hilary Benedict (Assistant Director), Amanda K. Mullan (Analyst  in Charge), Colette Alexander, Antoinette Capaccio, Jennifer Echard,  Cindy Gilbert, Michael LaForge, Jason Lee, Holly Sasso, and Sheryl  Stein.","output":null}
{"id":"gao_GAO-19-244","pid":"gao_GAO-19-244_0","input":"\tBackground\n\nThe military services preposition stocks ashore and afloat so that DOD is  able to respond to multiple scenarios during the initial phases of an  operation until the supply chain has been established. The military  services maintain their own configurations and types of equipment and  stocks to support their respective prepositioned stock programs:\nThe Army stores sets of combat brigade equipment, supporting  supplies, and other stocks at land sites in several countries and  aboard ships.\nThe Marine Corps stores equipment and supplies for its forces aboard  ships stationed around the world and at land sites in Norway (see fig.  1).\nThe Navy\u2019s prepositioned stock program provides construction  support, equipment for off-loading and transferring cargo from ships to  shore, and expeditionary medical facilities to support the Marine  Corps.\nThe Air Force\u2019s prepositioned stock programs include assets such as  direct mission support equipment for fighter and strategic aircraft as  well as base operating support equipment to provide force,  infrastructure, and aircraft support during wartime and contingency  operations.\nPrepositioned stocks are employed by the geographic combatant  commanders, who have the authority to, among other things, organize  and employ forces assigned to them as they deem necessary to  accomplish assigned missions. DOD apportions the services\u2019  prepositioned stocks among the geographic combatant commands  according to joint guidance, and the afloat prepositioned stocks may be  apportioned to more than one geographic combatant command.  Requirements for prepositioned stocks are developed based on an  approved operation plan. The services determine how best to meet the  needs of the geographic combatant commanders, which may include the  use of prepositioned stocks. Geographic combatant commanders  periodically review their plans, assess the risk to those plans, and report  the results to the Chairman of the Joint Chiefs of Staff. The approval of  the Secretary of Defense is generally required to use the prepositioned  stocks.\n\n\tDOD\u2019s Prepositioned Stock Implementation Plan Does Not Fully Address Four of the Seven Required Elements\n\nDOD\u2019s implementation plan for managing prepositioned stocks includes  information that addresses three of the seven required elements  enumerated in section 321 of the NDAA for Fiscal Year 2014. However,  the plan, which is 5 pages in length, lacks the detail needed to fully  address the remaining four required elements (see table 1).\nThe Assistant Secretary of Defense for Logistics and Materiel Readiness  approved the implementation plan on August 29, 2017, but an official  from the Office of the Secretary of Defense told us that DOD did not  formally issue the plan. As such, it does not bear a DOD seal, signature,  or issuance number and most prepositioning service officials we spoke  with were not aware of the plan\u2019s existence.\nAs shown in the table, DOD fully addressed three elements in section 321  of the NDAA for Fiscal Year 2014 by describing how the department will  achieve its vision, desired end state, and goals, assigning roles and  responsibilities, and including a schedule for the implementation of the  plan. However, we assessed the remaining elements as partially  addressed or not addressed because DOD did not provide the required  information in its implementation plan. Specifically:\nElement two (comprehensive list of DOD\u2019s prepositioned  materiel and equipment programs, partially addressed). DOD\u2019s  implementation plan contains a list of the department\u2019s prepositioned  stock programs but that list omits one Army and eight Air Force  prepositioned stock programs. In table 2, we compare the list of  prepositioned stock programs that service officials provided to us with  the list in DOD\u2019s implementation plan.\nAn official from the Office of the Secretary of Defense told us in April 2017  as part of a previous review that the department would not address this  required element in the implementation plan because the department lists  its prepositioned stock programs in its annual report to Congress. The  implementation plan notes that DOD submits a comprehensive list of  materiel to Congress each year per 10 U.S.C. \u00a72229a. However, the  annual report to Congress does not include a comprehensive list of the  department\u2019s prepositioned materiel and equipment programs. Rather,  the annual report describes most of the department\u2019s prepositioning  programs but it omits one Army and six Air Force programs not listed in  the implementation plan. Apart from the statutory requirement, Standards  for Internal Control in the Federal Government state that management  should communicate quality information externally so that external parties  can help the entity achieve its goals and address risks. Without a  comprehensive list of prepositioned materiel and equipment programs,  DOD decision makers do not have all of the information they need to  conduct effective oversight to assist the department in achieving its vision  and goals.\nElement three (detailed description of how the plan will be  implemented, partially addressed). The plan identifies policy,  governance, and assessment initiatives through which the department  aims to achieve its goals. However, the plan does not provide a  detailed description of how the department will implement these three  initiatives.\nSpecifically, the plan states that DOD will identify policy gaps and  revise or develop policy at all levels to better oversee prepositioned  stocks; assigns the Under Secretary of Defense for Acquisition,  Technology, and Logistics, the Chairman of the Joint Chiefs of Staff,  and the services to review and revise the current prepositioning  policies as appropriate; and tasks the geographic combatant  commanders to ensure that theater campaign plans provide clear  guidance for service prepositioned stock planning. However, the plan  does not provide details on when geographic combatant commanders  should finalize clear guidance for service prepositioned stock planning  or describe what the guidance should include. The plan also states  that DOD will use a governance body composed of the Under  Secretary of Defense for Acquisition, Technology, and Logistics; the  Chairman of the Joint Chiefs of Staff; the geographic combatant  commanders; and the services to provide joint oversight of the  prepositioned stock programs. However, the plan is unclear as to  whether the Global Prepositioned Materiel Capabilities Working Group  is the governance body. For example, the plan states that DOD\u2019s joint  oversight framework will include the Global Prepositioned Materiel  Capabilities Working Group but also assigns the group to present  capability shortfalls and gaps to a governance body and implement  governance body decisions. Further, the plan states that DOD will use  current systems of record and established metrics to evaluate  performance and measure prepositioned stock status and capability.  However, these are existing mechanisms to monitor the services\u2019  programs and do not provide details on how the department will  assess implementation of the plan itself.\nIn 2017, a Joint Staff official told us that the implementation plan  would be broad and high-level but would be more detailed than the  DOD\u2019s strategic policy. However, the plan\u2019s descriptions of the  implementation initiatives lack sufficient detail on what the department  will do to implement the plan. Apart from the statutory requirement,  Standards for Internal Control in the Federal Government establish  that objectives should be defined in specific and measureable terms  that clearly define what is to be achieved. Without sufficient detail,  DOD risks being unable to fully support the emphasis and high priority  that the 2018 National Defense Strategy gives to prepositioned  stocks.\nElement six (description of the resources required to implement  the plan, not addressed). DOD\u2019s implementation plan does not  describe the resources required to implement the plan. Rather, the  plan states that prepositioning programs are resourced and managed  by the services in support of combatant command operational and  training requirements. In describing the joint oversight framework, the  plan states that DOD will leverage the processes that already exist to  resource prepositioning stock requirements including a focused effort  on prepositioning as part of the annual planning, programming,  budget and execution process, and the Joint Capabilities Integration  Development System. Officials from the Office of the Under  Secretary of Defense for Policy told us when they were developing the  implementation plan that they understood this element as requiring  information about the resources such as funding, personnel, and  technology that would be needed to implement the plan. However, the  plan does not include a description of the funding, personnel, or  technology resources required to implement the plan. DOD officials  reported that the services received $1.2 billion for prepositioned  stocks in fiscal year 2018 and that the annual report to Congress also  contains further information on the funding. However, this information  does not describe the resources needed to implement DOD\u2019s plan for  prepositioned stocks as required by the NDAA for Fiscal Year 2014.  Apart from the statutory requirement, Standards for Internal Control in  the Federal Government establish that organizations should gather  relevant operational and financial information for effective monitoring.  Without a description of the resources required for implementation,  decision makers do not have enough information to understand  whether the department has sufficient resources to implement the  plan.\nElement seven (description of how the plan will be reviewed and  assessed to monitor progress, partially addressed). DOD\u2019s  implementation plan describes how the department will monitor the  services\u2019 prepositioned stock capabilities and readiness but does not  describe how the department will review and assess the plan itself.  The plan states that the department will use standard metrics  contained in the readiness reporting systems of record to monitor  prepositioning capability and readiness of the services\u2019 programs. The  plan assigns the services and combatant commands to assess  prepositioned stock programs and posture annually and notes that all  of the services are to begin reporting through the Defense Readiness  Reporting System in the first quarter of fiscal year 2018. However,  similar to element three, the plan does not fully address the mandated  element in that it does not describe how the department will review or  assess the plan as a tool toward achieving the stated vision and  desired end state. The plan directs the Global Prepositioned Materiel  Capabilities Working Group\u2014which is responsible for providing  oversight of prepositioned stock programs and resolving joint issues  concerning prepositioned stocks\u2014to assess actions to ensure desired  results are achieved but does not describe how it is to do this. Apart  from the statutory requirement, Standards for Internal Control in the  Federal Government state that management should monitor its  internal controls to determine their effectiveness and make  modifications as necessary. Without reviewing and assessing the  implementation plan, DOD will be unable to determine whether the  current plan is helping the department progress toward its identified  vision and desired end state for its prepositioned stock programs.\nDOD did not fully address the required elements in the  implementation plan because, according to officials from the Office of  the Secretary of Defense for Policy and the Joint Staff,  implementation of the plan for managing prepositioned stock  programs is the role of the services. According to these officials, DOD  developed the implementation plan without details to allow the  services to determine how to implement their respective  prepositioning stock programs. Further, an official from the Under  Secretary of Defense for Policy noted that DOD\u2019s annual report to  Congress on prepositioned stock programs contains some of the  required information. However, as discussed earlier, we found that the  annual report to Congress does not include all of the information to  satisfy the required elements, such as a comprehensive list of the  department\u2019s prepositioned stock programs; and most service officials  we spoke with were unaware of the plan. Moreover, section 321 of the  NDAA for Fiscal Year 2014 required DOD to develop an  implementation plan that contained all seven elements.\nAbsent an implementation plan that fully addresses all of the elements  required in the NDAA for Fiscal Year 2014 and aligns with internal  control standards, DOD continues to provide incomplete information  to Congress and stakeholders within the department on its  prepositioned stock programs.\n\n\tDOD Has Made Little Progress in Implementing a Joint Oversight Approach for Managing the Military Services\u2019 Prepositioned Stock Programs\n\n\t\tDOD\u2019s Progress in Establishing a Joint Oversight Approach Has Been Slow\n\nIn 2011, Congress began mandating DOD take steps to develop a joint  strategy. Beginning in 2005 and subsequently in 2011, we reported that  DOD lacked a joint oversight framework of the services\u2019 programs.  However, as shown in figure 2, DOD has made limited progress in  addressing congressional requirements and our reporting  recommendations related to joint oversight of prepositioned stock  programs.\n\n\t\tDOD\u2019s Guidance on Joint Oversight Lacks Detail and Other Related Efforts Have Limitations\n\nDOD\u2019s recent approach to joint oversight has been to update guidance  and implement other related efforts. For example, over the past 2 years,  the Office of the Secretary of Defense and the Joint Staff have updated  existing documents and issued new policy documents, which each  contain broad statements about the need for joint oversight of the  services\u2019 prepositioned stock programs:  In December 2016, the Chairman of the Joint Chiefs of Staff updated  its Logistics Planning Guidance for Prepositioned War Reserve  Materiel. The document states that all service prepositioned stock  programs require joint alignment with national priorities and global  combatant command requirements across the full range of military  operations. The instruction specifically directs the Joint Staff to  develop a framework for joint oversight processes for synchronizing  the services\u2019 prepositioning strategies to minimize duplicative efforts  and to maximize efficiencies and return on investment for  prepositioned stocks. However, this document does not detail how the  Joint Staff is to develop this framework and does not describe the  elements that are to be included as a part of an effective approach for  joint oversight.\nIn March 2017, the Office of the Under Secretary of Defense for  Acquisition, Technology, and Logistics issued its Pre-Positioned War  Reserve Materiel Strategic Policy. One of the purposes of the  document is to establish joint oversight of the military services\u2019 pre- positioning efforts to maximize efficiencies across DOD. The directive  assigns the Chairman of the Joint Chiefs of Staff with the  responsibility to develop a framework for synchronizing the services\u2019  prepositioning strategies to minimize duplicative efforts and to  maximize efficiency and return on investment across DOD. However,  similar to the instruction above, this document does not detail how the  Joint Staff is to develop this framework or describe the elements that  are to be included as a part of an effective approach for joint  oversight.\nIn August 2017, the Assistant Secretary of Defense for Logistics and  Materiel Readiness finalized DOD\u2019s implementation plan for managing  prepositioned stock programs, which we discuss earlier in this  report. The plan calls for improved DOD guidance that builds a  framework and establishes joint oversight to synchronize service  prepositioned stock programs with DOD\u2019s strategic guidance and  priorities. The plan also calls for balancing service prepositioned stock  programs to maximize effectiveness and efficiency while minimizing  potential duplication across the department. However, in addition to  the shortcomings of the plan that we discuss earlier in this report, the  plan also does not provide a detailed discussion of what is needed to  implement a department-wide framework for joint oversight. Further,  although the plan states that clear policy is the foundation for joint  oversight, the plan itself was not issued as formal guidance, and, as  noted earlier, most prepositioning service officials we spoke with were  not aware of the plan\u2019s existence. DOD officials stated that they are  continuing to update existing guidance as needed and that the  services are responsible for implementing and managing their own  prepositioned stock programs.\nDOD also provides Congress annual reports on the status of the services\u2019  prepositioned stock programs. However, in June 2015, we reported that  the annual report provided inconsistent information among the services\u2019  programs using a nonstandardized definition of \u201cprepositioned stocks\u201d  and that the annual report is not an effective tool for joint oversight. We  recommended that DOD develop a standardized definition of  \u201cprepositioning\u201d for its annual report that is consistent with the definition  used in the department\u2019s joint service guidance and apply this definition  consistently to identify prepositioning materiel and equipment across  DOD. DOD concurred with our recommendations. However, as of  October 2018, DOD continued to use varying definitions of prepositioned  stocks. A broad definition exists at the strategic level, but service-level  definitions vary depending on what each service\u2019s prepositioned stock  needs are. For example, the Army\u2019s definition of prepositioned stocks is  based on the equipment and stocks required to meet the unique mission  requirements of brigade combat team configurations. Within this  definition, the Army includes equipment sets used for training units, but  the other services do not. DOD officials stated that although there is a  broad definition of prepositioned stocks, the services are responsible for  managing their individual programs to include what equipment and stocks  are a part of their respective programs based on their mission and needs.\nFurther, in 2008, DOD directed the establishment of the Global  Prepositioned Materiel Capabilities Working Group and assigned it  responsibility for addressing joint issues concerning war reserve materiel  requirements and positioning. According to DOD\u2019s prepositioned stock  implementation plan, the working group is DOD\u2019s focused joint oversight  framework effort to execute the following for prepositioned stock  programs: analyze service and combatant commander input in the annual report  identify potential opportunities to enhance efficiency and reduce  operational risk, present capability shortfalls\/gaps to a governance body for  implement governance body decisions in coordination with the  services and combatant commands, and assess actions to ensure desired results are achieved.\nAccording to DOD guidance, the Assistant Secretary of Defense for  Sustainment and the Chairman of the Joint Chiefs of Staff appoint co- chairs for the working group, which will include members from the military  services, the Defense Logistics Agency and the combatant commands    and meet annually or more often, as needed. However, since 2011, our  work has shown that DOD has been unable to ensure that the working  group\u2019s activities include the full range of the tasks the group was  established to perform because the working group lacks clear oversight  and reporting relationships to authoritative bodies within DOD. We  recommended that DOD assess the continued relevance of the Global  Prepositioned Materiel Capabilities Working Group\u2019s assigned tasks, and  DOD concurred. In September 2012, we reported that, according to DOD  officials, the main responsibility of the working group had been to  consolidate the services\u2019 individual submissions on their prepositioned  stock programs into DOD\u2019s annual report for Congress, and that the  working group had met only sporadically and had not yet addressed many  of the duties specified in its charter. This continues to be the case. We  found that, according to DOD officials, quarterly working group meetings  were frequently postponed, attendance was not fully representative of all  stakeholders, and the discussions during a September 2018 meeting we  observed were primarily focused on gathering information from the  services for preparations for the upcoming annual report to Congress and  receiving service updates on the current status of their respective  prepositioned stock programs.\nDOD has not fully implemented joint oversight of the services\u2019  prepositioned stock programs because the department\u2019s guidance lacks  detail and the department has not fully implemented requirements within  other intended joint oversight efforts, such as the working group. Instead,  DOD\u2019s approach has been for the services to manage their own  respective programs with limited oversight at the department level.  Standards for Internal Control in the Federal Government state that  objectives should be defined in specific and measureable terms that  clearly define what is to be achieved, who is to achieve it, how it will be  achieved, and the time frames for achievement. These standards also  state that management should evaluate performance and hold individuals  accountable for their internal control responsibilities. In addition, the  NDAA for Fiscal Year 2014 mandates a framework for joint departmental  oversight that reviews and synchronizes the military services\u2019  prepositioned stock strategies to minimize potentially duplicative efforts  and maximize efficiencies in prepositioned stocks across the DOD.  Further, our prior work in the area of fragmentation, overlap, and  duplication in the federal government has found that Congress and  executive branch agencies have opportunities to contribute toward fiscal  sustainability and act as stewards of federal resources. These include  taking actions to reduce, eliminate, or better manage duplication, overlap,  or fragmentation among federal agencies and programs; achieve cost  savings; or enhance revenues. \u201cFragmentation\u201d refers to those  circumstances in which more than one organization within an agency is  involved in the same broad area of national need and opportunities exist  to improve service delivery.\nWithout strengthening joint oversight across the department, DOD  continues to have a fragmented approach to its management of  prepositioning programs, which has led to inefficiencies. For example,  according to Joint Staff officials, there is no uniform process by which the  services are reporting the readiness of prepositioned stock assets. Joint  Staff officials also said that having a joint oversight approach would help  them have a more complete picture on the readiness of prepositioned  stocks across the services and help the services in developing more  consistent reporting methods. Service officials we interviewed have also  noted that there may be duplication among DOD\u2019s prepositioned stock  programs resulting from limited joint oversight. For example, Navy  officials stated that because each service utilizes medical assets as a part  of its prepositioned stock programs, there is potential duplicative medical  equipment across the services, which may result in inefficiencies. Finally,  our ongoing classified work is finding a lack of joint oversight related to  DOD\u2019s management of prepositioned stocks in Europe.\nAlthough DOD\u2019s current approach relies on the services managing their  own prepositioned stock programs and Title 10 requires the services to  train, man, and equip their forces, without fully implementing joint  oversight\u2014including providing more detailed information on how to  implement such an approach in its guidance and reviewing its other  efforts, such as the working group\u2014DOD will continue to experience  fragmented management of its prepositioned stock programs. Further,  given the lack of progress DOD has made in the past several years,  providing information to Congress on its efforts in this area could help  hold the department to greater accountability.\n\n\tConclusions\n\nPrepositioned stocks play a pivotal role during the initial phases of an  operation. We have reported for over a decade on the importance of DOD  having a department-wide strategic policy and joint oversight of the  services\u2019 prepositioned stock programs, and Congress has required that  DOD take action in this area. DOD issued guidance to include an  implementation plan for managing prepositioned stock programs.  However, the plan does not address all of the required elements  enumerated in section 321 of the National Defense Authorization Act for  Fiscal Year 2014, and DOD\u2019s various guidance documents include broad  direction for joint oversight. Without revising the implementation plan to  have more complete information\u2014including a full list of programs, a  detailed description of how DOD will implement key initiatives, a  description of the resources required, and an approach for monitoring and  assessing the plan itself\u2014the services will continue to operate their  prepositioned stock programs with limited direction from DOD. Further,  without fully implementing joint oversight, including providing more details  in guidance and reviewing related efforts, and providing accountability to  Congress on how the department will implement such oversight, DOD\u2019s  current fragmented management approach will continue to exist, which  creates the potential for duplication and inefficiencies among the services\u2019  prepositioned stock programs.\n\n\tRecommendations for Executive Action\n\nWe are making the following six recommendations to DOD:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, issue a more detailed implementation plan or include  implementation plan details in identified formal department-wide guidance  to include an updated list to provide quality information, including all of  DOD\u2019s prepositioned materiel and equipment programs.  (Recommendation 1)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, issue a more detailed implementation plan or include  implementation plan details in identified formal department-wide guidance  to include a detailed description of how DOD will implement the three key  initiatives in the plan\u2014policy, governance, and assessment\u2014including  clearly identifying what is to be achieved in these areas.  (Recommendation 2)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, issue a more detailed implementation plan or include  implementation plan details in identified formal department-wide guidance  to include a description of the resources (i.e., relevant operational and  financial information) required to implement the plan including dollar and  personnel amounts. (Recommendation 3)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, issue a more detailed implementation plan or include  implementation plan details in identified formal department-wide guidance  to include a description of how the department will review and assess the  implementation plan for effectiveness. (Recommendation 4)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, take steps to fully implement joint oversight of DOD\u2019s  prepositioned stock programs, including providing detailed information on  how to implement such an oversight approach in department guidance  and reviewing other joint oversight efforts, in order to synchronize the  military services\u2019 preposition stock strategies to avoid fragmentation.  (Recommendation 5)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in coordination with the Chairman of the Joint  Chiefs of Staff, update Congress on the department\u2019s progress in joint  oversight management in the prepositioned stock annual report or in a  separate report. (Recommendation 6)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD for review and comment. In its  comments, reproduced in appendix II, DOD concurred with each of the  six recommendations and described planned actions it will take to  implement them.\nWe are providing copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Assistant Secretary of Defense  for Sustainment; and the Chairman of the Joint Chiefs of Staff. In addition,  this report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf 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. GAO staff who made key contributions to this report  are listed in appendix III.\n\nAppendix I: Offices That We Contacted\n\nAppendix II: Comments from the Department of Defense\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, individuals who made key  contributions to this report include Alissa H. Czyz, Assistant Director;  Vincent M. Buquicchio; Pamela Davidson; Mae Jones; Cody Knudsen;  and Yong Song.","output":null}
{"id":"gao_GAO-20-86","pid":"gao_GAO-20-86_0","input":"\tBackground\n\n\t\tSurface Ship Assignments to U.S. and Overseas Homeports\n\nThe Navy bases the majority of its surface ships at homeports in the  United States, and five regional maintenance centers manage their  maintenance. At the time of our review, the Navy had 38 surface ships  assigned to overseas homeports, as illustrated in figure 1.\nA homeport is where a ship is based and primarily managed and  maintained. The Navy assigns all newly commissioned ships entering the  fleet to a U.S. homeport, and the Navy may change a ship\u2019s homeport  throughout its service life. The Navy may move a ship to an overseas  homeport to respond to strategic needs or to relieve another ship  returning to a U.S. homeport. We found in May 2015 that basing ships at  overseas homeports provides considerable additional time in strategic  areas of operation and other benefits ranging from increased  opportunities for collaboration with partners and allies to faster response  time for emerging crises. However, we also found that the Navy\u2019s high  pace of operations for its overseas-homeported ships affected the  material condition of these ships, and that they had experienced a  worsening trend in overall ship readiness when compared to U.S.- homeported ships over the preceding 5 years. We also reported that the  Navy generally intended ships to be homeported overseas for about 7 to  10 years, according to officials, but that some ships in Japan had been  based there for longer than 10 years. In 2018 Congress instituted a 10- year cap on the length of time certain U.S. Navy ships may be based at  overseas homeports.\n\n\t\tMaintenance Responsibilities for Surface Ships\n\nA number of organizations and commands within the Navy share  responsibilities for setting maintenance policies and planning, scheduling,  and executing ship maintenance, from the offices of the Secretary of the  Navy and Chief of Naval Operations, to fleet commanders and ships\u2019  crews. Key organizations include:  Type Commanders. The Navy\u2019s type commanders for surface ships\u2014 Commander, Naval Surface Force, U.S. Pacific Fleet, and Commander,  Naval Surface Force, U.S. Atlantic Fleet\u2014are responsible for maintaining,  training, and ensuring the readiness of the surface ships assigned to each  fleet.\nNaval Sea Systems Command (NAVSEA). NAVSEA, among other  things, maintains surface ships to meet fleet requirements within defined  cost and schedule parameters. These offices perform contract  administration, program management, and planning for future  maintenance periods informed by the historical maintenance needs of  Navy ships. For example, the following NAVSEA organizations have  certain responsibilities for overseas ship maintenance:\nNAVSEA\u2019s Deputy Commander for Ship Maintenance and  Modernization (NAVSEA 21). This office provides life-cycle  management for surface ships and manages critical modernization,  maintenance, training, and inactivation programs.\nNAVSEA\u2019s Surface Maintenance Engineering Planning Program  (SURFMEPP). SURFMEPP provides life-cycle management of  maintenance requirements for surface ships, including providing  centralized class maintenance and modernization planning and  management of maintenance strategies.\nCommander, Navy Regional Maintenance Center (CNRMC). This  office oversees the regional maintenance centers in the United States,  as well as the Forward Deployed Regional Maintenance Center  (FDRMC) headquarters in Italy, and its detachments in Rota, Spain,  and Manama, Bahrain, that manage the maintenance for the U.S.  Navy ships homeported there.\nNAVSEA\u2019s Logistics, Maintenance, and Industrial Operations  (NAVSEA 04). This office manages and oversees the naval shipyards  and the Ship Repair Facility and Japan Regional Maintenance Center  (SRF-JRMC) in Yokosuka, Japan, and its detachment in Sasebo,  Japan.\nSurface Team One. This body of stakeholders from across the Navy\u2019s  surface ship maintenance, modernization, and sustainment organizations  collaborates for the purpose of setting and developing surface ship  maintenance and modernization priorities, conducting analyses, and  improving surface ship maintenance performance. A Senior Flag  Oversight Council comprised of Commander, Naval Surface Force  Pacific, and Commander, NAVSEA, provides strategic vision and directs  Surface Team One\u2019s efforts, which may include knowledge-sharing  networks, working groups, or deep-dive studies and business case  analyses.\n\n\t\tTypes of Ship Maintenance Periods\n\nThe level of complexity of ship repair, maintenance, and modernization  can affect the length of a maintenance period, which can range from a  few weeks to 6 months or longer. The types of maintenance periods  include the following:\nChief of Naval Operations (CNO) maintenance. CNO maintenance  periods are scheduled to accomplish industrial, depot-level  maintenance and modernization\u2014work that cannot be conducted by  ship\u2019s crews or goes beyond fleet capabilities. These depot-level  maintenance periods can last 6 months or longer and the Navy  generally schedules them every 2 to 3 years throughout a ship\u2019s  service life. This can include major repair, overhaul, or complete  rebuilding of systems needed for ships to reach their expected service  life, and involve complex structural, mechanical, and electrical repairs.  For example, in certain types of depot-level maintenance, ships are  taken out of the water and put into a dry dock to perform maintenance  on below-water parts of the ship (see fig. 2 for a photo of a dry dock at  SRF-JRMC in Yokosuka, Japan). To inform the planning of the work  package for this maintenance period, Navy officials or contractor  representatives typically perform one or more \u201cship checks\u201d to assess  the material condition of the ship in advance of the maintenance  period.\nContinuous maintenance. Continuous maintenance periods are to  conduct maintenance outside of the longer CNO maintenance periods  that can be done in short periods typically scheduled to be 2 to 6  weeks in duration. According to Navy officials, the schedules of these  periods can vary, and commanders can adjust, postpone, or cancel  them based on operational demands.\nVoyage repair. Voyage repair maintenance periods are solely to  accomplish corrective maintenance of a mission- or safety-essential  nature necessary for a ship to deploy or continue its deployment. For  example, ships based in the United States that are deployed overseas  on a temporary basis schedule mid-deployment voyage repair to  ensure they can continue their deployment.\n\n\t\tPlanning Process for Surface Ship Depot-level Maintenance Periods\n\nThe process for planning surface ship depot-level maintenance periods  (i.e., CNO maintenance periods), whether the ship is based overseas or  in the United States, is contained in the Navy\u2019s Joint Fleet Maintenance  Manual. In general, the Navy begins planning for a ship\u2019s depot-level  maintenance period 720 days\u2014or roughly 2 years\u2014before the planned  start of the maintenance period. During this time, a variety of  organizations within the Navy plan what will be repaired, how long it will take, where the work will be done, as well as select the contractors to  perform the work, among other things. This process also includes  activities to close out the maintenance period once it is complete, which  overlap with the start of the planning cycle for the next maintenance  period. For example, certain milestones serve both planning and closeout  purposes\u2014such as the Life-cycle Planning Conference Meeting, which is  to both closeout a ship\u2019s completed maintenance period and to begin  planning for the next one by reviewing the maintenance requirements,  deferred work, and planned schedules (see figure 3).\nNAVSEA 21, including SURFMEPP, is generally responsible for the  advanced planning of maintenance periods, which includes setting the  baseline requirements and early estimates of how long maintenance  might take. In general, regional maintenance centers have overall  responsibilities for meeting milestones approximately a year prior to the  start of maintenance through execution and closeout, as illustrated in  figure 3 above. Overseas, the responsible regional maintenance centers  are the SRF-JRMC at the homeport in Yokosuka, Japan, and its  detachment at the homeport in Sasebo, Japan, and the FDRMC  detachments at the homeports in Rota, Spain, and Manama, Bahrain.  Naval Supply Systems Command\u2019s Fleet Logistics Centers offices  overseas are responsible for soliciting and awarding maintenance  contracts, for ships based overseas, among other things.\n\n\tThe Navy\u2019s Ship Maintenance Capacity and Approach Varies by Overseas Location\n\nThe Navy has developed different maintenance capacity and approaches  to maintain the 38 surface ships based in Japan, Spain, and Bahrain. The  Navy maintains these ships through a mix of Navy, host government, and  contractor industrial base facilities and resources that are different at  each location. The Navy has tailored the maintenance approaches it uses  at each homeport considering the available Navy and contractor capacity,  as well as the number and type of ships, according to Navy documents  and officials. Table 1 provides an overview of the Navy and contractor  industrial base capacity for depot-level maintenance of surface ships  based at the four main overseas homeports.\nU.S. Naval Ship Repair Facility and Japan Regional Maintenance  Center (SRF-JRMC), Yokosuka, Japan. The Navy\u2019s largest overseas  maintenance facility, SRF-JRMC is located in Yokosuka and is  responsible for the maintenance of 12 surface ships homeported there\u2014 including the most destroyers and the only cruisers based outside of the  United States. According to Navy officials, SRF-JRMC in Yokosuka  operates as a public shipyard would in the United States, with three on- base dry docks that fit all sizes of ships based there, as well as other  smaller dry docks. SRF-JRMC employs a Japanese workforce that  conducts the majority of the maintenance workload through a cost- sharing agreement between the United States and Japan. For example,  in fiscal year 2018, SRF-JRMC directly conducted about two-thirds of the  total ship maintenance workload, with about one-third conducted by local  contractors, according to SRF-JRMC workload reporting documentation.  For the contracted work, SRF-JRMC relies on one main contractor,  Sumitomo Heavy Industries, for ship maintenance in Yokosuka, though  additional smaller contractors are also used. Most contracted work also  takes place at Navy facilities on base, according to SRF-JRMC officials.\nShips in Yokosuka are able to receive deeper, more complex  maintenance than other ships based overseas because of the Navy  maintenance capacity at SRF-JRMC, according to NAVSEA officials.  SRF-JRMC in Yokosuka also conducts detailed planning for maintenance  periods that other regional maintenance centers do not, according to  NAVSEA officials. Specifically, it plans all the individual maintenance and  repair tasks to be conducted in each maintenance period, while other  U.S. and overseas maintenance centers can rely on the contractors to  plan the work they do. For additional information on SRF-JRMC in  Yokosuka, Japan, see appendix III.\nSRF-JRMC Detachment, Sasebo, Japan. The Navy also operates its  own shipyard with a Japanese workforce at the SRF-JRMC detachment  in Sasebo, though it primarily relies on the local contractor base to  conduct maintenance work. In fiscal year 2018, the SRF-JRMC  detachment directly conducted about one-third of the total maintenance  workload, with nearly two-thirds performed by contractors according to  SRF-JRMC workload reporting documentation. For the contracted work,  the Navy relies on about 14 smaller contractors, and while the SRF- JRMC detachment coordinates the work of the multiple contractors that  may contribute to a single maintenance period, the contractors directly  plan and manage their portion of the work, according to Navy officials.\nThe SRF-JRMC detachment in Sasebo includes two Navy dry docks,  though only one is used for depot-level maintenance periods. As a result,  dry-dock maintenance and modernization can be conducted on ships  based in Sasebo, but it is generally limited to the four MCM and two LSD  ships. The other amphibious ships based in Sasebo receive depot-level  maintenance that has been planned from about 2 to as long as nearly 9  months, but this does not include dry-dock maintenance. A unique  maintenance consideration in Sasebo is the deployment schedule of the  amphibious ships based there. These ships typically deploy three at a  time with U.S. Marines based in Okinawa on board. As a result, there are  times when all ships are in port and require maintenance, so the  detachment tries to stagger the work with the MCMs and closely  coordinate with contractors there in an effort to manage workload,  according to SRF-JRMC officials. For additional information on the SRF- JRMC detachment in Sasebo, Japan, see appendix IV.\nForward Deployed Regional Maintenance Center (FDRMC)  Detachment, Rota, Spain. The FDRMC detachment and four destroyers  are based in Rota, Spain, where a single state-owned contractor,  Navantia, performs all depot-level maintenance on the ships. Beginning  in 2014, the Navy deployed four destroyers to Spain to support the U.S.  ballistic missile defense mission to the North Atlantic Treaty Organization.  The Navy designed the maintenance approach for these ships with the  understanding that they would not require access to Navy- or contractor- operated dry docks during the time they are based in Spain, according to  Navy officials. The Navy initially expected these destroyers to be in Spain  for about 6 years and to receive maintenance every 2 years. However, in  2015 the Navy updated its maintenance strategy for these ships to  provide shorter, but more frequent maintenance periods to support a  longer time basing them in Spain. Under the updated approach, the Navy  plans for each destroyer to receive six maintenance periods during a  roughly 8-year time period based in Spain. For additional information on  the FDRMC detachment in Rota, Spain, see appendix V.\nFDRMC Detachment, Manama, Bahrain. The FDRMC detachment in  Bahrain is responsible for the depot-level maintenance of the 10 patrol  coastal and 4 mine countermeasures ships based there\u2014the most ships  based at an overseas homeport. While the Navy does not operate any  dry docks or depot-level repair facilities in Bahrain, it relies on two main  contractors, Bahrain Ship Repairing and Engineering Company and Arab  Shipbuilding and Repair Yard, to conduct ship maintenance in Bahrain.\nThe ships in Bahrain receive depot-level maintenance at contractor  facilities there. Both contractors in Bahrain have dry docks or similar  capacity to fit the MCMs and PCs based there, as well as some larger  Navy ships. A unique capacity consideration for ships visiting Bahrain,  according to officials there, is that the Navy does not have dedicated pier  space for ships when they come into port. As a result, the Navy must rely  on contractor space for maintenance, and on other pier space when  visiting ships are at the homeport\u2014which they share with others, such as  commercial cruise lines. For additional information on FDRMC  detachment in Manama, Bahrain, see appendix VI.\nIn addition to the depot-level maintenance periods for the surface ships  we reviewed, the Navy maintenance centers in Japan, Spain, and  Bahrain, also support additional maintenance functions, such as voyage  repairs or technical assistance for visiting U.S. ships; coordinating  intermediate-level maintenance that may be conducted there; and  providing additional maintenance support to overseas ships outside of  scheduled depot-level periods.\n\n\tThe Navy Did Not Complete the Majority of Maintenance on Time during Fiscal Years 2014 through 2018 for Ships Based Overseas, and Its Analysis on the Causes of Delays Is Limited\n\nThe Navy did not complete the majority of the maintenance periods  performed on ships based overseas on time during fiscal years 2014  through 2018. Navy officials identified a variety of factors that contribute  to delays, such as the discovery of additional work requirements after  maintenance has begun or staff shortages affecting management and  oversight of maintenance. The Navy collects information on overseas  maintenance at individual homeports, but its analysis of factors  contributing to the delays is generally focused on the planning and  execution of individual maintenance periods.\n\n\t\tThe Navy Underestimated Time Required to Complete the Majority of Maintenance Periods for Ships Based Overseas\n\nThe Navy underestimated the time needed to complete maintenance for  50 of the 71 maintenance periods\u2014about 70 percent\u2014started during  fiscal years 2014 through 2018. Specifically, 21 maintenance periods  ended early or on time and 50 maintenance periods ran beyond their  planned schedules, as illustrated in figure 4. More than half of the  maintenance periods that were completed late\u201429 of 50\u2014went 31 or  more days beyond the Navy\u2019s planned schedule. As a result, from 2014  through 2018 there were 29 times when ships based overseas were  unavailable for operational requirements, certain training, or other  purposes for 31 or more unplanned days. During this time period, the  Navy completed more maintenance periods a month or more later than  planned than it completed early or on time.\nAs a result of maintenance schedules not being completed on time, all  four overseas Navy homeports with surface ships we analyzed\u2014 Yokosuka, Japan; Sasebo, Japan; Rota, Spain; and Manama, Bahrain\u2014 experienced a total of 3,475 days ships were in maintenance beyond their  expected durations\u2014referred to in this report as days of maintenance  delay. As illustrated in figure 5, Manama, Bahrain, experienced the most  days of maintenance delay during fiscal years 2014 through 2018, while  Rota, Spain, experienced the least.\nWe also analyzed delays at overseas homeports by calculating the days  of delay experienced as a percentage of its total workload in terms of total  days of maintenance conducted. Using this analysis, we found that ships  in Bahrain experienced the highest rate of delay at 34 percent while ships  based in Rota, Spain, experienced only a 2.2 percent rate of delay (as  illustrated in figure 6).\nTaking workload into account illustrates some difference in the rate at  which each of these homeports experiences ship maintenance delays.  For example, ships in Sasebo and Yokosuka experienced a similar total  number of days ship maintenance was delayed\u20141,001 days and 994  days over the 5-year time period, respectively. However, when port  workload is taken into account, Sasebo\u2019s rate of delay is higher.  Specifically, ships based in Sasebo experienced a maintenance delay  rate of 31.2 percent compared with 18.5 percent of the time for the  surface ships in Yokosuka.\n\n\t\tVarious Factors Contribute to Maintenance Delays for Ships Based Overseas\n\nAccording to Navy maintenance center officials and crewmembers from  the ships we visited, and our analysis of Navy information, a number of  interrelated factors and issues contribute to maintenance delays for the  surface ships based overseas including:  Discovery of additional, unplanned work after maintenance is  underway. According to maintenance officials in Bahrain and Japan, the  discovery of the need for additional maintenance and repair work after the  work planned for the maintenance period has been finalized is a key  driver of maintenance delays. This additional work can be in the form of  growth in the magnitude of planned work, or identification of the need for  new work that was not previously planned. For example, maintenance  officials in Japan attributed maintenance delays they experienced on  ships at both Yokosuka and Sasebo during fiscal years 2016 through  2018 to this growth in planned work or new work. Similarly, officials in  Bahrain said that growth and new work is one of many contributing  factors to maintenance delays for the aging MCMs and PCs based there.  For example, officials from Commander, Naval Surface Squadron Five  that track their ships\u2019 depot maintenance identified that additional work to  stern tubes on the USS Squall, which is homeported in Bahrain, resulted  in the ship\u2019s maintenance schedule being extended by 137 days. Navy  officials also stated that the reason growth and new work is such a key  driver of delays is that it can add further delays beyond that needed to  complete the repair, due to time required for additional contract actions  and ordering parts that are needed to conduct the added work. A  number of factors can cause or further exacerbate growth and new work,  according to Navy officials. For example, the Navy has made efforts to  catch up on backlogs of deferred maintenance and improve the health  and condition of the ship, so the Navy may decide to extend the  maintenance period to ensure all identified maintenance has been  completed rather than deferring it to a subsequent maintenance period.  Additionally, officials pointed to ships\u2019 complex propulsion,  communication, and weapons systems that have complicated  maintenance and modernization requirements that cannot always be fully  anticipated.\nMissing or late maintenance planning milestones. The Joint Fleet  Maintenance Manual emphasizes the importance of meeting planning  milestones to identify, estimate, and schedule the work to be done in the maintenance period. These milestones include steps to guide advanced  planning of initial maintenance requirements and schedules, and to  further refine and develop the work, cost, and schedule estimates for  each maintenance period. For example, these milestones include  assessments of the ship\u2019s condition and other ship checks to identify and  validate planned work intended to minimize growth and new work; to  identify and mitigate risks to planned schedules; and to provide deadlines  for developing and awarding contracts to do the work. Adherence to these  planning milestones becomes more critical as the planned start of the  maintenance period approaches to ensure work can be contracted and  begun on time. The final contract is awarded about 2 months prior to work  beginning, and the Navy finalizes the planned duration and schedule of  the maintenance period about a month before maintenance is scheduled  to begin.\nAccording to Navy officials, missing or late planning milestones can  contribute to maintenance delays. For example, NAVSEA and overseas  maintenance officials emphasized that getting on board a ship at various  points in the planning process to assess the ship\u2019s condition and validate  planned work is critical to developing accurate work scope, cost  estimates, and schedules\u2014otherwise, growth and new work or other  issues can emerge once maintenance is underway. According to the Joint  Fleet Maintenance Manual, ship checks are needed to inform specific  planning milestones, to validate planned work, and should be done as  early in the planning process as possible. The Navy requires this  validation to ensure needed maintenance work is sufficiently defined,  problems are accurately diagnosed, and feasible resolutions are  recommended. However, even though ship condition assessments are  important milestones to limit growth and new work, NAVSEA officials part  of Surface Team One said that these assessments and other checks are regularly postponed, which can prevent work from being identified with  sufficient time to plan for it. Similarly, maintenance officials in Japan said  that, due to the operational tempo in Yokosuka and Sasebo, ships are  often not available for required ship checks until the ship arrives in port at  the start of its maintenance period.\nThough officials could not provide the frequency that such milestones are  missed, they said missing assessments and other milestones can  contribute to schedule delays and result in maintenance periods  exceeding planned resources. For example, the Naval Inspector General  found that the shortage of personnel at the FDRMC and Fleet Logistics  Center in Bahrain resulted in contracting milestones being routinely  missed for ships based there, and once these ships were in maintenance,  the growth in work to be completed grew by an average of $830,000 for  maintenance periods in fiscal years 2017 and 2018.\nShortages of experienced and skilled personnel for planning,  management, and oversight. According to NAVSEA and overseas  maintenance center officials, shortages of U.S. personnel that perform  maintenance planning, contracting, and oversight roles, particularly staff  with critical skills and experience, can affect ship maintenance and  contribute to delays. For example:\nPersonnel shortages hinder staffing of project teams. FDRMC Bahrain  officials said that due to personnel shortages, they are often unable to  assign staff to the project teams until the maintenance period starts.  According to the Joint Fleet Maintenance Manual, a project team is  assigned to manage an individual maintenance period, and is  composed of personnel with specific skills and responsibilities.  Additionally, according to CNRMC Instruction 4790.4B, the project  team is responsible for key maintenance planning and execution  activities and related milestones from as early as a year before the  maintenance begins. CNRMC Instruction 4790.4B also states that  such maintenance planning milestones are to aid in developing  project plans, identifying and mitigating risks, and tracking progress of  planning. Project teams are also responsible for overseeing  contracted maintenance work and ensuring it meets quality standards.  For example, prior to the start of the maintenance period, project  teams are responsible for identifying and mitigating risks to  completing maintenance within the planned schedule and budget.  However, officials in Bahrain stated that as a result of persistent  staffing shortages, they have been unable to staff these project teams  until the maintenance period begins, and have also been unable to  provide sufficient oversight of the contractors\u2019 performance during the  maintenance period, which has resulted in maintenance delays.\nShortages of personnel with relevant experience affect management  and oversight of maintenance. Officials in Japan and Bahrain stated  that insufficient numbers of personnel with ship maintenance  experience can negatively affect maintenance timeliness. For  example, the Fleet Logistics Center in Bahrain\u2014which manages the  contracting process for ships based there\u2014had only eight of 18  authorized U.S. civilian contracting-related positions filled, as of March  2019, according to officials. Additionally, of the filled positions, only  one contracting officer had prior experience with ship maintenance  contracting, according to Fleet Logistics Center officials. Officials in  Japan said that experience levels of U.S. civilians at SRF-JRMC have  decreased as a result of high turnover in recent years with the  average amount of work experience for U.S. civilians managing ship  maintenance in Sasebo declining from over 5 years in 2014 to 3 years  in 2017.\nStaff shortages on ships affect crews\u2019 ability to conduct maintenance.\nNavy officials also emphasized the importance of ship crews in  identifying and providing needed maintenance work, but noted that  ship crew shortages negatively affect on-board ship maintenance.  This can increase the amount of work required during depot-level  maintenance periods. In May 2017, we reported that reduced crew  sizes contributed to maintenance being deferred and increased  maintenance costs, and Navy officials and ships\u2019 crews we spoke to in  Japan and Bahrain stated that ships there continue to experience  manning shortages. For example, from September 2018 through  February 2019, nearly 30 personnel from Bahrain-based Navy  organizations were temporarily assigned to ships based in Bahrain to  fill manning shortages, according to Navy officials and information,  including for maintenance-specific positions.\nAccording to maintenance officials overseas and in the United States,  other factors also can add to the complexity of maintenance planning and  contribute to delays including the length of time it takes to obtain spare  parts overseas, availability of obsolete parts, and other challenges  associated with maintaining aging ships, such as the MCMs and PCs,  which are at or beyond their original service lives.\n\n\t\tThe Navy Collects Information on Overseas Maintenance at Individual Homeports, but Its Analysis of Factors Contributing to the Delays Is Limited\n\nThe Navy uses a number of mechanisms to monitor the planning and  execution of individual maintenance periods to track progress and  mitigate possible risks. According to Navy documentation and officials,  these mechanisms include:  Individual homeports identify technical reasons for delays on  individual maintenance periods. Maintenance centers overseas and  in the United States monitor the planning and progress of individual  maintenance periods. SRF-JRMC officials in Yokosuka, Japan,  monitor ongoing and recently completed maintenance periods and  may identify technical causes for ship delays. For example, new work  was identified on the main reduction gear of the USS Barry that was  not in the planned work package and led to delays, according to  officials. Additionally, Commander, Naval Surface Squadron Five in  Bahrain tracks instances of growth and new work during the depot- level maintenance periods for the PCs and MCMs based there,  including tracking the specific number of delayed days attributed to  certain issues.\nNAVSEA conducts regular meetings to report status of  upcoming and ongoing maintenance. NAVSEA collects information  on and monitors the progress of individual maintenance periods,  including at overseas homeports, through a variety of regular  meetings and briefings. For example, NAVSEA 04 and CNRMC each  conduct biweekly meetings with their respective maintenance centers  to monitor advanced planning of upcoming maintenance periods and  the progress of ongoing maintenance periods for the ships under their  responsibilities, according to officials. Information shared during these  briefings can include tracking whether certain planning milestones are  met and identifying risks to the on-time completion of individual ships\u2019  maintenance periods. This information is then compiled into monthly  briefings to the NAVSEA commander providing a snapshot of  upcoming and ongoing maintenance periods and seeking approval for  adjustments, according to officials.\nCollecting and sharing lessons learned throughout the planning  process. According to the Navy\u2019s maintenance manual and related  guidance, the collection and sharing of lessons learned from individual  maintenance periods is to be part of certain planning milestones,  including to inform the maintenance schedule and work estimates. For  example, CNRMC Instruction 4790.4B directs that maintenance  completion conferences with relevant stakeholders are to provide a  detailed review of the maintenance period, including lessons learned  that can be used to plan future maintenance periods, such as to  revise specific work items. According to CNRMC and NAVSEA 04  officials, lessons learned are collected at the end of each  maintenance period and can be shared with other project teams. The  Joint Fleet Maintenance Manual also states that while the lessons  learned process is owned by the type commanders\u2014for surface  ships, these are Commander, Naval Surface Force, U.S. Pacific Fleet  for ships in Japan and the western United States, or Commander,  Naval Surface Force, U.S. Atlantic Fleet, for ships in Spain, Bahrain,  and the eastern United States\u2014the lessons learned process is part of  the Surface Team One structure. However, Surface Team One  officials noted that each of the milestones that include them is led by  other Navy organizations, and its role in the lessons learned process  is managed by a part-time contracted position.\nCNRMC tracks overall days of maintenance delay by fiscal year.\nCNRMC tracks and monitors the overall number of days individual  ship maintenance periods are delayed and can perform analysis of  overall delays, such as the number of days experienced by ship class  and fiscal year. Additionally, CNRMC analysis has also identified  specific ships that experience the longest delays, though it did not  regularly include maintenance periods in Japan until 2018, according  to officials.\nCNRMC tracks costs associated with growth and new work for  individual maintenance periods. CNRMC tracks the costs  associated with growth and new work discovered during maintenance  periods by the regional maintenance centers it manages, including at  overseas detachments in Bahrain and Spain. The costs that are  tracked do not include information on any related delays, however,  and do not include these costs for the ships in Japan.\nOther recent Navy efforts have begun to examine issues related  to delays. According to Navy officials, several Navy entities are  beginning efforts to improve the execution of surface ship  maintenance. For example, in fiscal year 2019 the Navy began a  broad effort to improve Navy surface ship, submarine, and aviation  readiness, as well as public shipyards. This effort, called Performance  to Plan, designates Commander, Naval Surface Forces, and  Commander, NAVSEA, to improve performance of ship maintenance  in private and public shipyards. According to Navy officials, the effort  to improve surface ship maintenance consists of a pilot program  examining how to better execute maintenance periods for destroyers,  improve forecasts of maintenance period duration and assessments  of ship condition, planning for growth and new work, and adherence to  planning milestones. However, officials said this effort is still in the  early stage and does not specifically assess maintenance delays for  ships based overseas. NAVSEA\u2019s SURFMEPP and Surface Team  One also have recently begun related efforts. For example,  SURFMEPP officials said they recently began an effort to examine  and correct causes of growth and new work by analyzing changes to  contracts or work items that result in more than $100,000 of additional  cost. However, while officials said in July 2019 that this effort has  been underway for about 9 months, they could not provide additional  information on how it relates to delays. According to NAVSEA officials  that co-chair Surface Team One, it has begun an effort to improve  how adherence to key planning milestones is tracked across surface  ship maintenance periods. To support this effort, in October 2018 the  Navy updated the Joint Fleet Maintenance Manual to include  additional requirements for meeting maintenance milestones and to  document any changes, including reasons for those changes.  However, according to officials, these efforts are in their early stages,  and the Navy has not used the information to analyze maintenance  delays for overseas ships.\nAlthough a number of different Navy entities conduct a variety of activities  through which information on maintenance delays is collected and  analyzed, these efforts are limited as the existing analysis is not  comprehensive and systematic in nature. Specifically, the Navy has not  positioned itself well to address the factors contributing to the  maintenance delays because it has not (1) designated an individual entity  responsible for conducting a single, comprehensive systematic analysis  of overseas surface ship maintenance delays; and (2) developed a plan  based on that analysis to address these delays.\nFirst, this is in part because the responsibilities for managing surface ship  maintenance overseas is shared among NAVSEA 21, CNRMC, and  NAVSEA 04, which use somewhat different processes for their work,  according to officials. For example, NAVSEA 04 has responsibility for the  maintenance of aircraft carriers and submarines at naval shipyards, while  CNRMC focuses on surface ships. In addition, until SRF-JRMC was  brought under control of NAVSEA in October 2018, CNRMC was not  regularly including maintenance periods in Japan as part of its tracking  and monitoring of days of maintenance delay. According to officials, an  operating instruction to align roles, responsibilities, and processes for  surface ship maintenance in Japan between CNRMC and NAVSEA 04 is being developed, but as of September 2019, this instruction had not yet  been finalized. Further, CNRMC and NAVSEA 04 officials pointed to  NAVSEA 21 or Surface Team One as more appropriate entities to  conduct a comprehensive systematic analysis of ship maintenance delays  given their broad, enterprise-wide roles for managing and improving  surface ship maintenance.\nSurface Team One officials said that it could be an appropriate entity to  conduct such analysis, and according to its charter, one of the entity\u2019s  purposes is to measure performance of the planning and execution of  surface ship maintenance periods and to manage and improve schedule,  cost, and quality. However, officials said they have not conducted such a  systematic analysis of maintenance period performance or developed a  comprehensive plan to address them, in part due to inconsistent  organizational leadership and personnel turnover. According to officials,  since its founding in 2009, Surface Team One has been re-chartered  twice and is in the process of further reorganizing under a fourth version  of its charter. Part of the reason for this reorganization, according to  officials, is to resource and structure Surface Team One to conduct more  systematic, enterprise-wide analyses of issues affecting surface ship  maintenance, for which they hope to develop a plan by the end of 2019.  However, officials said these efforts did not specifically include analysis of  maintenance delays for ships based overseas. Additionally, while Navy  officials said that Performance to Plan efforts could help inform overseas  maintenance delays, this effort is in the early stages of a pilot effort  looking only at destroyer maintenance, and does not specifically analyze  maintenance delays for ships based overseas.\nSecond, as a result of there being no single, comprehensive analysis of  overseas surface ship maintenance delays, there is no plan for the Navy  to improve the timeliness of its maintenance in a holistic way. Instead,  individual organizations and maintenance centers have identified  improvements for individual ships\u2019 maintenance or have undertaken  efforts to address certain contributing factors to delays. While these  efforts are important, given the interrelated challenges related to  maintenance across the Navy, and that the Navy is dependent upon  synchronized and timely maintenance to provide ships for operations to  meet national security needs, the Navy would benefit from a plan of  action that was comprehensive in nature.\nStandards for Internal Control in the Federal Government state that  management should assign responsibility to achieve objectives and  remediate deficiencies; compare actual performance against planned  performance; and evaluate deficiencies on both an individual basis and in  the aggregate. Further, OMB Circular No. A-123, Management\u2019s  Responsibility for Enterprise Risk Management and Internal Control,  emphasizes that when developing corrective actions, agencies should  perform a root-cause analysis of the deficiency and ensure that  subsequent strategies and plans address the root of the problem and not  just the symptoms. Additionally, our past work on results-oriented  management cites a number of key practices that can strengthen the use  of performance information for process improvements. These practices  include aligning agency-wide goals and measures, and building analytic  capacity to use the information. Our past work has further shown this  information should then be incorporated into improvement plans that  include identifying analytically based goals; results-oriented metrics to  measure progress; required resources, risks, and stakeholders to achieve  those goals; and regularly reporting on progress.\nWhile several different Navy entities have a variety of efforts underway  related to issues associated with ship maintenance delays, without  designating an entity to conduct a comprehensive, systematic analysis to  identify and understand the underlying causes maintenance periods grow  beyond planned schedules, the Navy risks continuing to underestimate  maintenance needs and the time and resources required to address  them. Further, without conducting such an analysis to understand the  underlying, interrelated causes of these delays, and incorporating this  analysis into a comprehensive results-oriented plan to address them, the  Navy cannot effectively target corrective actions to improve timely  completion of ship maintenance to ensure ships are available for the  critical training crews need and operations to support U.S. military and  national security goals.\n\n\tNavy Has Not Assessed and Mitigated Risks That Challenges Pose to Implementing Its New Maintenance Approach or Included Overseas Maintenance in Its Plans to Grow Fleet\n\nThe Navy is in the process of updating the maintenance approach for  cruisers, destroyers, and amphibious ships based in Japan, but it has not  assessed and mitigated risks that several challenges may pose to its  successful implementation. Additionally, the Navy has not included  assessments of overseas maintenance requirements in its long-range  plans to support fleet growth to 355 ships.\n\n\t\tThe Navy Has Developed a New Maintenance Approach for Surface Ships in Japan Based on the Approach Used in Spain\n\nThe Navy has developed a new maintenance approach for the cruisers  and destroyers in Yokosuka and the amphibious ships in Sasebo based  on the approach developed for destroyers in Spain. Specifically, the Navy  developed a new maintenance approach for the four destroyers it began  to deploy to Rota, Spain, in 2014 and 2015 that includes generally  shorter, but more frequent, maintenance periods. According to  maintenance center and other Navy officials, the Navy developed this  approach to avoid conducting dry-dock maintenance overseas so that the  Navy could maximize the time the ships were available for operations.\nAccording to officials, the Navy tailored this approach to the specific  ships, mission, and maintenance resources available in Rota. For  example, the four destroyers in Rota conduct patrols two ships at a time  with predictable patrol schedules. With such specific operational and  maintenance schedules officials said there is little margin for changes,  and adjustments or delays could affect the ships\u2019 operational availability  to support their ballistic missile defense mission. Under this approach, the  Navy completed the majority of its maintenance on these four ships  during fiscal years 2014 through 2018 on time\u2014with only 20 total days of  maintenance delay, equating to a relatively low overall delay rate of 2.2  percent.\nNavy officials said that the new maintenance approach in Rota has been  successful because the Navy:  selected four ships with a high degree of commonality; for example,  the ships were of similar age, systems, and equipment configuration,  which helped facilitate planning for and conducting maintenance; ensured the ships received all needed maintenance and  modernization before being sent to Spain, and arrived from the United  States in good condition, which reduced the likelihood that they would  require unexpected maintenance while overseas; designed the maintenance center and its staffing around the  maintenance approach for the four destroyers; and  coordinated with the contractor in Spain to ensure it had sufficient  workforce and resources, including capacity to surge resources if  additional work is discovered so that it can be completed on time.\nBased on the performance of the maintenance approach for destroyers in  Spain, officials stated that the Navy began to develop a similar approach  in 2016 for its ships in Japan. NAVSEA officials identified that shorter,  more frequent maintenance could help ensure that its ships based in  Japan received the maintenance they need, while also meeting their high  operational demands. The Navy finalized a new maintenance approach  for cruisers and destroyers in Yokosuka in December 2018, and was in  the process of finalizing the maintenance concept for the amphibious  ships in Sasebo, according to NAVSEA officials in June 2019. For  example, like in Spain, the Navy has adjusted the schedules for the  planned periods in Yokosuka to be shorter, but more frequent. Planning  documents show that under the new approach for the destroyers in  Yokosuka, the Navy plans to provide them with eight maintenance  periods over approximately 8 years overseas before rotating the ships  back to the United States. Previously, the Navy planned for destroyers in  Japan to receive eight maintenance periods over an estimated span of  over 16 years overseas under the prior approach. Under the new  approach, the surface ships in Japan are expected to receive all required  maintenance, including completing most or all backlogged maintenance  according to officials, in the United States before relocating the ships to  Japan. Additionally, while officials expect ships in Yokosuka to receive  some dry-dock maintenance during their rotation overseas, the  amphibious ships in Sasebo generally will not\u2014similar to the  arrangement for destroyers in Spain. As a result, the new maintenance  approach expects that ships in Sasebo will accrue maintenance backlogs  that must be resolved upon return to the United States.\n\n\t\tSeveral Challenges Pose Risks to Successful Implementation of New Maintenance Approaches Overseas\n\nThe Navy has decided to apply its new maintenance approach for  cruisers, destroyers, and amphibious ships in Japan and in 2018 began  initial implementation on certain ships already based there, but a number  of challenges may pose risks to successful implementation of the  strategy. Based on information from planning documents and officials,  successful implementation relies on several planning assumptions that  may be optimistic when compared to actual experience maintaining  surface ships overseas and in the United States. Specifically, the new  approach in Japan assumes that:\nShips will receive robust, deep maintenance and modernization in the  U.S. and meet their life-cycle health requirements prior to overseas  assignment.\nShips will receive and complete planned maintenance on time while  overseas to maximize operational availability.\nShips will rotate back to receive full maintenance in the United States  after no longer than 9 years of overseas assignment.\nHowever, Navy officials and our analysis identified several challenges: (1)  U.S. industrial base maintenance capacity limitations, (2) maintenance  delays in the United States and overseas, (3) the ability of the overseas  contractor industrial base to support future workload in Japan, and (4)  differences in the operating environments between Spain and Japan.  These challenges, which are discussed below in more detail, could pose  risks to the successful implementation of the new maintenance approach.\nU.S. industrial base maintenance capacity limitations. Implementing  the new maintenance approach in Japan assumes that the ships  identified for deployment will receive all required maintenance and  modernization in the United States prior to being based overseas.  However, the Navy has been challenged to do this in the past due to  limited domestic maintenance capacity. For example, the Navy deferred  maintenance assessments of the condition of the USS Barry and USS  Milius that were to take place in the United States before moving the  ships to Japan. As a result, Navy officials said these assessments had to  be done in Japan. Additionally, upon arriving in Japan in November 2017,  the USS Barry had to begin immediate unscheduled maintenance to  correct various issues, and as of our visit in February 2019, was still  undergoing maintenance. According to U.S. Pacific Fleet and  maintenance center officials, in fiscal year 2014 the USS Curtis Wilbur  received modernization in Japan due to lack of capacity in the United  States.\nFurther, Navy planning documents identified U.S. commercial dry-dock  capacity shortfalls that may hinder the Navy\u2019s ability to support the future  maintenance workload in the United States. For example, the Navy\u2019s  Long-Range Plan for the Maintenance and Modernization of Naval  Vessels for Fiscal Year 2020 identified limited U.S. dry-dock capacity in  the United States as posing a significant challenge to maintenance of  U.S.-homeported ships and that this situation reduces the margin for  schedule changes. According to the Navy\u2019s analysis, demand for surface  ship maintenance in the United States will exceed available maintenance  resources for fiscal years 2019 through 2026. During this time, the Navy  will be rotating ships based in the United States to exchange with those  currently based in Japan and Spain. Navy officials said the capacity  shortfall in the United States negatively affects ship condition and  maintenance of ships sent to Japan. However, the Navy\u2019s analysis does  not account for the need to perform deep maintenance and modernization  on ships in the United States before and after sending them to overseas  homeports, as required by the new maintenance approach for ships  bound for Japan, as well as Spain.\nMaintenance delays in the United States and overseas. Maintenance  delays at both U.S. and overseas homeports may also affect the Navy\u2019s  implementation of its new maintenance approach. Successful  implementation of the new approach depends in part on ships receiving  all required maintenance on time prior to moving overseas, as well as  receiving timely maintenance during their time based abroad. Our  analysis of Navy surface ship maintenance periods that started in fiscal  years 2014 through 2018 found that about 60 percent of maintenance  periods in the United States ran 31 or more days beyond schedule.  Additionally, our analysis shows that ships homeported at both U.S. and  overseas locations experienced an average rate of delay of about 25  percent (see fig. 7). Additionally, rates of delay in Sasebo, where the  Navy plans to implement one of its new maintenance approaches, exceed  30 percent.\nAccording to Navy officials, the new maintenance approach for ships in  Japan is intended to provide more frequent maintenance periods, in an  effort to improve ship maintenance and to maximize ships\u2019 availability for  operations. However, the approach also relies on most of these  maintenance periods being shorter\u2014and being completed on time. Given  the Navy\u2019s history of persistent maintenance delays in Japan, this could  be a challenge. Further, Navy officials said that maintenance delays  experienced in the United States could also affect the maintenance that  ships bound for and returning from overseas homeports may receive, and  pose a risk that maintenance will be deferred to overseas homeports.\nChallenges with overseas contractor industrial base meeting future  workload in Japan. Navy maintenance officials in Spain said that  successful implementation of the new maintenance approach there relied  on sufficient contractor capacity overseas, and that the Navy involved the  contractor in the development of the maintenance approach to ensure  they could implement it.\nIn contrast, Navy officials in Japan stated that current contractor capacity  may not meet expected future workload. For example, Navy  documentation shows that contractors performed almost two-thirds of  ship maintenance in Sasebo in fiscal year 2018. Additionally, the  documentation shows that maintenance planned for fiscal year 2020 is  expected to increase beyond existing Navy and contractor capacity.  Maintenance in Sasebo relies on a number of smaller contractors, and  these contractors have experienced challenges planning for the  unpredictable maintenance workload there, according to officials.  Specifically, the amphibious ships based in Sasebo typically deploy as a  group of three. As a result, Navy officials said the workload in Sasebo  can be uneven. When all three ships return to port, they require  maintenance at the same time. The Navy found that contractors have  difficulty planning for this uneven workload, among other issues, which  can deter contractors from bidding on work. For example, in fiscal year  2015, the Navy found that they were unable to award over 25 percent of  work planned for contractors in Sasebo because no contractor bid on the  work. The Navy plans to add a fifth amphibious ship in Sasebo in fiscal  year 2020, in part to provide a more stable workload there, according to  officials. The Navy expects the additional ship will also result in a  forecasted increase in overall maintenance workload there.\nNavy officials also expressed concerns about the continuity of the existing  industrial base in Yokosuka to be able to support future Navy needs.  According to Navy documentation, in fiscal year 2018, about one-third of  ship maintenance in Yokosuka was conducted by contractors, and,  according to officials, the Navy relied on one main contractor to conduct  much of this work. However, Navy maintenance center officials in Japan  stated they have concerns about the continuity of the contractor to  support this workload. The Navy has begun efforts to consider conducting  maintenance at contractor facilities outside the ships\u2019 homeports of  Yokosuka and Sasebo. Specifically, the Navy has begun to consider  using contractor facilities located outside the Yokosuka area, as far as 2  hours away from where the ships are currently based. For example, Navy  officials told us that they conducted market research and outreach to  potential contractors, and have awarded a small contract for a short  continuous maintenance period to a new contractor about 30 minutes  outside the Yokosuka area. However, maintenance and contracting  officials stated these efforts face their own challenges. For example,  conducting weeks or months of maintenance on a ship as far as 2 hours  outside a ship\u2019s homeport\u2014where crews and families live\u2014could require  additional travel, housing, and other costs. Additionally, maintenance and  contracting officials in Yokosuka stated that the substantial regulatory,  legal, and Navy requirements that private companies must adopt to  contract with the U.S. government might serve as disincentives for  prospective Japanese contractors, and developing these contractors will  take time.\nDifferences in the operating environments in Japan and Spain.  According to NAVSEA officials, the decision to apply the approach in  Japan was based on its timely performance in Spain, but the ships,  missions, and operating environment in Yokosuka and Sasebo differ  substantially from the environment in Spain. For example:\nGreater diversity and number of ships in Japan. Navy officials told us  that the four destroyers sent to Rota in 2014 and 2015 were  specifically chosen with similar age, configuration, and condition,  which made it easier to sustain the maintenance approach, since  issues and lessons from one ship could be easily applied to the next.  The ships in Japan in fiscal year 2019 consisted of a more diverse set  of ships\u2014eight destroyers and three cruisers in Yokosuka, and  various classes of amphibious ships in Sasebo. According to officials,  these ships are of different configurations and capabilities.\nGreater workload and staffing challenges in Japan. Navy officials  have attributed the persistent maintenance delays experienced in  Japan to insufficient U.S. maintenance prior to deployment,  insufficient estimation of the maintenance work package, missed  planning milestones, staffing challenges, and other causes, that are  not currently being experienced in Rota.\nLess predictability in operational tempo in Japan. According to Navy  officials in Rota, the four ships based there have the same mission,  regular and predictable patrol schedules, and do not go above Navy  deployment limits. Additionally, officials said the patrol schedules  allow for some additional maintenance to be conducted when ships  are in port, if needed. As a result, Navy officials in Rota said that they  are able to meet key maintenance planning milestones such as  conducting ship checks and other assessments.\nIn Japan, however, Navy officials and operational commanders  described operational tempo as more unpredictable, and that ships  can be unavailable due to the operational demands of the varied  missions with different timeframes for ships in Seventh Fleet\u2019s area of  responsibility. For example, according to Seventh Fleet officials, the  cruisers and destroyers in Yokosuka are expected to serve a number  of different missions, including conducting patrols around Japan or  Guam; providing ship presence in the East China Sea; or escorting  the carrier as part of the strike group. Additionally, according to Navy  officials, operational tempo in Japan continues to be high, and in 2015  we reported that to meet increasing demands overseas, the Navy has  extended deployments and increased operational tempo.\nStandards for Internal Control in the Federal Government state that it is a  key responsibility of management to analyze and respond to identified  changes and related risks, and to monitor program effectiveness. These  standards also note that changing conditions often result in new risks or  changes to existing risks that need to be assessed. Additionally, the  April 2011 DOD Product Support Business Case Analysis Guidebook  further states that each risk should be reviewed and assessed, and that  effective mitigation plans may involve making tradeoffs in capabilities,  schedule, and performance.\nHowever, NAVSEA officials said the Navy has not assessed the risks  posed by these challenges to implementing its new maintenance  approach in Japan. Instead, officials based the decision to implement the  approach in Japan on the performance of the approach in Rota, Spain.  Without a full assessment of the risks these challenges may pose to  successful implementation of its new maintenance approach, and without  identifying ways to mitigate any risks posed by these challenges, the  Navy cannot ensure its overseas homeported ships complete all required  maintenance as planned in support of fleet readiness needs.\n\n\t\tThe Navy Plans to Grow Its Fleet but Has Not Included Overseas Ship Maintenance Requirements in Its Plans\n\nThe Navy\u2019s timeline for growing the fleet from 290 total ships (as of  September 2019) to 355 ships shows that the largest increase will be in  the number of surface ships. Specifically, the Navy plans to increase the  number of surface ships in the fleet by a total of 48 ships in the next 15  years, or by 2034. However, the Navy\u2019s long-range plans to grow its fleet  do not consider the maintenance these ships will require while based or  traveling overseas. The Navy\u2019s Report to Congress on the Annual Long- Range Plan for Maintenance and Modernization of Naval Vessels for  Fiscal Year 2020, which is intended to assess the maintenance and  modernization requirements for the fleet as it grows, only assesses  maintenance provided by private and public shipyards in the United  States, not overseas. It does not identify or assess the maintenance  requirements needed overseas\u2014including those provided by Navy  facilities or the contractor industrial base. Moreover, it does not identify  overseas requirements, such as any expected changes in the number of  ships based there or growth in the number of ships visiting overseas  locations from the United States. For example:\nAs the number of ships in the overall fleet grows, NAVSEA officials  said they expect the number of ships based overseas to grow  proportionally, and the number of U.S.-based ships conducting  operations and exercises overseas to increase, thereby increasing  overseas maintenance requirements. However, the expected increase  in the fleet and associated maintenance requirements for ships based  and visiting overseas were not included in the recent long-range  plans. For example, according to officials, the Navy plans to base an  additional amphibious ship in Sasebo, Japan, by fiscal year 2020, and  the Navy is examining a possible increase to the number of  destroyers in Rota, Spain. According to maintenance center officials  in Rota, increasing the number of ships based in Rota would require  additional planning to meet the Navy\u2019s needs, such as negotiating  with the Government of Spain to request additional capacity, such as  pier space, for such future requirements.\nThe Navy projects the number and type of ships based in Japan and  Bahrain to change in the next few years. Specifically, the Navy plans  to decommission the mine countermeasures (MCM) ships currently  homeported in Japan and Bahrain by 2023 and replace them with  littoral combat ships to perform the mine countermeasures missions.  However, maintenance center officials in Bahrain stated that as of  March 2019, plans for the overseas maintenance of littoral combat  ships remained uncertain, even though officials expect the initial  deployments of littoral combat ships to Bahrain to begin as early as  2020. Additionally, the Navy has not developed deployment timelines  and overseas maintenance requirements for littoral combat ships in  the Middle East and Western Pacific areas of operation, even though  the USS Montgomery arrived in Singapore to begin its overseas  rotational deployment in July 2019. According to Navy officials, the  Navy expects long-term deployments of littoral combat ships to both  areas of operation as the MCMs are decommissioned.\nShips based in the United States also rely on voyage repair at  overseas shipyards while conducting missions or patrols. For  example, according to the Navy\u2019s annual report to Congress listing all  repairs and maintenance performed on Navy ships, in fiscal year  2018, the maintenance center in Bahrain conducted voyage repairs  for the USS Monterey and USS Arleigh Burke, both based in Norfolk,  Virginia, and the USS The Sullivans, based in Mayport, Florida.  Additionally, voyage repairs were conducted in Japan for visiting Navy  ships and submarines based in Washington and Hawaii.\nStandards for Internal Control in the Federal Government state that it is a  key responsibility of management to consider changes within the  environment and other factors, and analyze and respond to identified  changes and related risks through methods such as strategic planning  and other assessments. These standards also note that conditions  affecting the organization and its environment continually change, and  management can anticipate and plan for significant changes by using a  forward-looking process.\nNAVSEA officials said that when planning for future growth, they have  focused on analyzing U.S. industrial base issues and potential mitigations  to increase capacity for U.S.-based ship maintenance as demand grows  beyond existing dry docks and pier space. Officials said the Navy did not  analyze overseas maintenance requirements or projected growth  overseas to include in the long-range plan. According to NAVSEA  officials, future iterations of long-term maintenance planning are to  include analysis of the Navy\u2019s overseas maintenance capacity, which  Navy officials said could begin in March 2020. As the Navy continues its  long-term maintenance planning, it will be important for the Navy to  conduct and include analysis of anticipated overseas maintenance  requirements given that substantial growth of surface ships is expected  through 2034\u2014including destroyers and amphibious ships, two types of  ships currently based overseas. Without analyzing maintenance needs  and requirements for ships based overseas, including any projected  growth or other force changes, in its long-range plans, the Navy cannot  ensure it is sufficiently planning for the total needs\u2014and resulting  readiness and health\u2014of the future fleet.\n\n\tConclusions\n\nThe Navy bases and maintains 38 surface ships\u2014such as destroyers,  cruisers, and amphibious ships, among others\u2014at homeports outside of  the United States. The 2018 National Defense Strategy has prioritized  military readiness, which depends in part on ships completing  maintenance on time, to ensure that the United States is positioned to  respond to events quickly all over the world. Ship maintenance is a  complex process involving numerous Navy and private industry  stakeholders that devote substantial time and effort to ensure that ships  receive the maintenance they need. Yet we have previously reported on  the persistent delays and other challenges the Navy faces in completing  maintenance on time both for ships in the United States and overseas.  While a number of entities in the Navy have different efforts underway to  examine individual ship maintenance issues, a comprehensive,  systematic understanding of the underlying and interrelated causes for  these delays is essential to implementing corrective actions to ensure  these strategically based ships are able and ready for operations when  needed.\nThe Navy has also taken steps to adjust its maintenance strategies to  improve ship maintenance while balancing the high operational demands  for ships based in Japan. Additionally, the Navy has begun planning to  grow the fleet, but the expected increase in the fleet and associated  maintenance requirements for ships based and visiting overseas were not  included in the recent long-range plans. Also, the Navy\u2019s plans to  implement updated maintenance strategies overseas, as well as to grow  the total fleet, were developed without accounting for risks that challenges  may pose to these strategies, as well as analysis of the necessary  overseas maintenance requirements to sustain the Navy\u2019s strategically  important ships homeported or visiting overseas locations. Ensuring the  Navy\u2019s maintenance plans and capacity for the total fleet align with its  plans for substantial future fleet growth will enhance the Navy\u2019s ability to  conduct timely maintenance of its overseas surface fleet, which, in turn, is  essential to the Navy achieving its strategic goals.\n\n\tRecommendations\n\nWe are making a total of five recommendations to DOD.\nThe Secretary of the Navy should assign responsibility to an entity to  conduct a single, comprehensive systematic analysis of overseas surface  ship maintenance delays. (Recommendation 1)\nThe Secretary of the Navy should ensure the designated entity conducts  a comprehensive, systematic analysis to identify the underlying,  interrelated causes of overseas surface ship maintenance delays.  (Recommendation 2)\nThe Secretary of the Navy should use the results of the analysis to  develop a plan to address surface ship maintenance delays overseas.  Such a plan should incorporate results-oriented elements, including  analytically based goals, identification of risks to achieving those goals,  identification of required resources and stakeholders, metrics to measure  progress, and regular reporting on progress. (Recommendation 3)\nThe Secretary of the Navy should ensure that Naval Sea Systems  Command assesses and mitigates risks posed by any challenges, such  as persistent delays and capacity limitations, to successful  implementation of its new maintenance approach in Japan.  (Recommendation 4)\nThe Secretary of the Navy should ensure that Naval Sea Systems  Command conducts analysis to include overseas maintenance  requirements as part of its long-term maintenance plan to support the  planned growth and readiness of the fleet. (Recommendation 5)\n\n\tAgency Comments\n\nWe provided a draft of this report to DOD for review and comment. In  written comments provided by the Navy (reproduced in appendix VII),  DOD concurred with our recommendations. The Navy also provided  technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate 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.\nIf you or your staff have questions about this report, please contact me at  maurerd@gao.gov or (202) 512-9627. Contact points for our Offices of  Congressional Relations and Public 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report (1) describes existing maintenance capacity and approaches  the Navy uses for surface ships based overseas, (2) assesses the extent  to which the Navy completed maintenance periods as scheduled in fiscal  years 2014 through 2018 and analyzes factors contributing to any delays,  and (3) evaluates the extent to which the Navy has assessed any  challenges facing future overseas ship maintenance efforts.\nThe scope of this review includes the regularly scheduled depot-level  maintenance of surface ships based overseas, the maintenance of which  is generally the responsibility of Naval Sea Systems Command  (NAVSEA). These ships comprised 38 of the 40 ships based overseas  during the time period we analyzed, and consisted of the following ship  classes: guided-missile cruisers (CG 47 class), guided-missile destroyers  (DDG 51 class), mine countermeasures ships (MCM 1 class), patrol  coastal ships (PC 1 class), amphibious assault ships (LHD 1 class),  amphibious transport dock ships (LPD 17 class), dock landing ships (LSD  41 class), and an amphibious command ship (LCC 19 class). These  ships were based overseas at homeports located in Japan, Spain, and  Bahrain as of the end of fiscal year 2018.\nFor objective one, to describe existing capacity and maintenance  approaches the Navy uses for the regularly scheduled depot-level  maintenance periods for the 38 surface ships based overseas during the  time of our review, we reviewed Navy documents and information on the  Navy\u2019s overseas maintenance centers\u2019 physical capacity and authorized  workforce, local contractor industrial base and capacity, and other Navy  organizations and commands responsible for planning, managing, and  overseeing the maintenance of these ships. To examine physical  capacity, we analyzed Navy information on U.S. and contractor facilities  and equipment such as dry docks and information on future planning or  improvements. We reviewed NAVSEA information and data on ship  maintenance periods, as well as information and documentation on  historic and forecasted workloads at each homeport, including the  number and type of ships that have received maintenance at those  shipyards. We also reviewed Navy maintenance plans and guidance that  document Navy maintenance approaches and organizations at overseas  homeports. We conducted site visits to three overseas homeports\u2014 Yokosuka and Sasebo, Japan, and Manama, Bahrain\u2014where the Navy  bases a majority of the surface ships overseas. We observed the physical  capacity and operations of the maintenance centers and shipyards there,  as well as the Forward Deployed Regional Maintenance Center (FDRMC)  headquarters in Naples, Italy. We interviewed cognizant officials at Navy  commands, numbered fleets, and maintenance centers, including officials  at all the overseas maintenance centers responsible for ships based  overseas: the U.S. Naval Ship Repair Facility and Japan Regional  Maintenance Center (SRF-JRMC) in Yokosuka, Japan, and its  detachment in Sasebo, and the FDRMC headquarters in Naples, Italy, as  well as its two detachments\u2014in Rota, Spain, and Manama, Bahrain.\nFor objective two, to assess the extent to which maintenance schedules  are completed as planned, we analyzed Navy data on regularly  scheduled, depot-level maintenance periods for surface ships\u2014including  those maintained at overseas homeports and in the United States.  NAVSEA collects and manages data on these maintenance periods\u2014 known as Chief of Naval Operations maintenance availabilities\u2014for  surface ships, submarines, and aircraft carriers. We obtained the data on  surface ship depot-level maintenance periods used by NAVSEA\u2019s Surface  Maintenance Engineering Planning Program and the Commander, Navy  Regional Maintenance Center (SURFMEPP). We used Navy data to  identify depot-level maintenance periods conducted at each homeport  starting in fiscal years 2014 through 2018 and to assess the extent to  which maintenance schedules for ships based overseas were executed as planned from fiscal year 2014 through 2018, and the delays  experienced.\nTo assess the reliability of this data, we interviewed cognizant NAVSEA  officials to understand system operating procedures, organizational roles  and responsibilities, and any data limitations. NAVSEA provided  information based on our questions regarding data reliability, including an  overview of the data, data-collection processes and procedures, data  quality controls, and overall perceptions of data quality. NAVSEA also  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. We interviewed officials  from SURFMEPP and CNRMC to obtain further clarification on data  reliability, discuss how the data were collected and reported, and explain  how we planned to use the data. Some of these data were used in prior  reports, and their reliability had previously been assessed. In addition, we  also assessed the reliability of the data by checking: (1) for missing data  entries, (2) for duplicate records, and (3) to ensure the data was  formatted consistently. We determined that the data were sufficiently  reliable for the purposes of summarizing surface ship maintenance  periods and related information at homeports both overseas and in the  United States, including reporting on the duration of maintenance periods  and the number of days of maintenance delays.\nBecause maintenance periods may cross over one or more fiscal years,  to be able to report on days ships spent in maintenance periods from  fiscal years 2014 through 2018, we analyzed data on maintenance  periods that began in fiscal years 2012 through 2018 for all surface ships  included in the data, including those based at overseas and U.S.  homeports. Specifically, we used the dates of the planned and actual  durations of the maintenance periods in our data set to determine the  total number of days ships spent in maintenance in fiscal years 2014  through 2018 and by how many days the maintenance periods were  extended beyond their planned number of days\u2014which the Navy refers to  \u201cdays of maintenance delay.\u201d To determine the total number of days  ships spent in maintenance in each fiscal year, we allocated the number  of days spent in maintenance periods according to the fiscal year in which  the maintenance days occurred. After we calculated the number of days  each maintenance period went beyond the planned duration, we allocated  these days of maintenance delay to the fiscal years in which they  occurred. To compare ship maintenance delays experienced at different  homeports while accounting for the varying workload at each, we  calculated days of maintenance delay as a percentage of the total  number of days ships spent in maintenance periods each location, which  resulted in a rate of delay that we could compare across homeports. In  addition, we analyzed the number of maintenance periods that were  completed on or ahead of time or were completed later than planned, and  we examined these maintenance durations by the fiscal year in which the  maintenance periods started.\nWe interviewed officials to understand the reasons they identified for  delays. We reviewed the actions the Navy has taken to identify, evaluate,  and resolve these delays, including information in Navy policies,  guidance, and documentation on the planning, management, and  oversight of overseas ship maintenance. This information included the  Joint Fleet Maintenance Manual and related Navy instructions,  documents establishing maintenance requirements. We also reviewed  Navy guidance and documentation on the planning and execution of  maintenance for ships based overseas and in the United States, including  documentation such as status briefings, planning documents, and lessons  learned information identifying certain reasons for maintenance delays of  individual maintenance periods. We interviewed cognizant Navy officials  responsible for planning, managing, and conducting oversight for surface  ship maintenance in the United States and overseas to understand how  they produce and use this information to improve maintenance planning  and execution. We compared this information to standards for planning,  scheduling, and monitoring events to correct deficiencies and identify  process improvements, including Standards for Internal Control in the  Federal Government, which includes principles pertaining to oversight  responsibility, evaluating issues, and remediating deficiencies; our  Schedule Assessment Guide; and OMB Circular No. A-123,  Management\u2019s Responsibility for Enterprise Risk Management and  Internal Control, which includes guidance on conducting a root-cause  analysis when developing corrective actions. We also compared this  information with our past work identifying best practices for results- oriented performance management and planning.\nFor objective three, to assess the extent to which the Navy has assessed  and mitigated challenges that may affect overseas ship maintenance  efforts, including new maintenance approaches and future maintenance  requirements as the Navy seeks to grow the fleet, we analyzed Navy  documentation, NAVSEA data, and available information documenting  challenges that affect maintenance overseas, as well in the United States.  We also analyzed Navy efforts to address these challenges, as well as  Navy plans for future fleet growth and maintenance workload, including  the long-range plans for shipbuilding and maintenance as the Navy seeks  to grow its fleet, as well as other studies and analyses pertaining to these  plans. We interviewed cognizant Navy officials who plan, execute, and  oversee overseas shipyards and maintenance, as well as operational  commanders, to obtain their perspectives on issues and challenges  associated with execution of ship maintenance. We compared this  information to government standards for planning and monitoring events  to assess changes in risk, correct deficiencies, and identify process  improvements, including Standards for Internal Control in the Federal  Government and DOD Product Support Business Case Analysis  Guidebook.\nLogistics, Maintenance, and Industrial Operations (NAVSEA 04)\nDeputy Commander for Ship Maintenance and Modernization (NAVSEA 21)\nCommander, Navy Regional Maintenance Center (CNRMC)\nSurface Maintenance Engineering Planning Program (SURFMEPP)\nU.S. Naval Ship Repair Facility and Japan Regional Maintenance Center (Yokosuka, Japan, and detachment in Sasebo, Japan)\nForward Deployed Regional Maintenance Center in Naples, Italy, and its detachments in Rota, Spain, and Manama, Bahrain\nNaval Supply Systems Command Fleet Logistics Centers in Yokosuka, Japan, and Manama, Bahrain\nU.S. Naval Forces Central Command\nU.S. Naval Forces Europe-Africa\nHuman Resources Office for Commander Navy Region Europe, Africa, Southwest Asia (CNREURAFSWA)\nWe conducted this performance audit from August 2018 to February 2020  in accordance with generally accepted government auditing standards.  Those standards require we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Naval Sea Systems Command (NAVSEA) Organizations with Responsibility for Surface Ship Maintenance Overseas\n\nHistory and Mission  The Ship Repair Facility and Japan  Regional Maintenance Center  (SRF-JRMC) was originally created  in 1947 as the Ship Repair  Department, and in 1951 became  the Ship Repair Facility. In 2004 it  became the combined SRF-JRMC.  Headquartered in Yokosuka, SRF- JRMC provides oversight and  support to its detachment in  Sasebo and is responsible for the  maintenance for ships based in  Yokosuka. SRF-JRMC also  provides technical assistance and  voyage repairs for Navy ships  visiting Japan.\nU.S. Navy Surface Ship Maintenance Snapshot  Surface Ships Maintained in Yokosuka as of Fiscal Year 2018  8 Guided-missile destroyers (DDG)  3 Guided-missile cruisers (CG)  1 Amphibious command ship (LCC)\nFiscal Year 2018 Authorized SRF-JRMC Workforce   U.S. Civilians: 272   U.S. Navy: 108   Japanese nationals: 2,341 (paid for by the Government of Japan)\nIn 2018, the Navy finalized a new maintenance approach for cruisers and  destroyers based in Yokosuka. This approach relies on deep maintenance in the  United States prior to ships moving to Japan, and increases the frequency of  maintenance periods while ships are in Japan. The Navy has begun efforts to  identify additional private companies to conduct ship maintenance to meet future  planned workload, according to Navy officials.\nHistory and Mission  The Ship Repair Facility and Japan  Regional Maintenance Center  (SRF-JRMC) detachment in  Sasebo was originally designated  as the Sasebo Office to the Ship  Repair Facility in Yokosuka in  1976, and made a detachment in  1984. The SRF-JRMC detachment  is responsible for supporting the  maintenance for the eight surface  ships based in Sasebo, and can  provide technical assistance and  other maintenance to ships in and  visiting Japan.\nU.S. Navy Surface Ship Maintenance Snapshot  Surface Ships Maintained in Sasebo as of Fiscal Year 2018  1 Amphibious Assault Ship (LHD)  1 Amphibious Transport Dock (LPD)  2 Dock Landing Ships (LSD)  4 Mine Countermeasures Ships (MCM)  Fiscal Year 2018 Authorized SRF-JRMC Workforce   U.S. Civilians: 65   U.S. Navy: 40   Japanese nationals: 450 (paid for by the Government of Japan)\nU.S. Navy Surface Ship Maintenance Snapshot  Surface Ships Maintained in Rota as of Fiscal Year 2018  4 Guided-missile destroyers (DDG)\nFiscal Year 2018 Authorized FDRMC Workforce  U.S. Civilians: 73   U.S. Navy: 8   Future Considerations  The Navy plans to rotate the four current ships back to the United States  beginning in 2020 through 2022. FDRMC officials said the next set of ships  will not be as standardized as the first four. Additionally, the Senate Armed  Services Committee has directed the Navy to assess the feasibility of  increasing the number of guided-missile destroyers based in Rota from four  to six. FDRMC officials said increasing the number of ships would require  additional staff and physical infrastructure that would need to be negotiated  with the Spanish government.\nHistory and Mission  The Forward Deployed Regional  Maintenance Center detachment in  Bahrain (FDRMC Detachment  Bahrain) was established in June  2014. FDRMC Detachment  Bahrain manages the maintenance  of ships based there, and can  provide fleet technical assistance  and coordinate voyage repairs for  other ships in the U.S. Fifth Fleet  area of operations including Military  Sealift Command ships and visiting  U.S. Navy ships. FDRMC  Detachment Bahrain manages the  maintenance for the most  homeported ships of all overseas  locations.\nU.S. Navy Surface Ship Maintenance Snapshot  Surface Ships Maintained in Manama as of Fiscal Year 2018  10 Patrol Coastal Ships (PC)  4 Mine Countermeasures Ships (MCM)\nFiscal Year 2018 Authorized FDRMC Workforce  U.S. Civilians: 87   U.S. Navy: 29   Foreign nationals: 14  Future Considerations  Beginning in fiscal year 2020, the Navy will decommission U.S.-based MCMs  to provide spare parts to MCMs overseas. The Navy plans to decommission  the MCMs and PCs in Bahrain in fiscal years 2023 and 2026, respectively.  The Navy plans to replace the MCM mission with littoral combat ships but  has not finalized plans for their deployment or maintenance, according to  Navy officials.\n\nAppendix VII: Comments from the Department of Defense\n\nAppendix VIII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition the contact named above, the following staff members made  key contributions to this report: Suzanne Wren (Assistant Director), Sally  Williamson (Analyst in Charge), David Ballard, Martin De Alteriis,  Alexandra Gonzalez, Amie Lesser, Shahrzad Nikoo, Carol Petersen,  Clarice Ransom, Rachel Schultz, and Samuel Woo.\n\nRelated GAO Products\n\nNavy Maintenance: Persistent and Substantial Ship and Submarine  Maintenance Delays Hinder Efforts to Rebuild Readiness. GAO-20-257T.  Washington, D.C.: December 4, 2019.\nNaval Shipyards: Key Actions Remain to Improve Infrastructure to Better  Support Navy Operations. GAO-20-64. Washington, D.C.: November 25,  2019.\nNavy Readiness: Actions Needed to Evaluate the Effectiveness of  Changes to Surface Warfare Officer Training. GAO-20-154. Washington,  D.C.: November 14, 2019.\nMilitary Depots: Actions Needed to Improve Poor Conditions of Facilities  and Equipment that Affect Maintenance Timeliness and Efficiency. GAO- 19-242. Washington, D.C.: April 29, 2019.\nMilitary Personnel: Strategy Needed to Improve Retention for  Experienced Air Force Aircraft Maintainers. GAO-19-160. Washington,  D.C.: February 5, 2019.\nDOD Depot Workforce: Services Need to Assess the Effectiveness of  Their Initiatives to Maintain Critical Skills. GAO-19-51. Washington, D.C.:  December 14, 2018.\nNavy and Marine Corps: Rebuilding Ship, Submarine, and Aviation  Readiness Will Require Time and Sustained Management Attention.  GAO-19-225T. Washington, D.C.: December 12, 2018.\nNavy Readiness: Actions Needed to Address Costly Maintenance Delays  Facing the Attack Submarine Fleet. GAO-19-229. Washington, D.C.:  November 19, 2018.\nMilitary Readiness: Analysis of Maintenance Delays Needed to Improve  Availability of Patriot Equipment for Training. GAO-18-447. Washington,  D.C.: June 20, 2018.\nNavy Shipbuilding: Past Performance Provides Valuable Lessons for  Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018.\nWeapon Systems Annual Assessment: Knowledge Gaps Pose Risks to  Sustaining Recent Positive Trends. GAO-18-360SP. Washington, D.C.:  April 25, 2018.\nMilitary 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.\nNavy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Affecting the Fleet. GAO-17-809T.  Washington, D.C.: September 19, 2017.\nNaval Shipyards: Actions Needed to Improve Poor Conditions that Affect  Operations. GAO-17-548. Washington, D.C.: September 12, 2017.\nNavy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: September 7, 2017.\nNavy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery  Process and Ship Quality. GAO-17-418. Washington, D.C.: July 13, 2017.\nDepartment of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.\nNavy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.\nNavy Ship Maintenance: Action Needed to Maximize New Contracting  Strategy\u2019s Potential Benefits. GAO-17-54. Washington, D.C.: November  21, 2016.\nMilitary Readiness: Progress and Challenges in Implementing the Navy\u2019s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.\nDefensed Civilian Compensation: DOD and OPM Could Improve the  Consistency of DOD\u2019s Eligibility Determinations for Living Quarters  Allowances. GAO-15-511. Washington, D.C.: June 16, 2015.\nNavy 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.","output":null}
{"id":"gao_GAO-20-169","pid":"gao_GAO-20-169_0","input":"\tBackground\n\nVA\u2019s mission is to serve America\u2019s veterans and their families, and one of  the ways it does so is by providing veterans with medical services. To  help meet the health care needs of veterans, VHA is planning to complete  approximately 70 new major medical projects between 2020 and 2024.  Activation is one of the key steps that must occur before veterans can  access care at these facilities.\nAccording to VA\u2019s Activation Process Guide, activation typically involves  activities such as planning for, purchasing, and installing new furniture,  fixtures, and equipment (FF&E), ordering supplies, and hiring staff. For  new buildings, the Guide states that activation activities begin when the  building is being designed, continue through construction, and end when  the facility is fully operational.\nThe expenses associated with activation can reflect either one-time  purchases or ongoing expenditures. One time purchases\u2014called non- recurring activation expenses\u2014involve the acquisition of assets such as  furniture or equipment, or payment to a contractor for services such as  equipment installation. Ongoing expenses, or expenses incurred more  than once\u2014called recurring activation expenses\u2014are for staff salaries  and consumable supplies, such as gowns and gloves. After a facility  opens and begins serving patients, facilities are permitted to treat  supplies and the salaries of new staff as activation costs until the site is  serving enough patients to receive funding through one of VA\u2019s regular  funding processes, known as the Veterans Equitable Resource Allocation  (VERA). Figure 1 provides examples of recurring and non-recurring  activation expenses.\nThe total cost of activation for major lease and major construction projects  can be substantial. The median activation funding that facilities reported  spending on major activations from fiscal year 2012 through 2018 was  approximately $16 million. The four newest hospitals (in Denver, Las  Vegas, Orlando, and New Orleans) spent a cumulative total of more than  $1.9 billion for activation during this time period.\nThe types of facilities undergoing activation can vary in size, services  provided, and overall purpose within the VHA healthcare system, as  shown in figure 2. For example, a community-based outpatient clinic  (CBOC) is typically much smaller than a medical center but can provide  primary, specialty, subspecialty, mental health, or any combination of  delivery services that can be appropriately provided in an outpatient  setting. Large medical centers can provide outpatient services as well as  a broad range of inpatient services, including emergency services,  surgery, and acute psychiatric care. Smaller facilities may refer patients to  medical centers for complex treatment.\nNational, regional, and local staffs play different roles in the activation  process:  National: VHA\u2019s Activations Office\u2014under the Office of Capital Asset  Management (OCAM)\u2014historically provided ad-hoc support to sites  activating a major lease or construction project, such as providing on-site  training related to the activation process and facilitating input from subject  matter experts within VHA. The office also determines the base amount  of activation funding that sites receive. Officials overseeing the office  stated that its role is being reassessed and that the type of support it  provides for activations may change in light of an internal reorganization  and consideration for VA\u2019s future growth plans.\nRegional: VHA\u2019s18 regional networks, known as Veterans Integrated  Service Networks (VISN), are responsible for the coordination and  oversight of all administrative and clinical activities at health care facilities  within their specified region. A VISN\u2019s role in activation varies depending  on the expertise available at the facility level, but VISNs can help facilities  arrange contracts for services (like laundry or hazardous waste removal);  review a facility\u2019s budget submissions to VHA; and facilitate discussions  with senior management or knowledge-sharing with other sites that have  recently completed activation. The VISNs are also responsible for  distributing activation funding from VHA.\nLocal: In addition to providing medical services, medical centers function  as administrative hubs for services in the area. As a result, the medical  center director is ultimately responsible for activating facilities within the  center\u2019s administrative boundary. The medical centers can appoint staff to  manage the activities required for activation. These staff can include the  activations project manager, financial officers, and subject matter experts  like interior designers. As a team, the staff are responsible for developing  technical requirements, creating risk mitigation strategies, and deciding  key acquisition dates, among other tasks.\n\n\t\tActivation Tasks Include Identifying and Fulfilling Staffing, Equipment, and Other Needs Planning and Execution of Activation Tasks Align with Building Acceptance and the First Day of Clinical Services\n\nWhile VHA has not identified standard milestones for activation, based  upon our review of VHA documents and interviews with local and regional  VHA officials, we found that two events are especially relevant to the  planning and execution of activation activities: (1) building acceptance  (when VHA formally takes possession of and occupies a building) and (2)  providing medical services to the first patient. Figure 3 describes  examples of activation activities in relation to these events, although the  actual timing of tasks will vary depending on the needs of individual  facilities.\n\n\t\tActivation Teams Begin Equipping and Staffing New Facilities Prior to Building Acceptance\n\nOfficials from selected facilities said that prior to building acceptance,  their activation activities typically focus on determining furniture and  equipment needs, placing orders, anticipating staffing needs, and hiring  new staff.\nDetermining furniture and equipment needs is intertwined with the  building design process, according to officials from three VHA facilities,  because the design of the physical space can dictate what equipment is  purchased. For example, a VHA official from one health-care center said  that the activations team showed the medical care providers a mock-up of  a treatment room and created cardboard models of furniture to help them  select items. The official told us that getting the medical care team\u2019s input  early in the planning process can avoid the need to make costly changes  in order to make the physical space fit the equipment or furniture  requested by the medical care providers.\nConversely, the building may be designed to accommodate specific  equipment. For example:\nOfficials from one facility shared the specifications of the radiology  equipment with the team designing the building in order to leave a  proper amount of space for the equipment.\nSimilarly, an annex\u2019s activation staff worked with the resident engineer  to design an enclosed area separate from their main building for a  mobile MRI machine. This design ensured a new MRI machine could  be swapped out in the event of a breakdown without causing a  disruption to the facility\u2019s operations.\nOfficials said that they also begin the purchasing process for equipment  and furniture prior to building acceptance. VHA officials stated they work  backwards from the construction endpoint to determine when to order  items. VHA officials told us they need to place orders for certain items\u2014 such as high-tech equipment or made-to-order furniture\u2014well in advance  of the facility\u2019s opening because the items are known to have long  delivery times. For example:\nOfficials from one clinic reported they ordered their facility\u2019s imaging  equipment 22 months before they needed it.\nSimilarly, an official from a different clinic said that furniture is often  not manufactured until it is ordered, so it can take several months to  arrive. In contrast, the official said items like a staff refrigerator could  be picked up at a local store within days and do not require  substantial advance planning.\nFacilities also begin planning for their workforce needs prior to building  acceptance. For example:\nAn official from one clinic stated that facilities typically identify their  staffing needs during this time period by position, title, and pay.\nOfficials from an annex said that before their facility\u2019s construction  groundbreaking, they discussed how many staff would move from the  old facility to the new facility, and how many new staff they expected  to hire.\nAfter activation teams determine their staffing needs, facilities hire and  begin training new staff. For example:\nAn official from one clinic said that new staff needed to be trained  prior to opening day, so it is not uncommon for staff to be hired and  brought on-board before the facility begins providing clinical services.\nIn the case of a very large facility, such as a medical center, hiring the  required staff can require an extensive search that must commence  before the building is finished. An official from a medical center said  that a shortage of skilled medical workers required a nationwide  search for suitable candidates.\n\n\t\tNew Facilities Prepare for Patient Care after Building Acceptance\n\nOfficials said that after a building is accepted as complete, activation  typically focuses on tasks associated with moving into the space, such as  equipment installation and training staff. For example:\nOne clinic\u2019s project calendar showed in the weeks leading up to  opening day that the activations staff planned to install office furniture  such as desks and filing cabinets, as well as to perform checks on  biomedical equipment to ensure proper functioning.\nOfficials from another clinic coordinated equipment and furniture  deliveries between the warehouse (where items were being stored)  and the new facility.\nThe extent of staff training after building acceptance depends on the need  to familiarize staff with the new facility, and the complexity of services  offered. Activation staff might choose to have medical staff become  familiar with the new facility by working at the facility prior to new  operations. For example:\nOne clinic\u2019s staff started working in the building before their first  patient was seen in order to become familiar with the new space.\nAn official from a medical center said that facility staff adjusted to  operating newer infrastructure, such as learning to operate a modern  computerized boiler system. That official also stated that the medical  center might need to conduct extensive training exercises to simulate  24\/7 inpatient care. In contrast, outpatient facilities that do not operate  around the clock may not have these same training needs.\n\n\t\tActivation Continues after Facilities Begin Providing Clinical Services\n\nOnce a facility begins providing medical care, officials said that activation  tasks are typically related to facility operations. These tasks can include  on-the-job training in the new space and making necessary adjustments  to the facility to ensure it runs properly while concurrently serving new  patients. For example:\nAn official at one clinic said that beginning patient care with a  decreased workload, known as a \u201csoft opening,\u201d can help facilitate on- the-job training. The same official explained that this approach allows  staff to become accustomed to their new facility\u2019s operations and  address any issues that may emerge without the demands of  operating at full capacity.\nVHA officials from a health care center said that space adjustments  included repositioning exam beds and ordering ergonomic chairs.\nOfficials at several sites stated that they used SharePoint, an internal  communication tool, to keep track of needed adjustments. This  approach enables staff to monitor ongoing issues during the  beginning of new operations, resolve unexpected problems, and track  issues as they occur.\nSeveral VHA officials also said that some activation tasks \u2014such as  hiring staff\u2014may occur after a facility begins serving patients. If a facility  plans on a phased opening, in which some services will not be available  on the first day, processes that would typically be completed earlier may  take place during this time frame instead. For example, a medical center  in our review utilized a phased-opening approach, as it expanded its  capabilities with new medical services after opening.\n\n\tSelected Facilities Provided Most Clinical Services within Expected Time Frames, but Delays Occurred for a Variety of Reasons\n\nThe facilities included in our review provided most medical services within  planned time frames; however, nearly one-third of services were  delayed for various reasons. Overall, 59 of the 87 services were offered  within planned time frames (69 percent). Of the 28 services that were not  provided on time, staffing, equipment size, \u201ccommissioning\u201d, and  procurement issues contributed to the delays, according to officials.\nStaffing issues delayed a total of 14 services in two of the seven  facilities reviewed. One facility had 13 services with delays that  ranged from 4 to 6.5 months. Officials said the delays were due to  difficulties recruiting the staff necessary for those services, which  included various types of surgery, radiology, and mental health,  among others. Similarly, difficulties recruiting a dentist at a second  facility delayed dental service 4 months beyond the expected delivery  time frame.\nEquipment at one facility did not fit into some of the rooms and the  space needed to be altered in order to accommodate it. Officials  said that all 12 services were delayed by approximately 1 month so  that the facility could open with all services available, though officials  noted that the full extent to which the equipment issues contributed to  these delays was unknown (i.e., there could have been other causes  that they could not recall.)\nCommissioning issues delayed women\u2019s healthcare services at one  annex by approximately 1 month. Officials said that the air circulation  rate\u2014which needed to be higher in rooms where certain procedures  are performed\u2014was inadequate. As a result, the air exchange had to  be improved before the facility could begin performing the planned  clinical procedures.\nProcurement issues led to delays in providing radiology services at  one facility. Officials told us that x-ray services were delayed by 3  months because the equipment was ordered through the centralized  purchasing process, which took longer than local officials had  anticipated.\nThese delays primarily affected services that were originally planned to  be offered within 2 months of building acceptance. While selected  facilities planned to offer approximately 92 percent of services within 2  months of building acceptance, as shown in figure 4, 61 percent were  actually offered within that time frame.\nVHA does not provide a guideline for how much time facilities should  need after building acceptance to provide clinical services. Officials  explained that the appropriate amount of time will vary based upon the  scope of the project, including factors such as the number and kinds of  services offered and the level of effort associated with installing the  equipment (e.g., a replacement hospital will require more effort than a  small outpatient clinic). Thus, we did not determine if facilities were  allotting appropriate amounts of time to complete activation activities and  serve patients. However, VA\u2019s Activation Process Guide provides some  information regarding when full services should be available. The Guide  states that clinical services can be added for up to 6 months after opening  day (i.e., the first day that patients receive any services at the facility).  The Guide further states that facilities may expect to offer services  gradually\u2014versus all on opening day\u2014when services are new to an area.\nOf the 87 services offered by the facilities in our review, 86 were offered  within 6 months of opening day. The remaining service\u2014a clinic that  provides colonoscopy and other related procedures at one facility\u2014 opened on schedule approximately 11 months after opening day. This  facility was replacing another facility that had not previously offered this  service. Officials explained that because the service was new, they  needed more time to develop and equip the space as well as hire staff, so  they planned on offering this service later than services that were being  transferred from the previous facility.\n\n\tVHA Lacks Processes and Clear Definitions to Estimate and Oversee Total Activation Costs\n\nVHA lacks processes to develop total cost estimates for major activations.  Without total cost estimates, VHA is unable to determine whether actual  activation expenses are higher or lower than planned. Furthermore, VHA  does not have documentation that defines allowable activation costs,  including what facilities can purchase with activation funding and when  facilities should cease spending activation funds. As a result, VHA  officials lack critical information to support decision-making about  resource allocation, and are not well positioned to effectively identify and  investigate deviations from planned spending.\n\n\t\tVHA Lacks Processes to Develop Total Activation Cost Estimates and Compare Them against Actual Costs\n\nVHA lacks processes to develop reliable total activation cost estimates for  major activation projects and to compare actual costs against these  estimates. According to our assessment of information from VHA, the  current cost estimation process does not cover the full duration of  activation and does not reflect best practices for developing reliable cost  estimates. In addition, VHA officials said that until recently, the agency  lacked the accounting mechanisms necessary to facilitate comparisons of  a project\u2019s total activation costs against estimated costs; however, while  VHA now possesses these mechanisms, it has not documented the  process for how the new information should be used.\nThe Activations Office and facility activation staff annually develop cost  estimates for the upcoming 3 fiscal years using (1) an activation cost  model (the model) and (2) a cost template (the template). According to  Activations Office officials, the model is managed by the Activations  Office and uses inputs such as a facility\u2019s square footage and project  schedule. Activations Office officials also said that the template is typically  completed by facility activation staff and includes inputs such as planned  clinical services as well as estimated staffing, equipment, and supply  costs. While the cost estimate is driven primarily by the model,  information in the template is also considered before annual activation  funds are distributed, according to Activations Office officials. Figure 5  shows the steps for determining and distributing annual activation funds.\nWe determined that the model and template do not estimate costs for the  entire duration of a facility\u2019s activation. According to our review of  facilities\u2019 spending data, activation spending for a given facility can occur  over more than 3 fiscal years. All eight of the facilities in our review, for  example, spent activation funds over 4 or 5 fiscal years. Thus, the  estimate the Activations Office would have developed at the beginning of  these projects would not have reflected total activation costs. Moreover,  we did not see evidence that VHA medical facilities independently  develop total activation cost estimates that are appropriate to compare  against total actual costs. None of the eight selected facilities we  reviewed could provide total activation cost estimates appropriate for this  use, according to officials at each facility. Officials from five facilities  stated that they had not developed such estimates, an official from one  facility said that an estimate could not be located and probably had never  been done, and officials from two facilities said that such documentation  could not be located.\nVHA officials said that the existing cost estimation tools reflected the  budgeting process (i.e., the current fiscal year and two future years) and  that they had not previously been required to develop a cost estimate for  the entirety of activation. Officials noted that as the Activations Office\u2019s  role shifts to include more oversight, it will be important for the Office to  have total cost estimates for activation; however, as of September 2019,  VHA did not have any specific plans for how to collect estimates for a  project\u2019s entire activation cost.\nWe also found that VHA\u2019s current process for developing activation cost  estimates does not fully align with best practices for developing cost  estimates as established in the GAO Cost Guide (see table 1 below).  VHA\u2019s process minimally met 10 and did not meet 2 of the steps\u2014each of  which reflects multiple best practices\u2014required to develop reliable cost  estimates. A reliable cost estimate is critical to the success of any  program, providing the basis for informed decision-making, realistic  budget formulation and program resourcing, and accountability for results.  VHA officials acknowledged that following these practices would be  valuable for the activations process, and explained that the agency did  not previously incorporate these practices because they had not  assessed the strength of their activation cost estimation process in this  manner.\nLastly, the Activations Office does not compare existing estimates and  actual activation costs. While the Activations Office develops activation  cost estimates for the upcoming 3 fiscal years and has some capabilities  to track activation costs, to date it has not compared the planned costs to  actual expenses. According to Activations Office officials, they have  historically been unable to track how activation funding was spent at the  facility level, which impeded such comparisons. Starting in fiscal year  2020, officials from the Activations Office plan to use accounting codes  associated with each activation project, which will allow them to track  expenses at the facility level. An internal review conducted in mid-2019 by  the department overseeing the Activations Office concluded that the  agency needed to regularly assess the extent to which activations spent  funds as planned. As of October 2019, however, officials said the office  has not documented the process for how they will deploy their new  accounting oversight capabilities, including which personnel would be  responsible for conducting such comparisons, the frequency of  comparisons, and any follow-up steps that would be considered in the  event of significant differences.\nWithout processes for estimating total costs and comparing them against  actual expenses, the Activations Office is limited in its ability to improve  resource planning, budgeting, and allocation\u2014critical elements that  support VA\u2019s stated management priority to enhance data-driven  decision-making. Further, guidance from the Office of Management and  Budget states that agencies should obtain information on actual project  costs and compare them against planned expenses so managers can  have a clear understanding of how resources are being used and whether  cost goals are being met. Documented processes for cost estimation  and comparison would be particularly important in the case of large  medical centers, whose activation costs are in the hundreds of millions of  dollars.\n\n\t\tVHA\u2019s Activations Office Has Not Clearly Defined Allowable Activation Costs or Spending Time Frames\n\nThe Activations Office has not clearly defined what officials at local  facilities can purchase with activation funding and how long activation  funding should continue after opening day. Activations Office officials said  that there is a general understanding that some expenses, such as  medical equipment for new facilities or services, are activation expenses,  and that the Activations Office intends to provide activation funding until  the facility begins to receive VERA funding to cover operational  expenses. However, there is no policy to inform facility activation staff of  what they can purchase with activation funding and when funding will  cease. In mid-2019, an internal review conducted by the department  overseeing the Activations Office found that the lack of clarity regarding  what could or could not be purchased should be remedied; however, as  of September 2019, no specific plans have been established to define  appropriate purchases.\nOfficials we spoke with\u2014both at the selected medical facilities and  VISNs\u2014expressed uncertainty about what expenses they could pay for  using activation funding.\nOfficials from two of eight facilities told us that there were times when  they did not know if they should charge an expense to activation or  another funding source, such as construction accounts. For  example, officials at one facility told us that they were unsure whether  construction or activation funds would pay for the special window  blinds needed for the intensive care units.\nOfficials at four of the VISNs also said that when contacted by medical  facility officials for guidance on allowable expenses, there were times  when they did not know if facilities should charge an expense to  activation or another funding code.\nIn addition, officials from the selected sites held differing views on how  long they were eligible to receive activation funding from the Activations  Office. Finance officials for one of the selected facilities said that  activation funding is provided for up to 5 years, while officials from several  other facilities said that activation funding is available until operational  expenses are covered by VERA. Activations Office officials said that the  latter interpretation is accurate and that this transition to ongoing VERA  support should take place within approximately 2 years after opening  day. However, an official from the Activations Office said that a few  facilities have received funding from the Activations Office for more than 2  years after opening because there was no clear definition for when  activation funding should cease.\nThe lack of clear definitions regarding what constitutes allowable  activation expenses and when activation funding should end limits VHA\u2019s  ability to consistently and accurately estimate and track activation costs.  For example, similar facilities could develop varying total cost estimates  due to different understandings of what expenses are allowable. VA  management priorities include making data-driven decisions to improve  resource planning, budgeting, and allocation. In addition, Standards for  Internal Control in the Federal Government states that management  should use quality information to achieve the entity\u2019s objectives. Clear  definitions on what expenses facilities should charge to activation  accounts, and for how long, would improve the Activations Office\u2019s ability  to monitor activation costs and improve resource stewardship.\n\n\tConclusions\n\nAs VHA undertakes the process of replacing facilities to better reflect its  focus on outpatient and specialized care, it is poised to spend hundreds  of millions of dollars per year to equip and staff these new sites. However,  VHA does not have a clear understanding of total costs and whether  individual activation projects are spending funds effectively. Because  VHA does not have a process for developing an estimate for the entire  activation cost of a project, the agency lacks a critical baseline that can  inform future spending decisions. In addition, because VHA lacks a  process that describes how officials should compare actual expenses to  that estimate, the agency has no mechanism to regularly identify and  respond to unplanned differences in activation costs. Furthermore,  defining allowable activation expenses would better position VHA to  ensure total cost estimates are consistent from facility to facility. Lastly,  additional clarification on how to estimate activation costs and compare  them against actual expenses would help VHA to more effectively  manage the activations process. Without processes and clear definitions  associated with activation cost measurement, VHA does not have  reasonable assurance that it will be able to effectively manage the  resources associated with activation.\n\n\tRecommendations for Executive Action\n\nWe are making the following four recommendations to VA:\nThe Assistant Deputy Under Secretary for Health for Administrative  Operations should develop and document a process for estimating  total activation costs for major medical facility projects. This process  should reflect the 12 steps for developing a reliable cost estimate  outlined in the GAO Cost Guide. (Recommendation 1)\nThe Assistant Deputy Under Secretary for Health for Administrative  Operations should develop and document a process for comparing  actual activation costs for major medical facility projects to estimates.  This process should identify the personnel responsible for comparing  the estimated costs to the actual expenses and document their  responsibilities. (Recommendation 2)\nThe Assistant Deputy Under Secretary for Health for Administrative  Operations should define and document what items and services  officials can purchase with activation funds. (Recommendation 3)\nThe Assistant Deputy Under Secretary for Health for Administrative  Operations should define and document when facilities should cease  to spend activation funds. (Recommendation 4)\n\n\tAgency Comment\n\nWe provided a draft of our report to VA for review and comment. VA  provided written comments, which are reprinted in appendix II. VA  concurred with all of our recommendations. VA further provided  information on how it intends to address our recommendations, with  target dates for completion in December 2020.\nWe are sending this report to the appropriate congressional committees  and to the Secretary of the Department of Veterans Affairs. In addition,  this report is available at no charge on the GAO website at http:\/\/gao.gov.\nIf 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 report. Other key contributors to this report are listed in  appendix III.\n\nAppendix I: Reported Activation Costs at Selected VHA Medical Facilities\n\nTo understand the costs of the activations of the eight selected facilities,  we asked activation officials at each facility to provide a breakdown of the  activation costs by the following categories: (1) Furniture, Fixtures, and  Equipment; (2) Staffing; (3) Supplies; (4) Other; and (5) Total Cost. We  used these cost categories because these are the categories in the  template that facilities complete to estimate activation costs.\n\nAppendix II: Comments from the Department of Veterans Affairs\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact above, Heather Halliwell (Assistant Director);  Alison Snyder (Analyst-in-Charge); Rose Almoguera; Brian Bothwell;  Geoffrey Hamilton; Jason Lee; Terence Lam; Ethan Levy; Josh Ormond;  Daniel Setlow; Laurel Voloder; Mary Weiland; and Elizabeth Wood made  key contributions to this report.","output":null}
{"id":"gao_GAO-19-565","pid":"gao_GAO-19-565_0","input":"\tBackground\n\nGDUFA and GDUFA II both provided supplemental resources to FDA by  giving it the authority to collect user fees from the generic drug industry, in  addition to its regular appropriations, in order to make improvements to  the generic drug application review process. GDUFA was enacted in  July 2012, in part, to provide funding for more generic drug application  reviewers at FDA in order to handle an increase in the volume of  application submissions and speed up reviews. GDUFA II was enacted in  August 2017 to reauthorize the generic drug user fee program from fiscal  year 2018 through fiscal year 2022. In return, FDA provided Commitment  Letters to Congress that detailed its plans to implement program  enhancements and meet certain performance measures related to the  review of generic drug applications. For example, in its Commitment  Letter for GDUFA II, FDA stated that, for applications in the first review  cycle, it would review and act on at least 90 percent of them within  specified timeframes\u20148 months for certain priority applications and 10  months for all other applications. FDA stated that it met this  performance measure for fiscal year 2018. The Commitment Letter also  indicated that one of the goals of GDUFA II is to minimize the number of  review cycles for applications to attain approval.\n\n\t\tGeneric Drug Application Review Process\n\nFDA\u2019s generic drug application review process includes a number of  steps. The process begins when a generic drug application is submitted  to FDA for review by the Office of Generic Drugs and the Office of  Pharmaceutical Quality within FDA\u2019s Center for Drug Evaluation and  Research. The Office of Generic Drugs is responsible for providing  regulatory oversight and strategic direction for FDA\u2019s generic drug  program to make safe, effective, and high-quality generic drugs available  to the public. The Office of Generic Drugs\u2019 Division of Filing Review  determines whether the generic drug application is acceptable for review,  meaning that the application is sufficiently complete for FDA to review the  application, such as information about the amount of active ingredients  present in the drug. If the generic drug application is not acceptable for  review, FDA issues a Refuse to Receive letter to the applicant explaining  what additional information is required before the application can be  accepted for review. In response, the applicant can resubmit the generic  drug application with additional information and officials within the  Division of Filing Review will assess the information and determine if the  resubmitted application is acceptable for review.\nOnce the Division of Filing Review determines that a generic drug  application is acceptable for review, the first review cycle begins, and  FDA officials review the application across the following three review  disciplines:\nBioequivalence. Officials within the Office of Bioequivalence are  responsible for examining whether the generic drug application is  bioequivalent to the brand-name drug, meaning that the drug delivers  the same amount of active ingredient in the same amount of time as  the brand-name drug.\nLabeling. Officials within the Division of Labeling Review are  responsible for ensuring that the proposed labeling language in the  generic drug application, including the drug\u2019s prescribing information,  matches the language found in the labeling of the corresponding  brand-name drug.\nPharmaceutical quality. Officials within the Office of Pharmaceutical  Quality have responsibility for ensuring the quality of drug products  and assessing all drug manufacturing facilities, including both  domestic and foreign. Officials within this office assess the risk of toxic  substances or bacterial content in the drug, among other things.\nAll generic drug applications are reviewed by primary reviewers and  secondary reviewers. Primary reviewers assess the application to ensure  that the documentation meets regulatory requirements in their specific  disciplines. For example, primary reviewers within the Office of  Pharmaceutical Quality evaluate documentation related to the proposed  drug manufacturing process to ensure that the process produces quality  drugs consistently. Secondary reviewers ensure the quality and  consistency of primary reviewers\u2019 assessments and the clarity of  communication to applicants.\nDuring the first review cycle, FDA communicates with applicants when  issues arise during its review that may prevent the agency from approving  the generic drug application. This communication is typically made  through the issuance of information requests or discipline review letters:  Information requests. Information requests are letters sent to  applicants to request clarification or additional information that is  needed or would be helpful for FDA to complete its review. These  letters may be sent by any review discipline and can be sent at any  point after the Office of Generic Drugs accepts the generic drug  application for review.\nDiscipline review letters. Discipline review letters are letters issued  by each review discipline at about the mid-point of the review cycle to  identify possible deficiencies. FDA officials said they aim to issue  these letters no later than 6 months into the first review cycle.\nIn response to these letters, applicants can submit additional information  for FDA to consider before the end of the review cycle.\nAfter FDA\u2019s three review disciplines complete their review of an  application and any additional information the applicant has submitted in  response to information requests and discipline review letters, the agency  issues an action letter that informs the applicant of whether the  application is approved, marking the end of the first review cycle and the  end of FDA\u2019s review if the application is approved. There are three types  of action letters:\nApproval letter. Issued when the agency has concluded its review of  a generic drug application and the applicant is authorized to  commercially market the drug.\nTentative approval letter. Issued when the agency has completed its  review of an application and has concluded that the generic drug  application is sufficient, but patents or other exclusivities prevent  approval. A tentative approval letter does not allow the applicant to  market the generic drug.\nComplete response letter. Issued at the completion of the review of  an application where deficiencies remain at the end of the review  cycle. The complete response letter describes any deficiencies that  must be corrected in order for the application to be approved.\nFor a generic drug application that receives a complete response letter,  the applicant can amend the application and seek another full review,  which begins the second or subsequent review cycles. During these  cycles, FDA officials review changes made to generic drug applications in  response to deficiencies that FDA identified.\n\n\tFDA Approved 12 Percent of Generic Drug Applications in the First Review Cycle and Several Factors May Have Contributed to Whether Applications Were Approved\n\nOur analysis of FDA data shows that 12 percent of the 2,030 generic drug  applications that FDA reviewed in fiscal years 2015 through 2017  received approval in the first review cycle. See figure 1.\nWe identified several factors, including certain characteristics of generic  drug applications, that may have contributed to whether an application  received approval in the first review cycle, including the sufficiency of the  application, deficiencies in drug quality, the type of drug reviewed, and  the application\u2019s priority status.\nSufficiency of the application. We found that the sufficiency of the  generic drug application, including the completeness of the application  and the degree to which the applicants understood and fulfilled  application requirements, affected its likelihood of receiving an approval in  the first review cycle. According to FDA, one indication of the sufficiency  of the generic drug application is whether FDA had previously refused to receive the application for review because it was not substantially  complete upon its first submission. Our analysis of FDA data found that  applications that had previously been refused were slightly less likely to  be approved in the first review cycle compared with applications that had  not previously been refused, and rates of approvals decreased for  applications with two previously refused attempts. See table 1.\nAccording to stakeholders we interviewed, the sufficiency of a generic  drug application may partially reflect the level of experience the applicant  has in submitting applications, and we found some evidence to support  this explanation. FDA managers and reviewers said that, in general, less  experienced applicants are more likely to produce lower-quality generic  drug applications compared to applicants with relatively more experience.  Our analysis of FDA data found that applicants that submitted just one  application during fiscal years 2015 through 2017 had a slightly lower rate  of approval in the first review cycle (10 percent) compared to the rate  across all applicants (12 percent). Additionally, in our review of 35  selected generic drug applications, we identified three applications that  were from applicants that had no previously approved generic drug  application submissions, an indication that they may have little or no  experience with these applications. None of the three applications were  approved in the first review cycle. One of these applications elicited  reviewer comments that outlined basic application requirements,  potentially reflecting the lack of experience of the applicant.\nDrug quality deficiencies. Our review of documentation from the first  review cycle for 35 generic drug applications included 26 that were not  approved in that cycle. Among those 26 applications, the most common  deficiencies that remained at the end of the first cycle were related to the  quality of the drug\u2014356 out of 435 deficiencies. These deficiencies  included issues related to the drug manufacturing facilities, which can  affect the quality of the drug produced and the stability of the drug over  time, among others. Officials from one large applicant told us that most of  the comments they received from FDA reviewers are related to the quality  of the drug. Three out of five applicants we interviewed also noted that  the results from inspections of drug manufacturing facilities\u2014which FDA  includes as a component of its review of the quality of the drug\u2014are a  factor that may cause an application not to be approved in the first review  cycle. Among the 26 applications we reviewed that were not approved,  eight had an outstanding deficiency related to the manufacturing facility.\nType of drug. We also found that the rate of approval in the first review  cycle differed based on certain characteristics of the type of drug  reviewed, including the route of administration, which may indicate the  complexity of the drug. Complexity can also be influenced by other factors  including, for example, the drug\u2019s active ingredient or formulation. FDA  officials noted that some complex drugs\u2014including those that combine  drug products with drug delivery devices, such as asthma inhalers\u2014are  less likely to be approved in the first review cycle. Officials we interviewed  from one large applicant\u2014which we identified based on the number of  approved generic drug applications it had in fiscal year 2018\u2014reported  that their company had never submitted a generic drug application for a  complex drug product that received approval in the first review cycle  despite having significant experience with producing complex drugs.  Officials we interviewed from another applicant said that very few of its  dermatological products, which are considered complex, had received  approval in the first review cycle.\nIn our review of FDA data, we also found that applications for drugs with  certain routes of administration\u2014the method by which the drug is taken,  such as oral, topical, or intravenous\u2014had different rates of approval in  the first review cycle. In particular, from fiscal years 2015 through 2017,  FDA reviewed generic drug applications for 41 ophthalmic and 20  transdermal drugs\u2014types of drugs that FDA considers complex\u2014and  none of these applications received approval in the first review cycle. In  contrast, generic drug applications for topical drugs, which FDA also  identifies as complex, had higher approval rates. Specifically, our analysis  found that the rate of approvals in the first review cycle for generic drug  applications for topical drugs was 25 percent\u2014more than double the rate  for all applications included in our analysis. FDA officials stated that in  recent years FDA released several product-specific guidances for topical  drugs\u2014technical guidance intended to help applicants identify the most  appropriate methodology for developing certain drugs and generating the  evidence needed to gain approval. FDA officials told us these guidances  may have contributed to the higher rates of approval in the first review  cycle for topical drugs. See table 2.\nGeneric drug application priority review designation. In addition, we  found that a generic drug application\u2019s priority review status may affect  the rate of approval in the first review cycle. FDA may grant priority review  status to applications under several circumstances, including for the first  generics of brand-name drugs and other designations, such as for drugs  that could help address public health emergencies. Our analysis of FDA  data found that the rates of approval in the first cycle were lower for  applications for first generics than for applications with no priority  designation\u20146 percent and 14 percent, respectively. One potential  explanation for the relatively low rate of approval is that for a first generic,  applicants have a financial incentive to be the first to submit an  application to FDA. Officials from one trade association stated that  applications for first generics may be of lower quality because the  applicants are rushing to submit their applications. In other cases,  priority designations were associated with higher first-cycle approval  rates. First-cycle approval rates for applications with other types of priority  designations were higher than for applications with no priority  designation\u201418 percent for applications that were marked as priority for  other reasons, such as drug shortages or public health emergencies. See  table 3.\n\n\tFDA Made Changes That Could Increase the Rates of Approval for Generic Drugs in the First Review Cycle, but Opportunities Exist to Enhance Its Efforts\n\n\t\tFDA Has Taken Steps to Enhance Communication with Applicants and Improve Reviewer Consistency to Increase the Rate of Generic Drug Approvals in the First Review Cycle\n\nOur review of FDA guidance and regulations found that FDA has taken  steps to enhance communication with applicants to increase the rate of  generic drug application approvals in the first review cycle. Specifically,  since the beginning of fiscal year 2013 in response to GDUFA, FDA  increased communication with applicants prior to and during a generic  drug application\u2019s first review cycle consistent with its goal of helping  applicants prepare approvable applications. These changes have  included the following:\nAdditional product-specific guidance. FDA has continued to  release new and revised product-specific guidance to support a  generic drug application\u2019s approval within the first review cycle. Since  GDUFA\u2019s implementation and at the time of our review, FDA told us  that it issued 993 new and revised product-specific guidance  documents that describe acceptable methodologies for developing  generic drugs and generating evidence needed to support a generic  drug application\u2019s approval. FDA officials indicated that product- specific guidance helps streamline both application development and  review.\nAdditional regulatory guidance. FDA has also issued regulatory  guidance to communicate the agency\u2019s expectations for the content  and format of generic drug applications, which can facilitate approval  in the first review cycle. In addition, in 2018, FDA issued draft  guidance that described common application deficiencies and sought  to promote approval during the first review cycle by providing  recommendations on avoiding these recurring deficiencies.\nPresentations to industry. In presentations to applicants and others,  FDA officials have presented information about generic drug  application reviews and deficiencies frequently identified in generic  drug applications. FDA has posted some of these presentation  materials, including several video recordings, publicly on its website to  share the information with industry.\nCommunication during the review cycle. FDA has changed its  review process to encourage reviewers to communicate with  applicants at about the mid-point of the review cycle. FDA reviewers  now aim to issue discipline review letters at about the mid-point of the  first review cycle, rather than waiting until the end of the review cycle  to communicate deficiencies. According to FDA, these earlier  communications are intended to provide applicants with an  opportunity to address issues before the end of the first review cycle  and facilitate more approvals during that cycle.\nAssistance with applications for complex drugs. FDA has taken  steps to assist applicants developing generics of complex drugs, such  as drugs with complex active ingredients, formulations, or routes of  administration. Beginning in fiscal year 2018 when GDUFA II was  implemented, applicants developing complex drugs may request  meetings with FDA prior to submitting a generic drug application and  at the mid-point of the review cycle. In addition, FDA officials told us  that since fiscal year 2013 when GDUFA was implemented, the  agency has released 378 product-specific guidance documents  focused on complex drugs.\nWhile all five applicants we interviewed generally described FDA\u2019s efforts  to increase communication as helpful, they offered opportunities for  improvement. For example, four out of the five applicants said that  product-specific guidance helps them understand exactly what the  requirements are for product development, which can facilitate approval  in the first review cycle. However, two of these applicants also said that  FDA does not obtain sufficient input from the generic drug industry when  developing product-specific guidance documents. To increase  transparency, stakeholders said that FDA could solicit industry input to  avoid proposing unrealistic guidance and one stakeholder suggested that  FDA could create a workgroup to prevent unintended consequences  following the implementation of new and revised guidance. However, FDA  officials told us that draft guidance documents have a public comment  period for stakeholders to provide comments on guidances before they  are finalized.\nIn December 2017, we similarly found that stakeholders indicated they  would benefit from greater transparency in FDA\u2019s process for developing  guidance. We recommended that FDA publicly announce the agency\u2019s  plans for issuing new and revised product-specific guidance for  nonbiological complex drugs within the next year. FDA agreed with this  recommendation and published a website in April 2019 that provides  information about upcoming product-specific guidance documents for  complex generic drugs.\nIn addition, all five applicants we interviewed said that FDA has improved  communication with them, such as by increasing the frequency and timing  of communications, and two applicants indicated that discipline review  letters add predictability to the review process. (See app. I for more  information on FDA\u2019s changes to the generic drug application review  process to improve communication with applicants.) While all five  applicants we interviewed generally agreed that the increased  communications would help increase rates of first-cycle approval, they  also suggested that additional flexibility to communicate with FDA  informally mid-cycle, such as by phone, could further facilitate the review  process by helping applicants respond to questions or get clarity on  questions included in the information requests or discipline review letters.  FDA officials told us that applicants currently can request teleconferences  with FDA, such as after receiving a complete response letter; however,  they also noted that applicants generally prefer email communications  and such teleconferences are not frequently utilized.\nFDA has also taken steps to improve consistency among reviewers.  These steps could facilitate more approvals in the first review cycle  because receiving consistent comments from FDA reviewers typically  makes it easier for applicants to respond more quickly, which\u2014according  to some stakeholders\u2014can result in approval in the first review cycle.  These changes include the following:\nCreating review templates. Officials from FDA\u2019s review disciplines  have developed templates to guide reviewers through the generic  drug application review process. According to FDA\u2019s Manual of  Policies and Procedures, these templates are intended to increase  reviewers\u2019 efficiency and improve assessment consistency.\nDeveloping common phrases. FDA also issued internal guidance on  common phrases that reviewers may use to communicate generic  drug application deficiencies in their comments to applicants during  the first review cycle. For example, officials from the Division of  Labeling Review said they maintain a database of common phrases  and train reviewers on how to explain deficiencies to applicants.  Officials explained that the Division of Labeling Review is also working  toward pre-populating some parts of the review template to increase  efficiency and consistency in the review process.\nUnderstanding the generic drug industry. FDA has taken steps to  increase reviewers\u2019 and applicants\u2019 common understanding of  industry practices and FDA review standards, such as through visits  to manufacturing facilities, to improve the quality and consistency of  reviewers\u2019 comments in the first review cycle. However, all five  applicants we interviewed noticed inconsistency among reviewers.  FDA officials and two applicants suggested that this may be because  FDA reviewers have different professional backgrounds. One  applicant noted that some reviewers benefit from visiting  manufacturing facilities if they do not have prior experience in the  generic drug industry. Officials from a trade association said that such  steps improve applicants\u2019 understanding of what FDA reviewers are  looking for in generic drug applications and may enhance their ability  to submit applications that are approvable in the first review cycle.\n\n\t\tOpportunities Exist to Enhance FDA\u2019s Efforts to Increase the Rates of Approval for Generic Drugs in the First Review Cycle\n\nWhile stakeholders stated that the changes FDA made to improve  reviewer consistency were positive, they noted that inconsistency among  reviewers still remained, and we also found inconsistencies among  reviewers. In addition, while stakeholders we interviewed raised concerns  that the timing of brand-name labeling changes could affect whether  applications were approved in the first review cycle, FDA has not taken  steps to assess the validity of these concerns.\nInconsistency among FDA reviewers. While FDA has taken steps to  improve consistency among generic drug application reviewers,  stakeholders noted that inconsistencies persist, and these inconsistencies  may influence whether an application is approved during the first review  cycle. For example, most stakeholders we interviewed (three out of five  trade associations and four out of five applicants) indicated that they were  aware of examples when different FDA reviewers within the same review  discipline provided substantively different assessments of similar generic  drug applications, specifically by requesting additional information from  applicants for some applications and not others. For example, one  applicant cited an example of two similar topical drugs whose applications  relied on the same data set. The reviewer for one application required  additional data, while the reviewer for the other application did not. To  improve consistency, four applicants we interviewed suggested that FDA  improve its reviewer training and one suggested that FDA create a  workgroup to examine and address inconsistencies among reviewers.\nFour of the five applicants we interviewed also reported variation in the  consistency of reviewers\u2019 comments, including a lack of clarity in the  information required for the applicant to address the comments. For  example, one applicant said that they have received comments where  reviewers did not specify what further information was required, and  added that comments that suggest specific resolutions are extremely  helpful, which would be consistent with FDA\u2019s Manual of Policies and  Procedures. This manual describes a standard process for FDA  reviewers to use when assessing the completeness of generic drug  applications, including clearly communicating with applicants about  deficiencies that must be corrected for their applications to be approved in  order to reduce the number of review cycles. According to the manual,  primary reviewers are responsible for assessing whether applications  meet the regulatory requirements for approval, while secondary reviewers  are responsible for ensuring consistency among assessments and quality  of communications to the applicant. Further, the manual advises primary  and secondary reviewers to ensure that comments to applicants about  deficiencies include similar content. The manual also indicates that  comments should include the following four elements: (1) refer to a  specific location within the generic drug application; (2) identify the  omitted information or explain the problem with the information submitted;  (3) explain the actions necessary to resolve the deficiency; and (4)  explain why the information or revision is needed. Finally, FDA provides  reviewers with plain language writing guidelines and other writing  resources to support the development of clear messages for external  communications.\nIn our review of documentation from the first review cycle for 35 generic  drug applications, we found variation in the clarity and specificity of some  reviewer comments that may have influenced the outcome of the first  review cycle. For example, some discipline review letters included clear  descriptions of potential remedies for some deficiencies, while others did  not clearly describe the deficiency or FDA\u2019s expectations for an  approvable generic drug application. Of the 35 generic drug applications,  we conducted a more detailed review of four applications from fiscal year  2018\u2014two that received approval in the first review cycle and two that did  not. In the two applications that were not approved in the first review  cycle, we identified 32 instances in which the comments did not fully meet  FDA\u2019s criteria.\nTwo of the four applications we reviewed in more detail had similar  numbers and types of deficiencies identified in the discipline review letters  sent to the applicants mid-way through the first review cycle, such as  quality deficiencies related to the drug substance and drug product, but  the clarity and content of the comments included in the discipline review  letters varied considerably. For one of the applications, the comments were written clearly and, consistent with FDA\u2019s Manual of Policies and  Procedures, identified options for addressing the deficiencies. For the  other application, the comments were less clear and did not clearly  identify ways to address the deficiencies. The applicant of the generic  drug application with clearly written comments resolved all of the  deficiencies raised in their discipline review letter and the generic drug  application was approved in the first review cycle. In contrast, the  applicant of the other application did not resolve all deficiencies raised in  their discipline review letter and was not approved in the first cycle. See  Table 4 for more detail on these two examples.\nInconsistency among reviewers could affect the rate of approvals in the  first review cycle if comments provided to applicants differ in content or  are not clearly communicated. For example, if some reviewers provide  unclear comments, it could be more difficult for the applicant to address  deficiencies in a timely manner, while applicants that received clear  comments could potentially address deficiencies within the first review  cycle. This could delay some generic drugs from entering the market if  applicants require more time, including potentially additional FDA review  cycles, to understand and respond to unclear comments. This has  potential impacts on patient access to generic drugs and on applicants\u2019  abilities to effectively manage their expectations for when their generic  drug applications will be approved.\nFDA officials explained that although secondary reviewers are  experienced, they do not consistently receive additional training to ensure  clarity and consistency among primary reviewers. They noted that FDA  offers training in clear writing for FDA employees but it is not required for  reviewers. FDA managers noted that some inconsistency among  reviewers may persist due to various factors such as tenure with the  agency and different professional backgrounds or interpretations of the  generic drug application information. They also said that standardizing  reviewers\u2019 writing is challenging since each reviewer might have his or  her own writing style and scientific expertise. Two applicants and one  trade association we interviewed also said that the length of reviewers\u2019  tenure with the agency could impact the substance of their comments in  information requests and discipline review letters and the likelihood of the  applicant attaining approval in the first review cycle. For example, one  trade association we interviewed said that inexperienced reviewers  typically request information from applicants that a more experienced  reviewer would already know, such as information about drug  manufacturing facilities.\nUnknown effects of labeling changes. Three applicants we interviewed  noted that they believe FDA could improve the rate of approvals during  the first review cycle if they took steps to mitigate delays that  stakeholders said result from brand-name drug labeling changes that  occur mid-cycle. Because generic drug labels generally must match  brand-name labels, most applicants we interviewed said that changes  made by brand-name drug companies to the labeling of drugs during the  review process can delay or prevent approval of generic drugs in the first  review cycle because the applicant of the generic drug would likely need  to update the label before it is approved. In addition, five of the 10  stakeholders we interviewed said they believe such labeling changes  negatively impact the rate of first-cycle approvals, and three said they  believe that brand-name companies may strategically time updates to a  brand-name drug\u2019s labeling to occur right before the approval of a generic  competitor in order to delay generic drug approvals.\nAlthough our review of 35 selected applications did not identify examples  where labeling changes made during the first review cycle were the only  factor that prevented approval, we identified two instances where labeling  changes were among multiple factors that prevented approval.  Specifically, we identified two applications for which the complete  response letters noted recent changes in the brand-name drug\u2019s labeling  as one of multiple factors that contributed to the generic drug application\u2019s  failure to receive approval in the first review cycle. One of these  applications had successfully addressed several labeling deficiencies  during the first review cycle, but received a complete response letter that  included new labeling deficiencies because of recent changes in the  brand-name drug\u2019s labeling.\nThree applicants and one trade association identified labeling changes as  a concern during our interviews. Two of these applicants and the trade  association suspected updates are strategically timed to delay generic  drug approvals. However, FDA does not know whether there is validity to  these concerns because it has not conducted analysis that would enable  it to assess their validity. FDA officials noted that they were aware of  these types of concerns, but thought it would be difficult for brand-name  drug companies to successfully time changes in their drugs\u2019 labeling to  affect applications under review, and that labeling changes for brand- name drugs must be justified, for example, to note an adverse reaction  identified after approval. However, FDA officials also acknowledged that  there may be an incentive for brand-name drug companies to change the  label on a drug frequently to make it more difficult for a generic drug  application to be approved.\nFDA officials stated that the Office of Generic Drugs does not assess how  often brand-name companies change their labeling or track how often  such labeling changes occur because such changes are reviewed by the  Office of New Drugs. Further, while FDA officials noted that the two  offices have coordinated on the review of some labeling changes, they  stated that they do not coordinate on the timing of approval of brand- name drug label changes. This is inconsistent with federal internal control  standards, which 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. In addition, FDA can approve a  generic drug application even though changes have been made in the  brand-name drug labeling that the applicant has not incorporated into its  proposed labeling, provided the applicant meets certain criteria; however,  FDA officials told us that applications rarely meet the required criteria.  Conducting an assessment of the extent to which the timing of such  changes affect the approval of generic drugs in the first cycle of review  would provide FDA with the necessary information to respond to  stakeholder concerns and take action, as appropriate, such as by  coordinating with the Office of New Drugs on this issue. To the extent that  brand-name companies\u2019 labeling changes are creating unnecessary  delays in generic drug approval, such delays may impede generic drug  entry into the market, which would be inconsistent with FDA\u2019s stated  goals of speeding up generic drug reviews.\n\n\tConclusions\n\nThe timely approval of safe generic drugs in FDA\u2019s first review cycle can  provide substantial cost savings to patients and third-party payers. Since  the enactment of GDUFA, FDA has taken steps to help applicants submit  stronger generic drug applications and correct deficiencies within the first  review cycle. However, according to FDA its most recent analysis found  that the average generic drug application required three cycles of review  before approval. Opportunities exist to enhance FDA\u2019s efforts to increase  the rates of approval for generic drugs in the first review cycle, including  improving the consistency and clarity of reviewer comments and  assessing the effects of the timing of brand-name companies\u2019 changes to  labeling.\nTaking such steps could help FDA meet the agency\u2019s goals of minimizing  the number of review cycles necessary for generic drug application  approval and increasing the overall rate of approval, including within the  first review cycle. Increasing the rate of approval in the first review cycle,  while maintaining the efficacy and safety of generic drugs, can expand  consumer access to relatively lower cost medications and has the  potential to save patients and third-party payers billions of dollars.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to FDA.\nThe Commissioner of FDA should take additional steps to address  inconsistency in its written comments to generic drug applicants\u2014 including the clarity of writing and the content of comments\u2014among  reviewers, such as requiring additional training for reviewers.  (Recommendation 1)\nThe Commissioner of FDA should assess the extent to which the timing  of brand-name drug companies\u2019 drug labeling changes affect the approval  of generic drug applications in the first review cycle, and take steps, as  appropriate, to limit the effect of brand-name drug labeling changes on  pending generic drug applications. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS for review and comment. In its  written comments, which are reproduced in appendix II, HHS concurred  with our recommendations. HHS stated that it will take steps to improve  the clarity and content of primary reviewers\u2019 comments by, for example,  providing training on written communication. Additionally, HHS stated that  it will take steps to assess examples in which a brand-name drug  company labeling change impacted the timeline of a generic drug  approval and assess what actions could address this issue. In addition,  HHS provided technical comments, which we incorporated as  appropriate.\nWe are sending copies of this report to the congressional addresses, 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.\nIf 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.\n\nAppendix I: Changes to the Generic Drug Review Process to Improve Communications with Applicants\n\nThe Food and Drug Administration (FDA) made several changes to its  review process for generic drug applications in its implementation of the  Generic Drug User Fee Amendments of 2017 (GDUFA II) that are  intended to improve communications with applicants, such as drug  companies, and included the following:\nAdditional communication with applicants. In its GDUFA II  Commitment Letter to Congress,  1. FDA committed to notify applicants of potential deficiencies in an  application that could prevent approval in the first review cycle  through information requests or discipline review letters by about the  mid-point of the review cycle; and  2. FDA committed to continue to issue additional information requests  or discipline review letters late in the review cycle as needed, and, in  certain circumstances, to work beyond the review timeframe to issue  an approval.\nPre-submission facility correspondence. In its GDUFA II  Commitment Letter to Congress, FDA committed to communicating  with applicants of priority generic drug applications before the  application is submitted. For priority generic drug applications, FDA  accepts information about facilities associated with an application,  such as manufacturing facilities, at least 2 months before the  application is submitted. If FDA finds the pre-submission facility  correspondence includes complete and accurate information, the  application may receive a review timeline of 8 months, rather than  10.\nFigure 2 provides an overview of the timeline for the first review cycle for  generic drug applications under the Generic Drug User Fee Amendments  of 2012 (GDUFA) and the revised review process under GDUFA II.\n\nAppendix II: Comments from the Department of Health and Human Services\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Gerardine Brennan (Assistant  Director), Rebecca Rust Williamson (Analyst-in-Charge), Caroline Hale,  and Elizabeth Leibinger made key contributions to this report. Also  contributing were Kaitlin Farquharson, Cathy Hamann, Dan Lee, Laurie  Pachter, and Vikki Porter.","output":null}
{"id":"gao_GAO-19-256","pid":"gao_GAO-19-256_0","input":"\tBackground\n\nOn September 6, 2017, the eye of Hurricane Irma traveled about 50  nautical miles to the north of the northern shore of Puerto Rico as a  category 5 hurricane. Less than two weeks later, Hurricane Maria made  landfall as a category 4 hurricane on the main island of Puerto Rico on  the morning of September 20, 2017 with wind speeds up to 155 miles per hour. The center of the hurricane moved through southeastern Puerto  Rico to the northwest part of the island, as shown in figure 1 below.\nIn response to the request of the Governor of Puerto Rico, the President  declared a major disaster the day after each hurricane impacted Puerto  Rico. Major disaster declarations can trigger a variety of federal  response and recovery programs for government and nongovernmental  entities, households, and individuals, including assistance through the  Public Assistance program. Under the National Response Framework,  DHS is the federal department with primary responsibility for coordinating  disaster response, and within DHS, FEMA has lead responsibility. The  Administrator of FEMA serves as the principal adviser to the President  and the Secretary of Homeland Security regarding emergency  management.\n\n\t\tFEMA\u2019s Public Assistance Program\n\nFEMA\u2019s Public Assistance program provides funding to state, territorial,  local, and tribal governments to assist them in responding to and  recovering from major disasters or emergencies. As shown in figure 2,  Public Assistance program funds are categorized broadly as either  \u201cemergency work\u201d or \u201cpermanent work.\u201d Within those two broad  categories are separate sub-categories. In addition to the emergency  work and permanent work categories, FEMA\u2019s Public Assistance program  includes category Z, which represents indirect costs, administrative  expenses, and other expenses a recipient or subrecipient incurs in  administering and managing projects.\nPuerto Rico\u2019s agencies, such as the Department of Housing; public  corporations, such the Puerto Rico Electric Power Authority and the  Puerto Rico Aqueduct and Sewer Authority; and Puerto Rico\u2019s 78  municipalities are eligible to apply for the Public Assistance program.  FEMA\u2019s Public Assistance program also provides funding for cost- effective hazard mitigation measures to reduce or eliminate the long-term  risk to people and property from future natural and man-made disasters  and their effects. Specifically, FEMA provides funding for hazard  mitigation measures in conjunction with the repair of disaster-damaged  facilities to enhance their resilience during future disasters. For example,  a community that had a fire station damaged by a disaster could use  Public Assistance funding to repair the facility and incorporate additional  measures such as installing hurricane shutters over the windows to  mitigate the potential for future damage.\nIn Puerto Rico, the Public Assistance program is administered through a  partnership between FEMA and the recipient (Puerto Rico), which  provides funding to eligible subrecipients (local or territory-level entities).  Under the standard Public Assistance program process, once the  President has declared a disaster, Public Assistance staff work with the  recipient or subrecipients to help them document damages, identify  eligible costs and work, and prepare requests for Public Assistance grant  funds by developing project proposals. Officials then review and obtain  approval of projects prior to FEMA obligating funds to reimburse  recipients or subrecipients for eligible work.\n\n\t\tThe Use of Alternative Procedures for Public Assistance Projects in Puerto Rico\n\nThe Sandy Recovery Improvement Act of 2013 authorized the use of  alternative procedures in administering the Public Assistance program,  thereby providing new flexibilities to FEMA, states, territories, and local  governments for debris removal, infrastructure repair, and rebuilding  projects using funds from this program. The stated goals of the alternative procedures are to reduce the costs to the federal government,  increase flexibility in the administration of the Public Assistance program,  expedite the provision of assistance under the program, and provide  financial incentives for recipients of the program for the timely and cost- effective completion of projects.\nUnlike the standard Public Assistance program where FEMA will fund the  actual cost of a project, the Public Assistance alternative procedures  allow awards for permanent work projects to be made on the basis of  fixed cost estimates to provide financial incentives for the timely and cost- effective completion of work. Under these procedures, if the actual cost  of the project exceeds the fixed cost estimate agreed upon by FEMA and  the recipient, the recipient or subrecipient is responsible for the additional  costs. However, if the actual cost of completing eligible work for a project  is below the estimate, the recipient or subrecipient may use the remaining  funds for other eligible purposes, such as for additional cost-effective  hazard mitigation measures to increase the resiliency of public  infrastructure. These funds may also be used for activities that improve  the recipient\u2019s or subrecipient\u2019s future Public Assistance operations or  planning. Although FEMA had approved alternative procedure grants in  30 states as of April, 2018, in these cases, alternative procedures were  used on a project-by-project basis. Puerto Rico\u2019s recovery from the 2017  hurricanes is the first recovery to use alternative procedures for all large  permanent work projects.\nOn October 30, 2017, Puerto Rico requested to use the alternative  procedures process for all large-project funding for Public Assistance  permanent work, categories C through G. According to FEMA guidance,  as part of the alternative procedures process in Puerto Rico, FEMA and  Puerto Rico must agree on a group of personnel with cost estimation  expertise who will serve as part of a center of excellence. This center of  excellence will assist FEMA and Puerto Rico in developing cost  estimating methodologies to be used for determining fixed cost estimates  for Public Assistance permanent work projects. FEMA officials stated that  they are in the process of conducting inspections for Public Assistance  projects for permanent work and, as of August 2018, had a total list of  10,000 site inspections to complete. FEMA officials stated that October  2019 is their target date for completing all alternative procedures fixed  cost estimates for Public Assistance permanent work. However,  pursuant to 428 guidance published in April 2018, this time frame may be  adjusted on a project-by-project basis, based on extenuating  circumstances.\n\n\t\tPuerto Rico\u2019s Central Recovery Office Oversees Federal Recovery Spending\n\nAmendment 5 to the President\u2019s disaster declaration imposed a number  of grant conditions, including that Puerto Rico establish an oversight  authority supported by third-party experts. This authority is to act as the  grant recipient for all Public Assistance and hazard mitigation funding to  ensure sound project management and enhanced, centralized oversight  over FEMA grant distributions. In October 2017, the Governor of Puerto  Rico established COR3, a Puerto Rico government office, to plan, guide,  and oversee recovery efforts, including administering and overseeing the  Public Assistance program. According to FEMA and COR3 officials,  COR3 will fulfill the oversight requirements outlined in Amendment 5.  According to COR 3 officials, COR3 was also established to ensure  coordination with FEMA. The Executive Director of COR3 will act as the  Governor\u2019s Authorized Representative, which is the designated individual  responsible for administering federal disaster assistance programs on  behalf of Puerto Rico. Among other things, COR3 will:  Identify, procure, and administer all federal, territorial, and private  resources available to Puerto Rico related to recovery;\nProvide oversight of subrecipients using risk-based monitoring; and\nProvide technical assistance and advise Puerto Rico\u2019s governmental  agencies and municipalities regarding any matter related to recovery.\nAccording to COR3 officials, they will also implement internal controls,  policies, and procedures to appropriately manage recovery funds.\nCOR3 has also launched an online transparency portal intended to  provide a breakdown of FEMA Public Assistance and other federal  funding made available for disaster recovery in Puerto Rico.\n\n\t\tBipartisan Budget Act of 2018 Requirements for Puerto Rico and Congressional Oversight of Recovery Efforts\n\nThe Bipartisan Budget Act of 2018 (Bipartisan Budget Act) required that  Puerto Rico submit an economic and disaster recovery plan to Congress  by August 9, 2018, that defines the priorities, goals, and expected  outcomes of Puerto Rico\u2019s recovery related to a number of sectors,  including, among other things, infrastructure, housing, electric power  systems and grid restoration. The Bipartisan Budget Act also directs the  Governor of Puerto Rico to develop the disaster recovery plan in  coordination with FEMA, with support and contributions from other federal  agencies having designated responsibilities in the National Disaster  Recovery Framework.\nAs of June 2015, Puerto Rico had roughly $66.9 billion in outstanding  debt. According to the recovery plan, economic contraction in the years  prior to the hurricanes contributed to a severe fiscal crisis and Puerto  Rico\u2019s credit rating dropped below investment grade in early 2014,  followed by a series of defaults on debt payments. In response to Puerto  Rico\u2019s financial crisis, Congress passed and the President signed the  Puerto Rico Oversight, Management, and Economic Stability Act in June  2016, which established the FOMB with broad budgetary and financial  control over Puerto Rico. The Bipartisan Budget Act also permits the  FOMB to review any federal funds over $10 million that are designated for  Puerto Rico\u2019s response to or recovery from Hurricanes Irma or Maria.\n\n\tFEMA Obligated Almost $4 Billion in Public Assistance Funding, and Puerto Rico and FEMA Have Taken Actions to Provide Oversight of Federal Recovery Funds\n\nFEMA obligated nearly $4 billion in Public Assistance funds for Puerto  Rico\u2019s emergency work projects, as well as the repair and restoration of  its public infrastructure, among other things. In order to provide financial  oversight of these funds, Puerto Rico is developing an internal controls  plan as well as management policies and procedures that will, in part,  help provide financial monitoring. In the interim, FEMA has instituted a  manual reimbursement process to mitigate risk and ensure fiscal  accountability.\n\n\t\tFEMA Obligated Almost $4 Billion, and Puerto Rico Expended Almost $1.7 Billion in Public Assistance Funding as of September 2018\n\nAs shown in figure 3, FEMA has obligated $3.63 billion (93 percent) for  emergency work (categories A and B), and $151 million (4 percent) for  permanent work (categories C through G) in Puerto Rico as of September  30, 2018. An additional $136 million (3 percent) was obligated for  management and administrative costs.\nAs of the end of fiscal year 2018, Puerto Rico expended about $1.7 billion  (about 43 percent) of the almost $4 billion Public Assistance funds  obligated by FEMA. Ninety-eight percent of this amount went toward  emergency work projects in categories A and B. For example, the Puerto  Rico Aqueduct and Sewer Authority expended almost $91 million to cover  the costs of generator usage. Aside from generators, one category B  project by the Puerto Rico Emergency Management Agency repaired the  emergency warning system for about $9.4 million. A third project put a  temporary roof on a Puerto Rico Institute of Culture facility in Vieques for  $4,000.\nAs shown in table 1, the majority of FEMA\u2019s obligations in Puerto Rico as  of September 30, 2018, have been for emergency work categories  because these projects began soon after the disasters struck and focused  on removing debris and providing assistance to address immediate  threats to life and property.\nIn contrast, permanent work projects take time to identify, develop, and  ultimately complete as they represent the longer-term repair and  restoration of public infrastructure. Funds expended by Puerto Rico for  permanent work have been mostly limited to roads and bridges (category  C) because impassable roads like the one shown in figure 4 below  impede the provision of critical services to citizens. They can also get in  the way of other disaster recovery efforts.\nExpenditures for roads and bridges (category C) amount to approximately  $32 million, while expenditures for other permanent work categories (D- G) total approximately $1 million. According to FEMA officials, Public  Assistance projects in categories D-G are still pending prioritization and  formulation. For example, figure 5 below shows a recreational public  space along the edge of a river in Maricao. The dashed line indicates  where the iron railing and concrete paving used to continue, overlooking  the river, before Hurricane Maria. As of September 2018, the municipality  was awaiting FEMA assistance to begin restoration   FEMA categorizes Puerto Rico\u2019s subrecipients as commonwealth public  corporations, commonwealth agencies, municipalities, and all other  entities.  As shown in table 2 below, 89 percent of obligations, as of the  end of September 2018, for Puerto Rico were awarded to commonwealth  public corporations and commonwealth agencies, with 47 percent  awarded to the Puerto Rico Electric Power Authority.  Overall, about 43  percent of obligated funds have been expended.\n\n\t\tPuerto Rico is Developing an Internal Controls Plan and Recovery Management Policies and Procedures to Provide Oversight of Federal Recovery Funds\n\nAs previously discussed, Puerto Rico designated COR3 to administer and  manage the Public Assistance program in coordination with FEMA. As  part of COR3\u2019s recovery oversight role, COR3 officials stated that they  are developing an internal controls plan and recovery management  policies and procedures with FEMA. According to COR3, these oversight  documents will provide detailed guidance on grant application,  procurement, payment and cash management, and financial monitoring  and reporting, among other things. According to COR3 officials, they have  held numerous meetings to coordinate with FEMA and have submitted  drafts of the internal controls plan as well as management policies and  procedures for FEMA\u2019s consideration. In addition, according to COR3  officials, COR3 plans to provide direct technical assistance related to  federal grants management to Puerto Rico\u2019s cabinet-level agencies,  public corporations, municipalities and other eligible subrecipients. As  part of COR3\u2019s advisory role, COR3 is expected to help Puerto Rico\u2019s  agencies, public corporations, municipalities, and some nonprofit entities  formulate projects, draft cost estimates, and make funding requests,  among other things.\n\n\t\tFEMA Has Instituted an Interim Manual Reimbursement Process to Mitigate Risk\n\nFederal grant award regulations allow FEMA to impose additional specific  grant award conditions in specific circumstances, such as to mitigate risk  and ensure fiscal accountability of the recipient or subrecipient.  According to FEMA, once FEMA obligates funds, the recipient is able to  expend funds as necessary. However, in November 2017, according to  FEMA officials, the agency instituted a manual reimbursement process for  subrecipients in Puerto Rico for federal funds, including Public Assistance  funds, to mitigate fiduciary risk and decrease the risk of misuse of funds.  Specifically, FEMA officials stated that they decided to institute this  process because the government of Puerto Rico had expended funds  prior to submitting complete documentation of work performed.  According to FEMA officials, they also decided to institute the manual  reimbursement process due to Puerto Rico\u2019s financial situation,  weaknesses in internal controls, and the large amount of recovery funds,  among other things.\nThis manual reimbursement process requires that COR3 fill out the Office  of Management and Budget\u2019s Standard Form 270 and submit supporting  documentation before obligated funds can be withdrawn by Puerto Rico  through COR3 and reimbursed to subrecipients. Subsequently, FEMA  must review the submitted Standard Form 270 and all project  documentation for completeness, compliance, and accuracy before  disbursing funds to the recipient. In cases where FEMA requires  additional documentation to process a Standard Form 270 request, FEMA  will submit requests for information asking COR3 to supply the  information needed for FEMA to complete the review. FEMA officials  said that they aim to complete the entire process described above within  ten calendar days, or 15-20 calendar days if FEMA needs to request  additional information from COR3. Additionally, FEMA officials stated that  the manual reimbursement process is intended as a temporary measure.  They will cease the process once FEMA has reviewed the operational  effectiveness of COR3\u2019s internal controls and approved the final internal  controls plan, which are under review.\n\n\tFEMA, COR3, and Subrecipients Report Initial Challenges with the Recovery Process\n\nFEMA, COR3, and Puerto Rico municipal government officials from ten  municipalities we interviewed reported initial challenges with the recovery  process, including with Public Assistance alternative procedures. These  concerns included (1) workforce capacity constraints, (2) a need for  additional guidance, (3) delays related to choosing cost estimators, and  (4) reimbursement for emergency work.\nWorkforce capacity constraints. FEMA and municipality officials cited  concerns about FEMA staff turnover and lack of knowledge about how  the Public Assistance alternative procedures are to be applied in Puerto  Rico. While several municipal officials we spoke to remarked positively on  consistent communication with FEMA officials, municipal officials in six  municipalities we visited cited high levels of turnover among FEMA staff  as a challenge. For example, officials in three municipalities said that  discontinuity in FEMA personnel has caused them to have duplicative  conversations with FEMA. An official from one municipality described the  disruption that had been caused by repeated changes in FEMA  personnel, especially when their point of contact at FEMA changed at  least six times since the hurricanes.\nFEMA officials acknowledged that more personnel with expertise in the  alternative procedures process are needed to administer the Public  Assistance program and assist subrecipients. According to FEMA  officials, FEMA has leveraged existing expertise from personnel in the  Federal Coordinating Officer Advisory Group to train new employees to  increase workforce capacity. FEMA personnel from this group are rotating  experts assigned to recovery issues to increase institutional  understanding of alternative procedures and train local hires. According to  FEMA officials, these local hires can serve as FEMA staff for up to one  year before they become reservists. In addition, FEMA officials stated  that they have identified contractors with previous experience regarding  alternative procedures to provide additional assistance to subrecipients.\nNeed for additional guidance. Municipal officials cited concerns about a  lack of comprehensive guidance for the alternative procedures process.  Specifically, officials in eight municipalities we interviewed cited problems  with missing, incomplete, or conflicting guidance from FEMA. In addition,  officials in four municipalities stated that they are waiting on additional  written instructions to establish more clear and consistent guidance.  Officials from one municipality told us that the lack of written guidance  has meant that the municipality has had to re-submit documents to FEMA  multiple times to respond to changing guidance that they have received  verbally. Additionally, four municipalities cited missing, incomplete, or  conflicting guidance from COR3 as a challenge. However, one  municipality noted that the quality of communication with COR3 has  improved over time as COR3 has become more established.\nAccording to FEMA officials, they are drafting supplemental guidance for  the alternative procedures process with the goal of incorporating lessons  learned from prior iterations of the alternative procedures. Similarly,  according to COR3 officials, COR3 is currently developing additional  guidance and standard operating procedures to help subrecipients,  including municipalities and Puerto Rico government agencies, better  understand FEMA Public Assistance grant requirements.\nDelays related to choosing cost estimators for Puerto Rico. As  mentioned previously, FEMA\u2019s guidance for alternative procedures  requires that FEMA and Puerto Rico, through COR3, choose personnel  with expertise in cost estimation to serve as a center of excellence, which  will develop a cost estimating methodology. FEMA has chosen personnel  to staff the center of excellence. However, in August 2018, FEMA officials  told us that COR3 had not yet finalized their choice of personnel, which  had delayed the cost estimation process. Subsequently, COR3 officials  told us that personnel have been identified to serve on the center of  excellence and the final contracting process for these personnel is now in  progress.\nReimbursement for emergency work. Officials in nine municipalities we  spoke to said that they had not been fully reimbursed for emergency work  they completed. Further, officials in five municipalities we interviewed  stated that the lack of full reimbursement has caused financial hardships.  For example, officials in three municipalities said that the lack of full  reimbursement has meant that the municipalities have had to pause or  delay recovery work due to lack of financial resources. A mayor in one  municipality stated that they have scaled back some essential services,  such as the frequency of garbage pick-up, while waiting for full  reimbursement.\nAccording to FEMA officials, delays in providing reimbursement were due  to several factors including a loss in FEMA personnel to process  reimbursement requests and a significant increase in the volume of  reimbursement requests submitted by COR3 to FEMA. FEMA officials  also stated an increasing need to make requests for information to COR3  due to a lack of documentation submitted at the time of the  reimbursement request. In response to these factors, FEMA officials told  us that they have undertaken new procedures with COR3. For example,  according to FEMA officials, COR3 adopted procedures to review the  completeness of documentation prior to submitting a reimbursement  request to FEMA. FEMA officials stated that the agency is also holding  weekly meetings with COR3 to increase coordination, and that FEMA  increased the number of personnel devoted to reimbursement reviews.  According to officials from FEMA and COR3, these steps have  contributed to reduced delays.\n\n\tPuerto Rico Developed an Economic and Disaster Recovery Plan in Response to the Bipartisan Budget Act of 2018 That Addresses Long- and Short-Term Needs\n\nIn response to the Bipartisan Budget Act, Puerto Rico submitted an  economic and disaster recovery plan (recovery plan) to Congress on  August 8, 2018. The recovery plan defines the priorities, goals, and  expected outcomes of Puerto Rico\u2019s recovery related to building  government capacity for the recovery and strengthening of Puerto Rico\u2019s  infrastructure, among other things. The recovery plan estimates  infrastructure repair and recovery costs of $132 billion and total recovery  costs of $139 billion for a time period starting in 2018 and ending in 2028.  According to the recovery plan, COR3 will guide recovery investment and  policy in the months and years ahead and is intended to serve as a focal  point for strategic thought and management of Puerto Rico\u2019s recovery.\nThe recovery plan is generally responsive to the directives outlined in the  Bipartisan Budget Act. For example, Puerto Rico submitted the plan to  Congress within 180 days of enactment of the Bipartisan Budget Act. The  recovery plan defines priorities, goals, and expected outcomes for Puerto  Rico\u2019s recovery effort based on damage assessments conducted by  sector. As mentioned earlier, Puerto Rico developed the recovery plan in  coordination with FEMA and with support of the U.S. Department of  Energy, the U.S. Department of Health and Human Services, and other  federal agencies with responsibilities outlined in the National Disaster  Recovery Framework.\nAdditionally, the FOMB of Puerto Rico certified the recovery plan on  August 28, 2018, as directed in the Bipartisan Budget Act, but provided  two caveats to its certification. First, FOMB expressed concern that the  recovery plan lacks sufficient detail of funding sources and estimates a  much greater amount of federal funding than the certified fiscal plan for  Puerto Rico projects. The recovery plan states that at the time of its  release, Puerto Rico had not undergone eligibility reviews in various  federal funding programs, and therefore the ability to identify accurate  funding sources was limited. COR3 officials confirmed that full recovery  funding needs will not be known until all damage assessments are  complete, and they will continue to identify and leverage all funding  resources as they are made available. Second, FOMB indicated that the  recovery plan does not address oversight of federal funds and the  recovery process. While the Bipartisan Budget Act does not require  specific mechanisms for oversight of federal funding as part of the  recovery plan, according to COR3 officials, they plan to implement  internal controls, policies, and procedures to provide oversight.\nPuerto Rico\u2019s recovery plan outlines 276 \u201ccourses of action\u201d (actions)\u2014 defined by the plan as \u201ca collection of potential activities, policies, and  other actions that could contribute to recovery\u201d\u2014selected by Puerto Rico  to align with its future recovery vision. As shown in table 3 below, the  actions reflect Puerto Rico\u2019s short-term and long-term recovery vision,  organized into three areas. First, the recovery plan proposes \u201cprecursor\u201d  actions\u2014those that serve as a foundation for all future actions\u2014that will  be prioritized for implementation. For example, the recovery plan includes  actions to build capacity of municipalities to secure and manage recovery  funds, and to improve the quality and volume of public data available to  decision makers. Second, the recovery plan proposes a set of actions  that aim to build the infrastructure and systems that support Puerto Rico\u2019s  economy, society, and disaster resiliency, such as addressing  vulnerabilities in Puerto Rico\u2019s electric grid. Finally, the recovery plan  proposes a set of actions that address Puerto Rico\u2019s long-term recovery  goals, such as developing and enhancing Puerto Rico\u2019s visitor economy.\nMost individual actions in the recovery plan include initial and recurring  cost estimates for the time period from 2018 through 2028. The recovery  plan describes all cost estimates as preliminary, and says that more  specific cost estimates require completion of damage assessments and  more details about the implementation of actions.\nTo develop Puerto Rico\u2019s disaster recovery plan, FEMA assisted COR3 in  retaining the Homeland Security Operational Analysis Center (HSOAC), a  federally-funded research and development center operated by the RAND  Corporation under contract with DHS. According to FEMA officials, FEMA  provided funding and technical assistance, through contractor support, for  Puerto Rico to develop the recovery plan, but COR3 and Puerto Rico will  be responsible for its implementation. These officials also stated that  Puerto Rico received input and technical assistance from other federal  departments, such as those in the Recovery Support Function Leadership  Group led by FEMA.\nHSOAC developed the recovery plan in consultation with Puerto Rico by  developing a preliminary sector-by-sector assessment of damages and  needs caused by Hurricanes Irma and Maria across Puerto Rico. In  conjunction with Puerto Rico\u2019s stated vision for the recovery process,  HSOAC\u2019s damage assessment report provided the baseline needed to  define, compare, and prioritize actions.\nHSOAC worked in teams of sector-specific experts to develop and refine  the actions by reviewing reports, proposals, best practices, and other  literature. For example, in June 2018, the U.S. Department of Energy  released a report on energy resilience for Puerto Rico\u2019s electric grid,  containing recommendations for Puerto Rico to consider when developing  the Recovery Plan. HSOAC sought feedback from various subject matter  experts and stakeholders while developing the recovery plan. According  to FEMA officials, FEMA\u2019s joint recovery office delivered interim drafts of  the recovery plan to federal agency partners and Puerto Rico for  feedback. HSOAC also sought input from local-level stakeholders,  including Puerto Rico\u2019s municipal governments. For example, HSOAC  commissioned a survey of officials from municipalities to gauge the  challenges they faced in the aftermath of the 2017 hurricanes. According  to FEMA and HSOAC officials, the survey, along with other input provided  by mayors led to the development of actions focused on building the  capacity of municipal governments to support recovery efforts.\nHSOAC officials noted that while the final recovery plan was submitted to  Congress, they will continue to produce products that will assist Puerto  Rico and their stakeholders in recovery implementation. HSOAC intends  to release updated versions of the recovery plan, including updated  damage and needs assessments. Other expected products include  detailed descriptions and cost estimates for each action and a lessons  learned report. The Bipartisan Budget Act also directs Puerto Rico to  develop a public report on the progress made in achieving the recovery  plan\u2019s goals every 180 days after submission.\nFEMA officials explained that the recovery plan serves as a strategic,  direction-setting plan for recovery, and does not provide step-by-step or  site-by-site guidance on the recovery process. FEMA officials also  acknowledged that there may be some overlap between some of the  actions in the recovery plan and some of the permanent work funded  through FEMA\u2019s Public Assistance program, but that it is COR3\u2019s  responsibility to merge and coordinate such recovery efforts.\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DHS and the government of Puerto  Rico for review and comment. In its comments, reproduced in appendix I,  DHS summarized the amount of Public Assistance funding provided to  Puerto Rico through fiscal year 2018. DHS also described FEMA\u2019s  temporary manual reimbursement process instituted to mitigate risk and  ensure fiscal accountability of taxpayer dollars, and stated that FEMA is  committed to supporting Puerto Rico as it finalizes internal controls,  management policies and procedures to oversee disaster recovery funds.   DHS also provided technical comments, which we incorporated as  appropriate.\nThe government of Puerto Rico provided comments that we reproduced  in appendix II. In its comments, the government of Puerto Rico stated that  in addition to what was discussed in this report, COR3 achieved progress  and faced additional challenges.\nThis report is a part of an ongoing review of disaster recovery efforts in  Puerto Rico. The remainder of our ongoing work will continue to examine  Puerto Rico\u2019s recovery process, including implementation of the Public  Assistance alternative procedures process and efforts by FEMA and  Puerto Rico to oversee disaster recovery funds, including the manual  reimbursement process.\nIf you and your staff have any questions, please contact me at (404) 679- 1875 or curriec@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  II.\n\nAppendix I: Comments from the Department of Homeland Security\n\nAppendix II: Comments from the Government of Puerto Rico\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nChris Currie, (404) 679-1875 or CurrieC@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Joel Aldape (Assistant Director),  Pedro Almoguera, Aditi Archer, Michelle Bacon, Sylvia Bascope, Lilia  Chaidez, Taylor Hadfield, Danielle Pakdaman, Lorraine Ettaro, Eric  Hauswirth, Heidi Nielson, and Kevin Reeves made key contributions to  this report.","output":null}
{"id":"crs_R45931","pid":"crs_R45931_0","input":"\tIntroduction\n\nThe William D. Ford Federal Direct Loan (Direct Loan) program makes several types of federal student loans available to individuals to assist them with financing postsecondary education expenses. It represents the single largest source of federal financial assistance to support students' postsecondary educational pursuits. The U.S. Department of Education (ED) estimates that in FY2020, 15.9 million new loans, averaging $6,299 each and totaling $100.2 billion, will be made through the Direct Loan pro gram to undergraduate and graduate students, and to the parents of undergraduate students. In addition, ED estimates that 755,000 Direct Consolidation Loans, averaging $61,433 each and totaling $46.4 billion, will be made to existing borrowers of federal student loans. As of the end of the second quarter of FY2019, $1.2 trillion in principal and interest on Direct Loan program loans, borrowed by or on behalf of 34.5 million individuals, remained outstanding. \nThis report presents a comprehensive overview of the terms and conditions that apply to federal student loans made through the Direct Loan program. It begins by providing background information on the history of the Direct Loan program. This is followed by a brief description of the various types of loans that are offered through the program. The report then presents a thorough description of the terms and conditions for loans made through the Direct Loan program. In identifying and describing loan terms and conditions, it focuses on provisions applicable to loans that are currently being made or that have been made in recent years. Emphasis is placed on discussing Direct Loan program provisions that are related to borrower eligibility, amounts that may be borrowed, interest rates and fees, procedures for loan repayment, repayment relief, the availability of loan discharge and loan forgiveness benefits, and the consequences of defaulting. The final section of the report provides a summary of the methods that are used to ensure that borrowers are informed about the terms and conditions of the loans they obtain and their obligation to repay them. \nThis report has been prepared as a resource for Members of Congress, congressional committees, and congressional staff to support them in their legislative, oversight, and representational roles related to federal student loan policy. It is intended to provide a thorough, but nonexhaustive, description of loan terms and conditions and borrower benefits. It is not intended to be relied upon by borrowers as a resource for validating individual eligibility for specific borrower benefits.\n Appendix A to this report contains a directory of resources from which additional information may be obtained about loans made available through the Direct Loan program. Appendix B consists of a glossary of terms. Appendix C contains a set of tables that present historical information on borrowing limits, interest rates, and fees that have applied to loans made through the Direct Loan program.\n\n\tBackground on the Direct Loan Program\n\nThe Direct Loan program is authorized under Title IV, Part D of the Higher Education Act of 1965 (HEA; P.L. 89-329, as amended). It was established by the Student Loan Reform Act of 1993 (SLRA), Title IV of the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). Federal student loans were first made through the Direct Loan program in 1994.\nIn the Direct Loan program, loans are made by the government using federal capital (i.e., funds from the U.S. Treasury), and once made, outstanding loans constitute an asset of the federal government. Some important characteristics of loans made through the Direct Loan program are that the federal government assumes the risk for losses that may occur as a result of borrower default, and that it pays for the discharge of loans in cases of borrower death, total and permanent disability, and other limited instances. The federal government also assumes the cost of loans that are not required to be paid in full due to borrowers satisfying criteria that make them eligible to have a portion or all of the balance of their loans discharged under any of several loan forgiveness programs. For federal budgeting purposes, the program is classified as a direct loan program, which is a type of federal credit program for which mandatory spending authority is provided. \nED's Office of Federal Student Aid (FSA) is the primary entity tasked with administering the Direct Loan program. The institutions of higher education (IHEs) that participate in the Direct Loan program originate loans to borrowers through FSA's Common Origination and Disbursement (COD) system. Contractors hired by ED service and collect on the program's loans. \nWhen the Direct Loan program was first established, it was intended gradually to expand and then ultimately fully replace the Federal Family Education Loan (FFEL) program, a guaranteed student loan program authorized under Title IV, Part B of the HEA, and through which most federal student loans were being made. The FFEL program had descended from the Guaranteed Student Loan (GSL) program, which was enacted under Title IV of the HEA in 1965 to enhance access to postsecondary education for students from low- and middle-income families by providing them access to low-interest federal student loans. In the FFEL program, loan capital was provided by private lenders who also originated and serviced loans. The federal government guaranteed lenders against loss due to factors such as borrower default, death, total and permanent disability, and in limited instances, bankruptcy. State and nonprofit guaranty agencies administered the federal guarantee. The federal government was also responsible for making several different types of payments to lenders and guaranty agencies to support the operation of the program. The FFEL program was administratively complex and the Direct Loan program was established with the aims of streamlining the federal student loan delivery system and achieving cost savings. \nSeveral years into the implementation of the Direct Loan program, statutory provisions specifying that it ultimately succeed the FFEL program were repealed by the Higher Education Amendments of 1998 ( P.L. 105-244 ). From 1994 to 2010, the Direct Loan program and the FFEL program operated side-by-side. During this period, IHEs could elect to participate in the program of their choice. As this decision was made at the institutional level, the program through which an individual could borrow federal student loans was dependent upon the program participation decisions made by the institution a student attended. \nDuring the period while loans were being made through both the FFEL and Direct Loan programs, from the perspective of the borrower the terms and conditions of loans offered through the programs were similar in most respects. However, the degree of similarity varied over time. Notable differences included certain characteristics of the repayment plans offered and, beginning in 2008, the availability of the Public Service Loan Forgiveness (PSLF) program only to borrowers of loans made through the Direct Loan program.\nThe authority to make loans through the FFEL program was terminated, effective July 1, 2010, by the SAFRA Act, Title II of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ). While loans are no longer being made through the FFEL program, as of the end of the second quarter of FY2019, $271.6 billion in principal and interest on FFEL program loans, borrowed by or on behalf of 12.8 million students, remained outstanding and due to be repaid over the coming years. \nOver the history of the Direct Loan program, Congress has periodically made changes to loan terms and conditions. Such changes have often been made as part of comprehensive amendments to the HEA, which authorizes the Direct Loan program; as part of amendments contained in budget reconciliation measures; or as part of amendments included in annual appropriations measures. Congress may well contemplate making future changes to loan terms and conditions. \n\n\tDirect Loan Types\n\nThe following types of loans are currently made available to borrowers through the Direct Loan program: \nDirect Subsidized Loans . These loans are available only to undergraduate students who demonstrate financial need. Direct Subsidized Loans are characterized by having an interest subsidy that applies during an in-school period when a borrower is enrolled in an eligible program on at least a half-time basis, during a six-month grace period, during periods of authorized deferment, and during certain other periods. The Direct Subsidized Loans currently being made have a fixed interest rate that remains constant for the duration of the loan. Direct Unsubsidized Loans . These loans are available to undergraduate students, graduate students, and professional students, without regard to the student's financial need. Direct Unsubsidized Loans generally do not have an interest subsidy. The Direct Unsubsidized Loans currently being made have a fixed interest rate that remains constant for the duration of the loan. The interest rate on loans made to graduate and professional students is higher than the rate on loans made to undergraduate students. Direct PLUS Loans . These loans are available to graduate and professional students, and to the parents of undergraduate students who are dependent upon them for financial support. They are made without regard to financial need and generally do not have an interest subsidy. The Direct PLUS Loans currently being made have a fixed interest rate, which remains constant for the duration of the loan; and the interest rate is higher than the rate on both Direct Subsidized Loans and Direct Unsubsidized Loans. Direct Consolidation Loans . These loans allow individuals who have at least one loan borrowed through either the Direct Loan program or the FFEL program to refinance their eligible federal student loan debt by borrowing a new loan and using the proceeds to pay off their existing federal student loan obligations, including loans that are in default. Direct Consolidation Loans may be obtained without regard to financial need. The Direct Consolidation Loans currently being made have fixed interest rates, which are determined by calculating the weighted average of the interest rates on the loans that are consolidated, rounded up the result to the next higher one-eighth of a percentage point. Upon an individual obtaining a Direct Consolidation Loan, a new repayment period begins, which may be for a longer term than applied to the loans originally borrowed. A Direct Consolidation Loan may have a subsidized component 18 and an unsubsidized component . \n\n\tEligibility and Amounts That May Be Borrowed\n\nEligibility for an individual to borrow a loan through the Direct Loan program and the amount that he or she may borrow are governed by provisions in the HEA and by policies and procedures implemented by ED. All loan types except Direct PLUS Loans are made available without consideration of a borrower's ability to repay the loan. Eligibility to borrow a Direct PLUS Loan depends on an individual's creditworthiness.\nThe section that follows identifies and describes factors that determine an individual's eligibility to borrow one or more types of loans made available through the Direct Loan program. This is followed by a section that describes policies and procedures for determining amounts that may be borrowed. \n\n\t\tFactors Affecting Eligibility to Borrow\n\nFor an individual to be eligible to borrow a loan through the Direct Loan program, the student borrower, or the student on whose behalf a parent borrower would obtain a Direct PLUS Loan, must meet a number of eligibility requirements. A broad set of general eligibility criteria applies to students who may benefit from a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan. An additional set of requirements applies specifically to applicants seeking to borrow a Direct PLUS Loan. Still other requirements apply to applicants for Direct Consolidation Loans. Eligibility to borrow various types of loans is also affected by a student's dependency status, program level (e.g., undergraduate, graduate, or professional), undergraduate class level, financial need, cost of attendance (COA) of the academic program, estimated financial assistance (EFA) he or she expects to receive from other sources, and certain other factors. Factors that affect eligibility to borrow through the Direct Loan program are discussed below.\n\n\t\t\tGeneral Student-Based Eligibility Criteria\n\nIn general, for a student to be eligible to borrow a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan, or for a parent to borrow a Direct PLUS Loan on behalf of a student, the student must \nbe enrolled on at least a half-time basis as a regular student in either an eligible program at a participating eligible IHE, a preparatory program necessary for enrollment in an eligible program (for up to one year), or a teacher certification program; not be incarcerated; be a U.S. citizen or national, U.S. permanent resident, or other eligible noncitizen; maintain satisfactory academic progress as defined by the school; not be in default on a federal student loan, nor owing a refund on a grant or loan made under HEA, Title IV without having made satisfactory repayment arrangements; have on file at the IHE attended a statement of educational purpose stating that the loan will be used solely for educational expenses; and meet applicable Selective Service System registration requirements. \n\n\t\t\tStudent Dependency Status\n\nFor purposes of awarding federal student aid, dependency status determines whether a student is deemed to be dependent upon his or her parents' financial support, or is independent of their support. Dependency status is determined by a student's responses to questions on the Free Application for Federal Student Aid (FAFSA), which he or she must complete and submit to ED when applying for federal student aid. \nA student is deemed to be an independent student if he or she\nis, or will be, 24 years of age or older before January 1 of the award year; is married at the time of completing the FAFSA; will be a graduate or professional student at the start of the award year; is currently serving on active duty in the Armed Forces for other than training purposes; is a veteran of the Armed Forces; has legal dependents other than a spouse; was an orphan, in foster care, or a ward of the court, at any time since age 13; is an emancipated minor or is in legal guardianship as determined by a court of competent jurisdiction in the individual's state of legal residence, or was when reaching the age of majority; is an unaccompanied youth who is homeless, or self-supporting and at risk of being homeless; or is a student for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances or based upon a documented determination of independence that was previously made by another financial aid administrator in the same award year.\nA student who does not satisfy any of the criteria to qualify as an independent student is classified as a dependent student .\nDependency status determines the types of loans available to be borrowed by students and their families, which in turn affects the amounts that may be borrowed. Of particular importance with regard to undergraduate students is the fact that Direct PLUS Loans\u00e2\u0080\u0094the loans with the most flexible borrowing limits\u00e2\u0080\u0094are available to the parents of dependent students but not to the parents of independent students. However, independent undergraduate students are extended higher personal borrowing limits than are dependent students. These differential borrowing limits are predicated on the expectation that the postsecondary education expenses of dependent students will be financed by some combination of students and their parents, whereas the postsecondary education expenses of independent students will typically be financed without parental assistance. \nDependency status also determines which individuals in a student's family will have their income and assets considered in need analysis calculations for the student (discussed below). Need analysis calculations for a dependent student are based on the income and assets of both the student and the student's parents, whereas need analysis calculations for an independent student are based on the income and assets of the student (and if applicable, the student's spouse).\n\n\t\t\tProgram Level\n\nThe academic level of the program in which a student is enrolled impacts both the types of loans that he or she may borrow and certain terms and conditions of such loans. \n\n\t\t\t\tUndergraduate Studies\n\nUndergraduate students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans, and the parents of undergraduate students who are dependent upon them for financial support may borrow Direct PLUS Loans on the student's behalf. Direct PLUS Loans may not be borrowed by undergraduate students nor by parents on behalf of undergraduate independent students.\n\n\t\t\t\tGraduate and Professional Studies\n\nGraduate and professional students may borrow Direct Unsubsidized Loans and Direct PLUS Loans. To be eligible to borrow as a graduate or professional student, an individual must be enrolled in a program above the baccalaureate level or in one that leads to a first professional degree, must have completed at least the equivalent of three years of full-time study either prior to entering the program or as part of it, and must not be concurrently receiving Title IV aid as an undergraduate student. Graduate and professional students, all of whom are classified as independent students, are extended higher borrowing limits than undergraduate students. \n\n\t\t\tUndergraduate Class Level\n\nFor undergraduates, a student's class level determines the maximum amount the student may borrow on an annual basis. A student's class level is based on his or her progression according to the academic standards of the school the student attends. For undergraduate students, progression to a higher grade level for purposes of awarding a loan through the Direct Loan program does not necessarily correspond to the start of a new academic year (AY). For instance, a student who continues to make satisfactory academic progress but does not progress to the next grade level due to having completed an insufficient number of credits could borrow a loan through the Direct Loan program more than once as a first-year student. Once the student accrues enough credits to progress to the next higher grade level, he or she would become eligible for the higher borrowing limits available to second-year students, and so on. \n\n\t\t\tFinancial Need\n\nDirect Subsidized Loans are need-based and may only be borrowed by students who demonstrate having financial need according to federal need analysis procedures. Applicants seeking to borrow Direct Subsidized Loans must undergo a need test through which the expected family contribution (EFC) to be made by the student, and, if applicable, the student's family, toward paying the student's postsecondary education expenses is determined on the basis of the financial resources available to the student. According to federal student aid need analysis procedures, the sum of the student's EFC and the amount of estimated financial assistance (EFA) he or she expects to receive from sources other than programs authorized under Title IV of the HEA is subtracted from the estimated cost of attendance (COA) of the institution the student attends to determine the amount of need-based financial aid that he or she is eligible to receive. \nAdditional procedures are followed to determine the composition of the student's federal student aid package. For instance, undergraduate students must receive a determination of their eligibility to receive a Federal Pell Grant (a form of need-based aid available only to undergraduates) prior to being certified by their school as being eligible to borrow a Direct Subsidized Loan. This procedure is designed to first provide maximum grant aid to needy students before they incur student loan debt. The amount a student may borrow with a Direct Subsidized Loan may not exceed the amount of the student's unmet financial need after other forms of need-based federal student aid available under HEA, Title IV have been awarded. (For additional information, see the section on \" Limits on Borrowing Determined by Need Analysis and Packaging \" below.) Since July 1, 2012, only undergraduate students have been eligible to borrow Direct Subsidized Loans. \n\n\t\t\tDirect Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers\n\nSince July 1, 2013, a student who is a first-time borrower may only borrow Direct Subsidized Loans for a period that may not exceed 150% of the published length of the academic program in which he or she is currently enrolled. This is referred to as the Direct Subsidized Loan maximum eligibility period . For undergraduates subject to this provision, a student enrolled in a two-year associate degree program may receive Direct Subsidized Loans for a maximum eligibility period of no more than three years, while a student enrolled in a four-year bachelor's degree program may receive Direct Subsidized Loans for a maximum eligibility period of no more than six years. \nSubsidized usage periods are used to measure a borrower's progress toward the maximum eligibility period. They are the quotient of dividing the number of days in the borrower's loan period (e.g., semester, quarter) for a Direct Subsidized Loan by the number of days in the academic year for which the borrower receives the Direct Subsidized Loan, rounded to the nearest tenth of a year. Subsidized usage periods are prorated based on intensity of enrollment (i.e., multiplied by 0.75 or 0.50 for three-quarter or half-time enrollment, respectively). A borrower's remaining eligibility period is determined by subtracting a borrower's cumulative subsidized usage periods from the maximum eligibility period.\nThis provision also limits a borrower's eligibility for the interest subsidy on Direct Subsidized Loans. If a Direct Subsidized Loan borrower subject to this provision remains enrolled in the same program for which the loan was obtained, or another undergraduate academic program of equal or shorter length, beyond the applicable maximum eligibility period, the borrower will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period was exceeded.\n\n\t\t\tEligibility Requirements for Direct PLUS Loans\n\nIn addition to satisfying the general student-based eligibility criteria, an individual must meet certain other eligibility criteria specifically applicable to Direct PLUS loans. \n\n\t\t\t\tParent Borrower Eligibility Criteria\n\nDirect PLUS Loans may be borrowed by one or both parents of an undergraduate dependent student who meets the general student-based eligibility criteria described above. Eligible parents include biological parents, adoptive parents, and stepparents (if the stepparent's income and assets are taken into account in determining a student's EFC). A legal guardian may not borrow a Direct PLUS Loan on behalf of a student as a parent borrower. Parent borrowers must also meet the same citizenship and residency requirements as student borrowers; may not be in default on a federal student loan, nor owe a refund on a grant or loan made under Title IV without having made satisfactory repayment arrangements; and may not be incarcerated.\nFor a parent to be eligible to borrow a Direct PLUS Loan on behalf of an undergraduate dependent student, the student must have completed a FAFSA. There is no requirement that a parent borrower complete a separate FAFSA. The eligibility of a noncustodial parent to borrow a Direct PLUS Loan on behalf of his or her child is not impacted by that parent's financial information not appearing on the student's FAFSA. \n\n\t\t\t\tCreditworthiness Requirements to Borrow Direct PLUS Loans\n\nEligibility for an individual to borrow a Direct PLUS Loan also depends on that individual's creditworthiness. Only individuals who do not have an adverse credit history, as determined according to procedures specified in regulations, may borrow Direct PLUS Loans. The creditworthiness criteria apply to both parent borrowers and to graduate and professional student borrowers. Creditworthiness is assessed on the basis of a credit report on the applicant obtained from at least one consumer reporting agency. An applicant is considered to have an adverse credit history if he or she either\nhas one or more debts totaling more than $2,085 that are 90 days or more delinquent as of the date of the credit report, or that have been placed in collection or been charged off by the creditor as a loss within the two years prior to the credit report; or has been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a debt under HEA, Title IV within the five years prior to the credit report.\nAn applicant who is determined to have an adverse credit history may not obtain a Direct PLUS Loan unless he or she either obtains an endorser or demonstrates that extenuating circumstances exist with regard to the applicant's credit history. Extenuating circumstances may include an updated credit report or a letter from a creditor stating that the applicant has made satisfactory repayment arrangements on a derogatory debt. In addition, to obtain a Direct PLUS Loan an applicant who has an adverse credit history must also complete credit counseling. (See the section on \" PLUS Loan Credit Counseling For Borrowers with Adverse Credit .\") An applicant may not, however, be rejected for a Direct PLUS Loan on the basis of having no credit history.\nA dependent undergraduate student whose parents are unable to obtain a Direct PLUS Loan due to their having an adverse credit history may borrow a larger amount in the form of a Direct Unsubsidized Loan. In such a case, the student may borrow up to the borrowing limit applicable to a similarly situated independent undergraduate student. (These amounts are discussed below in the section on \" Amounts That May Be Borrowed .\")\n\n\t\t\tEligibility Requirements for Direct Consolidation Loans\n\nTo be eligible to obtain a Direct Consolidation Loan, a borrower must have an outstanding principal balance on at least one loan that was made through either the Direct Loan program or the FFEL program. In addition, with respect to the loans being consolidated, the applicant must be (1) in the grace period prior to entering repayment; (2) in repayment status, but not in default; or (3) in default, but having made satisfactory repayment arrangements. \nFor the purposes of including a defaulted loan in a Direct Consolidation Loan, making \"satisfactory repayment arrangements\" means that the defaulted borrower has made at least three consecutive voluntary full monthly payments within 20 days of the due date, or has agreed to repay according to one of the Income-Driven Repayment (IDR) plans (described below). A borrower of a defaulted loan who is subject to a court judgment or wage garnishment is ineligible to obtain a Direct Consolidation Loan. \nIn general, a set of loans may be consolidated only once. However, in select circumstances a Direct Consolidation Loan may be used to repay a previously obtained Direct Consolidation Loan or a FFEL Consolidation Loan. Loans made to borrowers within 180 days prior to or after the date of obtaining a Direct Consolidation Loan may be added to that Direct Consolidation Loan. A borrower who has an existing Direct Consolidation Loan and also has other eligible loans that have not been consolidated, or who subsequently obtains other eligible loans, may consolidate those loans with his or her existing loans for purposes of obtaining a new Direct Consolidation Loan. A borrower who has an existing FFEL Consolidation Loan and whose loan is in default or has been referred to a guaranty agency for default aversion assistance may consolidate his or her loan into a Direct Consolidation Loan for purposes of repaying according to one of the IDR plans. Finally, a borrower who has an existing FFEL Consolidation Loan may consolidate that loan into a Direct Consolidation Loan for the purposes of applying for loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program or to receive the No Accrual of Interest on Loans of Certain Active Duty Servicemembers benefit that is only available to borrowers of loans made through the Direct Loan program.\nA Direct Consolidation Loan must consist of at least one eligible loan made through either the Direct Loan or FFEL programs, and may also contain other types of federal student loans. The eligible types of federal student loans made through the Direct Loan and FFEL programs include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation Loans, FFEL Subsidized Stafford Loans, FFEL Unsubsidized Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. The eligible types of federal student loans made outside of the Direct Loan and FFEL programs are Federal Perkins Loans, Guaranteed Student Loans, Federal Insured Student Loans, National Direct Student Loans, National Defense Student Loans, Supplemental Loans for Students (SLS), Auxiliary Loans to Assist Students (ALAS), Health Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), Loans for Disadvantaged Students (LDS), and Nursing Loans.\n\n\t\tAmounts That May Be Borrowed\n\nThe maximum amounts that a student or a parent may borrow in loans made through the Direct Loan program are determined by the interaction of annual and aggregate borrowing limits and federal need analysis and packaging procedures. Limitations on borrowing vary by loan type, borrower characteristics, program level, and class level. \n\n\t\t\tAnnual Loan Limits\n\nFor undergraduate students, annual loan limits cap both the maximum amount that may be borrowed in Direct Subsidized Loans and the total combined amount that may be borrowed through Direct Subsidized Loans and Direct Unsubsidized Stafford Loans during a single academic year. Annual loan limits for Direct Subsidized Loans vary by undergraduate class level; however, at any particular class level these limits are the same for both undergraduate dependent students and undergraduate independent students. Annual loan limits for the total combined amount of Direct Subsidized Loans and Direct Unsubsidized Loans that may be borrowed by undergraduate students vary by both undergraduate class level and by student dependency status. \nFor graduate and professional students, annual loan limits cap the maximum that may be borrowed in Direct Unsubsidized Loans, irrespective of class level. However, higher exceptional annual loan limits are extended to students enrolled in certain health professions programs. There is no specified limit to the amount that may be borrowed in Direct PLUS Loans by either parent borrowers or by graduate and professional students. \nThe annual loan limits apply to the maximum principal amount that may be borrowed in an academic year. Any loan origination fees that the borrower is required to pay (see the \" Loan Origination Fees \" below) are included in the amount to be borrowed that is subject to these limits. \nBorrowing limits for a student who is enrolled for less than one year are prorated based on the fraction of the academic year for which the student is enrolled. An academic year is defined in statute as a minimum of 30 weeks of instruction for courses of study measured in credit hours, or 26 weeks for courses of study measured in clock hours and during which a full-time student is expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900 clock hours.\n\n\t\t\tAggregate Loan Limits\n\nAggregate loan limits cap the total cumulative amount of outstanding loans that a student may borrow through certain loan types. One limit applies to the total amount that may be borrowed in Direct Subsidized Loans and another limit applies to the total combined amount that may be borrowed in Direct Subsidized Loans and Direct Unsubsidized Loans. No aggregate limits are placed on Direct PLUS Loan borrowing. The aggregate loan limits apply only to the aggregate outstanding principal balance (OPB) of the loans a student has borrowed. They do not apply to accrued or capitalized interest. Annual and aggregate limits that have applied to loans made through the Direct Loan program since July 1, 2012, are presented in Table 1 .\nA listing of the annual and aggregate loan limits that have applied throughout the history of the Direct Loan program is presented in Appendix C in Table C-1 .\n\n\t\t\tLimits on Borrowing Determined by Need Analysis and Packaging\n\nThe process of awarding one or more forms of federal student aid to a student in accordance with federal student aid need analysis procedures and individual program rules is referred to as packaging . Financial aid administrators at IHEs are afforded a degree of discretion in determining how aid is packaged. The packaging of aid may affect the amounts that may be borrowed by a student or by a parent on behalf of a student through the various types of loans offered through the Direct Loan program. The process for packaging aid provided through the Direct Loan program is briefly described below. The following terms are instrumental in describing this process.\nCost of A ttendance (COA). This is an institution-determined amount indicative of a student's educational expenses for a period of enrollment (e.g., an academic year) at the IHE. It is determined by the institution a student attends and may include tuition and fees, and allowances for room and board, books, supplies, transportation, loan fees, personal expenses, child or dependent care, etc. For the Direct Loan program, a student's COA represents an absolute limit on the maximum amount of aid he or she may receive during an academic year. Expected F amily C ontribution (EFC). This is the dollar amount a student and the student's family (e.g., parents or spouse) are expected to contribute toward his or her education expenses for a year. A student's EFC is calculated according to procedures specified in law using information supplied by the student on the FAFSA. The formula for calculating a student's EFC takes into account myriad factors including taxed and untaxed income, financial assets, certain benefits (e.g., Social Security, unemployment compensation), family size, and the number of family members to be enrolled in college during an academic year. Estimated F inancial A ssistance (EFA). This is the amount of aid anticipated to be made available to a student from federal, state, institutional, or other sources for a period of enrollment. It includes grant, scholarship, fellowship, loan, and need-based employment assistance. For purposes of need analysis and packaging, two variations of EFA are relevant: (1) EFA not received under HEA, Title IV programs, and (2) EFA from all sources. EFA does not include Iraq and Afghanistan Service Grants; federal veterans' education benefits; or, for purposes of awarding Direct Subsidized Loans, Segal AmeriCorps Education Awards. F inancial N eed. This is the amount determined by subtracting a student's EFC and EFA not received under HEA, Title IV from the student's COA. Unmet F inancial N eed. This is the amount determined by subtracting the sum of a student's EFC and EFA from the student's COA. \nWhen packaging Title IV aid, the total amount of need-based aid awarded to a student may not exceed the amount of the student's financial need. A common packaging strategy is to award need-based aid that is not required to be repaid (e.g., Federal Pell Grant, Federal Supplemental Educational Opportunity Grant [FSEOG] and Federal Work-Study [FSW] awards) before awarding loan aid, which must be repaid. With respect to loans made through the Direct Loan program, only Direct Subsidized Loans are need-based; however, Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans may all be awarded to satisfy a student's unmet financial need. Additionally, once a student's unmet financial need has been satisfied, non-need-based aid, such as Direct Unsubsidized Loans and Direct PLUS Loans, may be awarded to replace some or all of a student's EFC. Overall, when packaging Title IV aid the total amount awarded (including both need-based and non-need-based aid) may not exceed the student's COA, less EFA. Processes for determining the amount of aid that may be awarded through the various types of loans offered through the Direct Loan program are described below.\n\n\t\t\t\tDirect Subsidized Loans\n\nDirect Subsidized Loans are need-based. They may be awarded to satisfy a student's unmet financial need. The maximum Direct Subsidized Loan amount a student is eligible to borrow is determined by summing the student's EFC and EFA, and then subtracting that amount from the student's COA for the school attended. As discussed above, Direct Subsidized Loan borrowing is also capped by applicable annual loan limits. The calculation shown in the text box below is used to determine the amount that a student may borrow through a Direct Subsidized Loan.\n\n\t\t\t\tDirect Unsubsidized Loans\n\nDirect Unsubsidized Loans are non-need-based. Students are eligible to borrow Direct Unsubsidized Loans irrespective of the amount of their EFC, in amounts up to the lesser of (1) the result of subtracting the student's EFA (including, for undergraduate students, any amount borrowed through a Direct Subsidized Loan) from COA, or (2) the result of subtracting the amount borrowed through a Direct Subsidized Loan from the annual Direct Subsidized Loan and Direct Unsubsidized Loan combined borrowing limit applicable to the student's program level and class level. The calculation shown in the text box below is used to determine the amount that a student may borrow through a Direct Unsubsidized Loan.\n\n\t\t\t\tDirect PLUS Loans\n\nDirect PLUS Loans are non-need-based. Graduate and professional students and the parents of dependent undergraduate students may borrow Direct PLUS Loans irrespective of the student's EFC. The amount that may be borrowed through a Direct PLUS Loan is limited to the result of subtracting the EFA (including any amount borrowed through a Direct Subsidized Loan or a Direct Unsubsidized Loan) of the student on whose behalf the loan will be made from the COA of the institution attended. The calculation shown in the text box below is used to determine the amount that a student or a parent may borrow through a Direct PLUS Loan.\nWith regard to parent borrowing, the total Direct PLUS Loan eligibility amount may be borrowed by one parent, or it may be divided among more than one parent (including noncustodial parents) and borrowed in separate amounts by each. \n\n\tInterest on Direct Loan Program Loans\n\nInterest is charged on loans made through the Direct Loan program. It constitutes a charge for the use of borrowed money over a specified period of time. In the Direct Loan program, interest is calculated based on rates that are set according to formulas specified in the HEA. Interest accrual is calculated using a simple daily interest formula. The federal government offers several types of interest subsidies that may limit the amount of interest that accrues on the outstanding principal balance of a loan. In certain circumstances, a borrower may be permitted to defer paying some or all of the interest that has accrued on his or her loan(s) until a later point in time. If a borrower does not pay the interest that has accrued, it may, in certain circumstances, be capitalized (i.e., added to the outstanding principal balance of the borrower's loan).\n\n\t\tInterest Rates\n\nInterest rates on loans made through the Direct Loan program are set according to procedures specified by statute. Since the inception of the Direct Loan program in 1994, a variety of different procedures have been used for setting student loan interest rates. The loans currently being made through the Direct Loan program have fixed interest rates that remain constant from the time a loan is made until it is paid in full. Since July 1, 2013, Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans, have been made with fixed interest rates that are indexed to the interest rates on 10-year U.S. Treasury notes that are auctioned just prior to the start of the academic year during which the loans are made. Since February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that are based on the weighted average of the interest rates on the loans that are included in the Direct Consolidation Loan. Previously, other procedures had been used for setting student loan interest rates, and a number of loans that had been made according to these prior procedures remain outstanding.\n\n\t\t\tProcedures for Setting Student Loan Interest Rates\n\nThe various procedures that have been used for setting interest rates on loans made through the Direct Loan program can be broadly categorized as follows: (1) variable interest rates that are indexed to the interest rates on short-term U.S. Treasury securities that are auctioned just prior to the start of the academic year during which the rate will be in effect, (2) fixed interest rates that are set according to the weighted average of the interest rates of the loans included in a Direct Consolidation Loan, (3) fixed interest rates that are specified in statute, and (4) fixed interest rates that are indexed to the interest rates on long-term U.S. Treasury securities that are auctioned just prior to the start of the academic year during which the loans are made. Because loans with interest rates that have been set according to each of these categories still remain outstanding, each is briefly discussed below. Appendix C presents a detailed history of the various procedures that have been used to set the interest rates that apply to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans ( Table C-2 ); the procedures that have been used to set the interest rates that apply to Direct Consolidation Loans ( Table C-3 ); and the interest rates that have been in effect on these loans on a year-by-year basis ( Table C-4 ).\n\n\t\t\t\tVariable Interest Rates Indexed to Short-Term U.S. Treasury Securities\n\nAt the inception of the Direct Loan program in 1994, all loan types were made with variable interest rates that would adjust once per year on July 1. On variable rate loans, the applicable interest rate is determined according to a formula specified in statute. For each 12-month period that extends from July 1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 91-day U.S. Treasury bills (or other short-term U.S. Treasury securities) auctioned at the final auction held prior to the preceding June 1. An interest rate add-on increases the rate above the rate of the index. Different interest rate add-ons may apply to loans depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the status of the loan (e.g., in school, grace, repayment), and when the loan was made. An interest rate cap of 8.25% applies to variable rate Direct Subsidized Loans and Direct Unsubsidized Loans and the portion of a variable rate Direct Consolidation Loan attributable to such loans. An interest rate cap of 9.0% applies to variable rate Direct PLUS Loans and the portion of a variable rate Direct Consolidation Loan attributable to a PLUS Loan. Direct Consolidation Loans were made with variable interest rates through January 31, 1999, while all other types of Direct Loan program loans continued to be made with variable interest rates through June 30, 2006.\n\n\t\t\t\tFixed Interest Rates on Direct Consolidation Loans\n\nSince February 1, 1999, Direct Consolidation Loans have been made with fixed interest rates that remain in effect for the duration of the loan. The applicable interest rate on a Direct Consolidation Loan is determined by calculating the weighted average of the interest rates in effect on the loans being consolidated, and rounding the result up to the nearest higher one-eighth of 1%. If a borrower obtains a Direct Consolidation Loan to repay one or more loans having a variable interest rate, the weighted average of the interest rates in effect on the loans being consolidated will be used to set the fixed rate that will apply for the duration of the new Direct Consolidation Loan. For Direct Consolidation Loans made during the period from February 1, 1999, through June 30, 2013, the maximum interest rate was capped at 8.25%. There is no maximum interest rate for Direct Consolidation Loans made on or after July 1, 2013.\n\n\t\t\t\tFixed Interest Rates Specified in the HEA\n\nDuring the period from July 1, 2006, through June 30, 2013, all loans made through the Direct Loan program, with the exception of Direct Consolidation Loans, were made with fixed interest rates that were determined by Congress and specified in statute. Different fixed interest rates applied depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan), the program level for which it was borrowed (e.g., undergraduate, graduate), and the academic year for which the first disbursement of the loan was made (e.g., AY2007-2008, AY2008-2009). For these loans, the interest rate that was in effect when the loan was made remains in effect for the duration of the loan. \n\n\t\t\t\tFixed Interest Rates Indexed to Long-Term U.S. Treasury Securities\n\nWith the exception of Direct Consolidation Loans, all loans made through the Direct Loan program on or after July 1, 2013, have market-indexed fixed interest rates. For these loans, the applicable interest rate is set according to a formula specified in statute and remains in effect for the duration of the loan. For new loans made during each 12-month period that extends from July 1 through June 30, the applicable interest rate is indexed to the bond equivalent rate of 10-year U.S. Treasury notes auctioned at the final auction held prior to the preceding June 1. An interest rate add-on increases the applicable borrower rate above the rate of the index. Different interest rate add-ons apply depending on the type of loan (e.g., Direct Subsidized Loan, Direct PLUS Loan) and the program level for which it was borrowed (e.g., undergraduate, graduate). An interest rate cap of 8.25% applies to Direct Subsidized Loans and to Direct Unsubsidized Loans made to undergraduate students; a cap of 9.5% applies to Direct Unsubsidized Loans made to graduate and professional students; and a cap of 10.5% applies to all Direct PLUS Loans. The interest rates applicable to loans being made through the Direct Loan program in AY2019-2020 are presented below in Table 2 .\n\n\t\tInterest Accrual\n\nInterest accrual is the process through which interest accumulates over time. In the Direct Loan program, the accrual of interest is calculated using a simple daily interest formula. With this formula, interest accrues only on the outstanding principal balance (OPB) of the loan. This is in contrast to a compound interest formula, in which interest accrues on both the OPB of the loan and any interest that has accrued during a prior period. In a limited set of circumstances, accrued interest that has not been paid by a borrower may be capitalized, or added to the OPB of the loan. This is discussed below in the \" Interest Capitalization \" section.\nAccording to the simple daily interest formula used in the Direct Loan program, the amount of interest that accrues over a certain period of time is the product of (1) the number of days of interest being calculated (e.g., days since the last payment was made), (2) the OPB of the loan, and (3) an interest rate factor. The interest rate factor is the quotient of the applicable interest rate of the loan divided by the number of days in a year (365.25). An example of the calculation of accrued interest over a 30-day period is provided in the text box below.\nFor loans made through the Direct Loan program, interest begins to accrue on the OPB once the first installment of a loan is disbursed. Unless it is subsidized (see \" Subsidized Interest \"), interest accrues during the entirety of the period that a loan is in effect, irrespective of whether the borrower is expected to be making payments on it.\n\n\t\tSubsidized Interest\n\nIn a limited set of circumstances, the federal government subsidizes some or all of the interest that would otherwise accrue on loans made through the Direct Loan program. During periods when an interest subsidy is provided, borrowers are relieved of the requirement to pay the interest that would accrue. The availability of an interest subsidy depends on factors such as the type of loan borrowed, Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers, eligibility for an authorized deferment, the repayment plan selected, and the borrower's status as a servicemember in the Armed Forces. Interest subsidies that may be available on loans made through the Direct Loan program are described below.\n\n\t\t\tInterest Subsidy on Direct Subsidized Loans\n\nOn Direct Subsidized Loans, and on the subsidized component of Direct Consolidation Loans, interest is subsidized by the government (i.e., interest does not accrue) during in-school periods while a borrower is enrolled in an eligible program on at least a half-time basis, during a six-month grace period, and during periods of authorized deferment. Due to amendments to the HEA made by the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), interest is not subsidized during the grace period on Direct Subsidized Loans disbursed between July 1, 2012, and June 30, 2014.\n\n\t\t\t\tLimit on Direct Subsidized Loan Interest Subsidy if 150% of Published Academic Program Length is Exceeded\n\nFor a borrower to whom the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers applies, eligibility both to borrow a Direct Subsidized Loan and to receive the interest subsidy on Direct Subsidized Loans previously obtained is limited to a period that may not exceed 150% of the published length of the academic program in which the student is enrolled. If a Direct Subsidized Loan borrower subject to this provision remains enrolled beyond the applicable maximum eligibility period, the borrower will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period is exceeded.\n\n\t\t\tInterest Rate Reduction for Automatic Debit Repayment\n\nThe HEA authorizes the Secretary of Education (the Secretary) to offer borrowers of loans made through the Direct Loan program an interest rate reduction as an incentive for having loan payments automatically debited from a bank account. The Secretary currently offers a 0.25 percentage point interest rate reduction for automatic debit repayment. This option helps ensure that borrowers make their student loan payments on time. The interest rate reduction for automatic debit repayment does not apply during in-school, grace, deferment, or forbearance periods.\n\n\t\t\tInterest Subsidies on Eligible Loans Repaid According to Certain Income-Driven Repayment (IDR) Plans During Negative Amortization\n\nInterest subsidies are provided on certain types of loans repaid according to the Income-Based Repayment (IBR) plans, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan during periods when a borrower's loans are in negative amortization. (Details of these income-driven repayment plans are described below in \" Loan Repayment Plans \" section.) A common characteristic of these IDR plans is that an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans for a maximum of the first three consecutive years that the borrower repays according to the applicable IBR plan. In addition, in the REPAYE plan an extended, partial interest subsidy is provided on all eligible loan types. These IDR plan interest subsidies are described in greater detail below.\n\n\t\t\t\tThree-Year Interest Subsidy on Direct Subsidized Loans Repaid According to Certain IDR Plans During Negative Amortization\n\nThe structure of the IBR, PAYE, and REPAYE plans provide that in certain instances, a borrower's required monthly payment amount may be insufficient to pay all of the interest that has accrued on the borrower's Direct Subsidized Loans, or on the subsidized component of a Direct Consolidation Loan. In such instances, the Secretary does not charge the borrower for the amount of the accrued interest that is in excess of the applicable monthly payment amount (referred to as the remaining accrued interest ) for a period of up to the first three years from the date the borrower began repaying according to the IDR plan. For borrowers who switch repayment plans and repay their loans sequentially according to more than one of the IDR plans under which a subsidized loan interest subsidy is provided, a cumulative three-year limit on receipt of the interest subsidy applies to periods of repayment made under any of the aforementioned IDR plans. Any periods during which the borrower receives an economic hardship deferment and during which an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans are excluded from the three-year eligibility limit.\n\n\t\t\t\t50% Interest Subsidy on All Eligible Loan Types Repaid According to the REPAYE Plan During Negative Amortization\n\nIn addition to the three-year interest subsidy of the remaining accrued interest on Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans described above, the REPAYE plan includes a 50% subsidy of the remaining accrued interest on all loans. Beyond the three-year period for Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans (described above), and during all periods of repayment on other eligible loans, in the instance that a borrower's required monthly payment amount is insufficient to pay all of the interest that has accrued on his or her loans, the Secretary charges the borrower for only 50% of the remaining accrued interest. There is no time limit on receipt of the REPAYE plan 50% interest subsidy.\n\n\t\t\tNo Accrual of Interest on Loans of Certain Active Duty\u00c2 Servicemembers\n\nFor all types of loans made through the Direct Loan program that were first disbursed on or after October 1, 2008, no interest accrues during a period of up to 60 months while the borrower is serving on active duty in the Armed Forces or is performing qualifying National Guard duty in an area of hostilities during a war or national emergency. For Direct Consolidation Loans, the no accrual of interest subsidy applies only to the portion of the loan that was used to repay other loans that were first disbursed on or after October 1, 2008.\n\n\t\t\tSCRA 6% Interest Rate Cap on Loans of Borrowers Who Enter Military Service\n\nThe Servicemembers Civil Relief Act (SCRA) provides that for individuals who borrow loans after August 14, 2008, but prior to their entrance into military service, the interest rate on their loans must be capped at a rate of 6% for the duration of their military service. The federal government, as the creditor on loans made through the Direct Loan program, must forgive interest above the 6% rate and may not accelerate repayment of the loans. Loan servicers are required to regularly check with the U.S. Department of Defense Manpower Data Center (DMDC) to determine whether borrowers qualify for the SCRA 6% interest rate cap and to extend the benefit to borrowers. Borrowers also have the option of completing an SCRA Interest Rate Limitation Request and submitting it to their loan servicer to document their eligibility for the 6% interest rate cap.\n\n\t\t\t\tSCRA 6% Interest Rate Cap and Direct Consolidation Loans\n\nIf a borrower repays one or more loans on which the interest rate has been reduced to 6% under the SCRA with a Direct Consolidation Loan, the 6% interest rate is required to be used as the applicable interest rate on those loans for purposes of determining the weighted average interest rate of the new Direct Consolidation Loan. In such an occurrence, because Direct Consolidation Loans are currently being made with fixed interest rates, the 6% rate would essentially be locked in and would remain in effect beyond the end of the borrower's period of military service.\n\n\t\t\tInterest Subsidy on All Loan Types During Cancer Treatment Deferment\n\nA Cancer Treatment Deferment is to be provided during periods while a borrower is receiving treatment for cancer and for the six months thereafter. During periods while a borrower receives this deferment, no interest accrues on his or her qualifying loans. The Cancer Treatment Deferment is available on all types of Direct Loan program loans that are either made on or after September 28, 2018, or that had entered repayment status on or before September 28, 2019. This benefit does not appear to be available for loans that were made prior to September 28, 2019, but had not yet entered repayment prior to that date.\n\n\t\tDeferred Payment of Accrued Interest\n\nIn certain instances, the obligation of a borrower to pay the interest that accrues on the outstanding principal balance of loans made through the Direct Loan program may be deferred. For instance, during in-school, grace, deferment, and forbearance periods, borrowers are not required to make payments of either principal o r the interest that accrues on the OPB. Also, for a borrower whose loans are in repayment status and who is repaying according to an IDR plan, if the amount of his or her required monthly payment is less than the amount of interest that has accrued on the loans, the payment of any accrued interest owed that is in excess of the required monthly payment amount may be deferred. Nonetheless, except to the extent that a borrower is receiving an interest subsidy, interest continues to accrue on his or her loans during periods while repayment of accrued interest is deferred. \n\n\t\t\tNegative Amortization\n\nThe term negative amortization describes the situation in which the amount of interest that accrues on a loan over a given period of time is greater than the amount of payments that are made on it. In a case of negative amortization, the accumulation of unpaid accrued interest leads to the outstanding balance of principal and interest on the loan increasing over time. The deferred payment of accrued interest during periods of repayment according to the IDR plans (see \" Income-Driven Repayment (IDR) Plans \") may lead to negative amortization.\n\n\t\tInterest Capitalization\n\nOn certain occasions, any interest that has accrued but not been paid by a borrower may be added to the outstanding principal balance of the borrower's loans. This is called interest capitalization. When interest is capitalized, it becomes part of the OPB and interest begins to accrue on that new, larger loan amount. Over time, interest capitalization increases the total amount a borrower is required to repay. Interest is capitalized in the following situations:\nEntering R epayment Status . Any unpaid interest that has accrued on a borrower's loans during the in-school and grace periods is capitalized at the time a borrower's loan enters repayment status. Loan Consolidation. Any interest that has accrued on a borrower's loan and remains unpaid when the borrower includes the loan in a Direct Consolidation Loan is capitalized upon consolidation. Annually, in ICR and Alternative Repayment Plans. Any unpaid interest that has accrued on a borrower's loan while the borrower is repaying according to the income-contingent repayment (ICR) plan or one of the alternative repayment plans is capitalized annually. End of Partial Financial Hardship . Any unpaid interest that has accrued on a borrower's loans during a period when he or she was repaying according to either of the IBR plans or the PAYE repayment plan and had a partial financial hardship is capitalized when the borrower is determined to no longer have a partial financial hardship. Exit from IBR, PAYE, or REPAYE Repayment Plan. Any unpaid interest that has accrued on a borrower's loan during a period when he or she was repaying according to the IBR, PAYE, or REPAYE repayment plans is capitalized at the time the borrower changes to a different repayment plan. End of Deferment or Forbearance. Any unpaid interest that has accrued on a borrower's loan during a period of deferment or forbearance is capitalized at the expiration of the respective period. However, if during the period of deferment or forbearance a borrower was repaying according to either of the IBR plans or the PAYE repayment plan and was experiencing a partial financial hardship, any interest that accrued during the period of deferment or forbearance will not be capitalized so long as the borrower continues to have a partial financial hardship. Default. Any unpaid interest that has accrued on a borrower's loan prior to the borrower defaulting (e.g., during periods of negative amortization, during delinquency) is capitalized at the time of default.\n\n\t\t\tLimit on Interest Capitalization in the IDR and Alternative Repayment Plans\n\nFor borrowers who are repaying their loans according to some of the IDR plans or an alternative repayment plan, the amount of interest that may be capitalized is capped. For borrowers repaying their loans according to the ICR plan, the PAYE repayment plan, or the alternative repayment plans, interest may be capitalized until the outstanding principal balance reaches a maximum of 110% of the amount of the OPB owed at the time the borrower entered repayment. Once the limit is reached, interest will continue to accrue and accumulate, but it will no longer be capitalized as long as the borrower remains in the same repayment plan. \n\n\tLoan Origination Fees\n\nLoan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. No fees are charged to borrowers of Direct Consolidation Loans. These fees help offset federal loan subsidy costs by passing along some of the costs to borrowers. Loan origination fees are calculated as a proportion of the loan principal borrowed and are deducted proportionately from the proceeds of each loan disbursement to the borrower. \nThe amount to be charged for loan origination fees is specified in statute. For Direct Subsidized Loans and Direct Unsubsidized Loans made on or after July 1, 2010, the HEA specifies a loan origination fee of 1%. (Higher loan origination fees were charged on loans made prior to July 1, 2010.) Since the inception of the Direct Loan program, the HEA has specified a loan origination fee of 4% for Direct PLUS Loans. \nDuring periods when a budget sequestration order that applies to direct (or mandatory) spending programs is in effect, such as for the Direct Loan program, special rules apply to loan origination fees. In instances where the first disbursement of a loan is made during a period that is subject to a sequestration order, the loan origination fee is required to be increased by the uniform percentage sequestration amount that is applicable to nondefense, mandatory spending programs. Loan origination fees that apply to loans made during FY2019 and FY2020 (periods of budget sequestration) are presented below in Table 3 . A history of loan origination fees that previously applied to loans made through the Direct Loan program is presented in Appendix C in Table C-5 .\n\n\tLoan Repayment\n\nBorrowers are required to make payments on loans made through the Direct Loan program during a repayment period that, depending on the loan type, commences either upon the loan being fully disbursed (Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006) or after a six-month grace period (Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loans). Borrowers are afforded the opportunity to choose from among a selection of numerous loan repayment plan options to repay their loans. The repayment plan selected is a determining factor in the duration of the repayment period. Borrowers may prepay all or any part of a loan made through the Direct Loan program at any time without being subject to a prepayment penalty. \n\n\t\tGrace Period\n\nA grace period is a six-month period beginning immediately after a borrower of a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a pre-July 1, 2006, Direct Consolidation Loan first ceases to be enrolled in an eligible program on at least a half-time basis. The grace period excludes any period of up to three years during which a borrower who is a member of a reserve component of the Armed Forces is called or ordered to active duty for a period of more than 30 days and thus ceases to be enrolled on at least a half-time basis, as well as any additional period necessary for such a borrower to resume enrollment at the next available regular enrollment period. \nThe grace period is distinct from and not part of the repayment period. A loan on which a grace period is provided does not enter repayment status until the day after the grace period ends. If a borrower desires to enter repayment on loans that have a grace period immediately after completing school or ceasing to be enrolled on at least a half-time basis, he or she may consolidate those loans into a Direct Consolidation Loan during the grace period and enter repayment on the Direct Consolidation Loan upon its disbursement.\n\n\t\tLoan Repayment Period\n\nIn the Direct Loan program, the repayment period is the period during which borrowers are obliged to repay their loans. The repayment period for Direct Subsidized Loans, Direct Unsubsidized Loans, and pre-July 1, 2006, Direct Consolidation Loan begins the day after the grace period ends. Thus, for these types of loans the loan repayment period begins six months and one day after the borrower first ceases to be enrolled in an eligible program on at least a half-time basis. The repayment period for Direct PLUS Loans and Direct Consolidation Loans made on or after July 1, 2006, begins the day the loan is fully disbursed. (This would be the day of the last disbursement if the loan has multiple disbursements.) For all loan types, the first payment is due no later than 60 days after the start of the repayment period. \nIn general, the repayment period excludes any periods of authorized deferment and forbearance; however, in certain instances of a borrower repaying a loan according to an IDR plan, periods during which the borrower is receiving an economic hardship deferment may be considered as part of the repayment period. In instances where a borrower has entered a period of deferment or forbearance, the next subsequent payment is due no later than 60 days after the end of the deferment or forbearance period.\n\n\t\tLoan Repayment Plans\n\nBorrowers may choose from among numerous loan repayment plan options to repay their loans. The available repayment plans fall into five broad categories: standard repayment plans, extended repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and alternative repayment plans. \nThe particular repayment plans available to any individual borrower may depend on the type(s) of loans borrowed, the date of becoming a new borrower , or the date of entering repayment status. In general, all of a borrower's loans made through the Direct Loan program must be repaid together according to the same repayment plan. However, if a borrower seeking to repay according to one of the IDR plans has some types of loans that may be repaid according to an IDR plan and some that may not, the borrower may repay the eligible loans according to an IDR plan and the ineligible loans according to a non-IDR plan. If a borrower fails to actively select a repayment plan, he or she is placed into the standard repayment plan that is applicable to the loans. \nIn general, a borrower may change from one plan to another eligible plan at any time and may not change to a repayment plan that has a maximum repayment period of fewer than the number of years that the borrower's loans have already been in repayment status. If a borrower changes plans to any of the standard repayment plans, graduated repayment plans, extended repayment plans, or alternative repayment plans, the beginning of the applicable repayment period will be measured from the date that the borrower's loan initially entered repayment status. If a borrower changes to one of the IDR plans, the beginning of the repayment period will be measured from the date the borrower satisfied certain plan-specific criteria, as described below, for the applicable IDR plans. \nUnder the standard repayment plans, graduated repayment plans, extended repayment plans, and most alternative repayment plans, payment amounts may not be less than the amount of accrued interest that is due. Negative amortization is permitted in the IDR plans and as part of one alternative repayment plan option. Also, for loans with variable interest rates (which had been made prior to July 1, 2006), monthly payment amounts or the length of the repayment period may be adjusted under the standard repayment plans, graduate repayment plans, and extended repayment plans to take into account the effects of annual changes in the variable interest rate. \n Table 4 provides a summary of selected characteristics of the various loan repayment plans that are made generally available to borrowers. Following the table, the various repayment plans are described in detail. \n\n\t\t\tStandard Repayment Plans\n\nStandard repayment plans allow borrowers to make predictable, level payments on their loans over a defined period of time. Two standard repayment plans are offered.\n\n\t\t\t\tStandard Repayment Plan with a Maximum 10-Year Term\n\nAll borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans, and borrowers of Direct Consolidation Loans that entered repayment prior to July 1, 2006, may select a standard repayment plan that has a maximum repayment period of 10 years. According to this plan, borrowers make fixed monthly payments of not less than $50 over a period of 10 years; however, loans with small balances may be repaid in a period that is shorter than 10 years. \n\n\t\t\t\tStandard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms\n\nBorrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a standard repayment plan that has a repayment period of between 10 and 30 years. Under this plan, borrowers make fixed monthly payments of not than less than $50. The duration of the repayment period is based on the combined balances of the Direct Consolidation Loan and all other federal and private education loans owed by the borrower. However, for purposes of determining the repayment period, the combined balance of the other education loans may not be greater than the balance of the Direct Consolidation Loan. Repayment periods for the Standard Repayment Plan for Direct Consolidation Loans are shown in Table 5 . (The repayment periods shown also apply to the Graduated Repayment Plan for Direct Consolidation Loans, which is discussed in a later section.)\n\n\t\t\tExtended Repayment Plans\n\nAll borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans may elect to repay according to an extended repayment plan. The extended repayment plans afford borrowers with large total loan balances the opportunity to make lower monthly payments in return for extending the repayment of their loans for a longer duration. By extending the repayment term, interest accrues over a longer period of time; as a consequence, a larger amount of interest is paid under an extended repayment plan than would be paid according to a standard repayment plan with a 10-year term. There are three extended repayment plans. Eligibility to select an extended repayment plan is limited based on when a borrower's loans entered repayment and the total outstanding principal balance owed on loans made through the Direct Loan program.\n\n\t\t\t\tExtended Fixed Repayment Plan with a Maximum 25-Year Term\n\nThis repayment plan is available to individuals who are new borrowers on or after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance of more than $30,000 on loans made through the Direct Loan program. The Extended Fixed Repayment Plan allows borrowers to make monthly payments in equal amounts over a period of 25 years from the date their loans entered repayment status. This results in monthly payment amounts being lower than they would be under a standard repayment plan with a 10-year term. \n\n\t\t\t\tExtended Graduated Repayment Plan with a Maximum 25-Year Term\n\nLike the above plan, this repayment plan is available to individuals who are new borrowers on or after October 7, 1998; whose loans enter repayment on or after July 1, 2006; and who have an outstanding balance of more than $30,000 on loans made through the Direct Loan program. The Extended Graduated Repayment Plan allows borrowers to make monthly payments that are initially low and increase in amount every two years over a repayment period of 25 years from the date the borrower's loans entered repayment status. Under this plan, monthly payment amounts increase from an initial payment amount that must be at least $50 to an amount that may not be greater than three times the initial monthly payment amount.\n\n\t\t\t\tExtended Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)\n\nThis extended repayment plan is available to borrowers of loans made through the Direct Loan program who entered repayment prior to July 1, 2006. Under this plan, borrowers make monthly payments in equal amounts over a period that may range from 12 to 30 years from the date their loans entered repayment status. The minimum monthly payment amount is $50, and the duration of the repayment term is dependent upon the outstanding principal balance of the borrower's loans made through the Direct Loan program. The extension of the repayment term results in monthly payment amounts being lower than they would be under a standard repayment plan with a 10-year term. Repayment periods for the extended repayment plan, by loan amount, are shown below in Table 6 . (The repayment periods shown in this table also apply to the graduated repayment plan for borrowers who entered repayment prior to July 1, 2006, which is discussed in the next section.)\n\n\t\t\tGraduated Repayment Plans\n\nLoan repayment according to the graduated repayment plans is structured so that a borrower's monthly payment amount will periodically change over the course of the repayment period. In general, borrowers will be required to make smaller payments at first and larger payments later. Monthly payment amounts may be less than $50; however, in no instance may they be less than the amount of interest that accrues. There are three graduated repayment plans. A borrower's eligibility to select one of the graduated repayment plans depends on loan type and when the borrower's loans entered repayment. \n\n\t\t\t\tGraduated Repayment Plan with a Maximum 10-Year Term\n\nAll borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans that entered repayment after July 1, 2006, may select a graduated repayment plan that has a maximum repayment period of 10 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may be less than $50 to an amount that may not be greater than three times the initial monthly payment amount.\n\n\t\t\t\tGraduated Repayment Plan for Direct Consolidation Loanswith 10-Year to 30-Year Terms\n\nBorrowers of Direct Consolidation Loans that were made on or after July 1, 2006, may select a graduated repayment plan that has a repayment period of between 10 and 30 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may be less than $50 to an amount that may not be greater than three times the initial monthly payment amount. The duration of the repayment period is based on the combined balances of the Direct Consolidation Loan and all other federal and private education loans owed by the borrower. However, for purposes of determining the repayment period, the combined balance of the other education loans may not be greater than the balance of the Consolidation Loan. Repayment periods for the Graduated Repayment Plan for Direct Consolidation Loans are shown above in Table 5 .\n\n\t\t\t\tGraduated Repayment Plan with 12-Year to 30-Year Terms (Pre-July 1, 2006)\n\nBorrowers of loans made through the Direct Loan program who entered repayment prior to July 1, 2006, may repay their loans according to a graduated repayment plan with a term that can range from 12 to 30 years. Under this plan, monthly payment amounts increase incrementally every two years from an initial amount that may not be less than either $25 or 50% of the amount that would be required under the Standard Repayment Plan with a Maximum 10-Year Term to an amount that may be no more than 150% of the amount that would be required under the Standard Repayment Plan with a Maximum 10-Year Term. The duration of the repayment term is determined based on the total outstanding principal balance of the borrower's loans made through the Direct Loan program. Repayment periods for this graduated repayment plan vary by loan balance, and are shown above in Table 6 .\n\n\t\t\tIncome-Driven Repayment (IDR) Plans\n\nSince its establishment, the Direct Loan program has included a requirement that a repayment plan be made available to borrowers (other than to parent borrowers of Direct PLUS Loans) under which monthly payment amounts would vary according to the income of the borrower. For the first 15 years that the Direct Loan program was in operation, an Income-Contingent Repayment (ICR) plan fulfilled this requirement. Over time, additional repayment plans that served this purpose became available. Collectively, these plans have come to be referred to as income-driven repayment (IDR) plans. \nSeveral IDR plans are currently available to borrowers: the Income-Contingent Repayment plan, the Income-Based Repayment (IBR) plan (one version of which is available to individuals who qualify as a new borrower on or after July 1, 2014, and another which is available to individuals who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan.\nThe IDR plans afford borrowers the opportunity to make monthly payments in amounts that are capped at a specified share or proportion of their discretionary income over a repayment period that may not exceed a specified duration . Discretionary income is defined as the portion of a borrower's adjusted gross income (AGI) that is in excess of a specified multiple of the federal poverty guidelines applicable to the borrower's family size. In general, a borrower's family size includes the borrower, the borrower's spouse, and the borrower's children, and may include other individuals who both live with the borrower and receive more than half of their support from the borrower. The portion of a borrower's income that is below the federal poverty guideline multiple that is applicable to a particular IDR plan may be considered nondiscretionary income, or income that may be needed for purposes of meeting certain basic needs such as food and shelter. Multiples of the federal poverty guidelines that are applicable to the IDR plans are presented below in Table 7 for family sizes of one through eight persons. \nThe various IDR plans are primarily distinguished by (1) the multiple (e.g., 100%, 150%) of the federal poverty guidelines used to define discretionary income, (2) the percentage of a borrower's discretionary income (e.g., 10%, 15%, 20%) that is assessed as being available for purposes of making student loan payments, and (3) the maximum duration of the repayment term (e.g., 20 years, 25 years). The IDR plans also share other common characteristics that include the following: \nRequired certification of income and family size. The processes for determining IDR plan monthly payment amounts take into account a borrower's income and family size. Consequently, on an annual basis borrowers must provide documentation of their income and must certify their family size to become and remain eligible for IDR plan repayment. In addition, borrowers may update their income and family size at any time if either changes. Potential n egative amortization. IDR plan payment amounts are capped at no more than a certain proportion of a borrower's discretionary income. As a result, in some circumstances required payment amounts may be less than the amount of interest that accrues, which may lead to a borrower's loan(s) becoming negatively amortized. Potential availability of l oan forgiveness. All the IDR plans make available the prospect of eventual loan forgiveness if a borrower, after making payments according to one or more of the IDR plans, has been unable to fully repay his or her student loan debt by the end of the maximum repayment term. Payments made on defaulted loans repaid according to the IDR plans do not count toward a borrower's eligibility for loan forgiveness.\nEach of the IDR plans are described in detail below.\n\n\t\t\t\tIncome-Contingent Repayment (ICR) Plan\n\nThe Income-Contingent Repayment plan permits borrowers to make payments on eligible student loans in amounts that are determined according to procedures that take into account a borrower's adjusted gross income and family size. Any loan balance that remains unpaid after 25 years of repayment according to the ICR plan and other qualified plans will be forgiven. Specifications for the ICR plan are established by the Secretary and are codified in regulations. An income-contingent repayment plan has been available to borrowers since the establishment of the Direct Loan program in 1994. \nEligibility. The ICR plan is available to all borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate and professional students, and Direct Consolidation Loans. Direct PLUS Loans made to parent borrowers are not eligible to be repaid according to the ICR plan; however, parent borrowers of Direct PLUS Loans may qualify to repay those loans according to the ICR plan by consolidating them into a Direct Consolidation Loan. There are no specific income restrictions that limit a borrower's eligibility to repay according to the ICR plan.\nPayment Amounts. Under the ICR plan, monthly payment amounts are calculated according to procedures that take into account factors including the outstanding loan balance at the time the borrower's loans enter repayment status, the interest rates applicable to those loans, the amount of any unpaid accrued interest, the borrower's adjusted gross income (AGI) and family size, and an income percentage factor. For a married borrower who files a joint federal tax return with his or her spouse, the AGI for both spouses is used; for a married borrower who files a separate federal tax return, only the AGI of the borrower is used. Consistent with these criteria, monthly payment amounts are the lesser of\na monthly payment amount calculated according to a 12-year amortization schedule, multiplied by an income percentage factor that corresponds to the borrower's AGI and tax filing status; or one-twelfth of 20% of the amount by which the borrower's AGI exceeds 100% of the federal poverty guideline applicable to the borrower's family size (see Table 7 ). \nMonthly payment amounts may range from $0 for a borrower with an income at or below 100% of the federal poverty guideline to amounts more than sufficient to repay the borrower's loans in 12 years or less. For a borrower whose calculated monthly payment results in an amount that is greater than $0 but less than $5, a minimum monthly payment amount of $5 is required. Monthly payment amounts are recalculated annually to take into account changes (e.g., borrower AGI, the amount of any unpaid accrued interest) that may have occurred over the past year.\nJoint ICR Plan Repayment for Married Borrowers . Borrowers of loans made through the Direct Loan program who are married to each other may elect to repay their loans jointly. Married borrowers must file a joint federal tax return to qualify for Joint ICR plan repayment. Under this option, the sum of the outstanding loan balances of each borrower, as of the time they elect joint repayment, is used to determine their combined monthly payment amount according to the procedures described above for the ICR plan. Payments made by married borrowers repaying jointly are applied to each borrower's loans in proportion to each borrower's share of the combined outstanding balance.\nSubsidized Interest . No special interest subsidies are made available to borrowers as part of the ICR plan.\nApplication of Payments. Payments made by borrowers under the ICR plan are first applied to any outstanding charges or collection costs, then to outstanding interest due on the loan, and then to principal. Under the ICR plan formula, it is possible that a borrower's monthly payment amount may be for less than the amount of interest that has accrued since the last payment. Should this occur, interest will continue to accrue on the outstanding principal balance and unpaid interest that has accumulated will be capitalized into the principal balance of the loan once per year. However, unpaid accrued interest may only be capitalized until the outstanding principal balance reaches 110% of the amount of the original principal balance as of when the borrower's loan(s) entered repayment. Once the OPB has reached 110% of the original principal balance, unpaid accrued interest may continue to accumulate but will no longer be capitalized.\nFailure to Certify Income and Family Size . To qualify and remain eligible to repay according to the ICR plan, borrowers must annually provide certification of their income and family size to ED. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the ICR plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year.\nMaximum Repayment Period and Loan Forgiveness . The ICR plan has a maximum repayment period of 25 years. If a borrower repays according to the ICR plan and obtains an additional loan that is eligible to be repaid according to the plan, a new, separate repayment period will begin for the new loan when it enters repayment. If after 25 years of having repaid a nondefaulted loan or loans according to the ICR plan or certain other repayment plans, or having qualified for and received an economic hardship deferment, a borrower still has an outstanding loan balance, the remaining unpaid balance will be discharged (i.e., forgiven). The maximum 25-year repayment period for the ICR plan, after which loan forgiveness may be granted, includes periods during which the borrower\nmade monthly payments (including payments of $0) according to the ICR plan, made monthly payments (including payments of $0) according to an IBR plan while experiencing a partial financial hardship; made monthly payments, either as part of an IBR plan after no longer having a partial financial hardship or after leaving an IBR plan, in amounts calculated according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the outstanding balance as of when the borrower first began repaying according to an IBR plan; made monthly payments (including payments of $0) according to the PAYE repayment plan or the REPAYE repayment plan; made monthly payments according to the REPAYE Alternative Repayment plan prior to changing to an IBR plan; made monthly payments on a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan according to the Standard Repayment Plan with a Maximum 10-Year Term during the portion of the maximum 10-year repayment period that remains after the borrower ceases to repay according to an IBR plan; made payments on a Direct Consolidation Loan according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms or the Graduate Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms during the portion of the maximum 10-year to 30-year repayment period that remains after the borrower ceases to repay according to an IBR plan; made monthly payments according to the Standard Repayment Plan with a Maximum 10-Year Term; made monthly payments during periods after October 1, 2007, according to any repayment plan in amounts not less than the amount required under the Standard Repayment Plan with a Maximum 10-Year Term; only for borrowers who entered repayment prior to October 1, 2007, and only if the applicable repayment term is for not more than 12 years, made payments according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, the Extended Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, or the Graduated Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms (see Table 5 ); or received an economic hardship deferment.\n\n\t\t\t\tIncome-Based Repayment (IBR) Plans\n\nThe Income-Based Repayment plans permit borrowers to repay eligible student loans according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's adjusted gross income, family size, and monthly payment amount as calculated according to a standard 10-year repayment period, based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time the borrower elects to repay according to the IBR plan. Any loan balance that remains after the maximum repayment period of the plan will be forgiven. There are two IBR plan versions that function similarly. They are differentiated by (1) the date used to delimit borrower eligibility (July 1, 2014), (2) the percentage of discretionary income used to determine borrower eligibility for the plan and monthly payment amounts (15% or 10%), and (3) the maximum repayment period (25 years or 20 years). The description that follows distinguishes between the two IBR plan versions as applicable.\nThe initial version of the IBR plan was established under the College Cost Reduction and Access Act of 2008 (CCRAA; P.L. 110-84 ), and on July 1, 2009, it became available to borrowers of loans made through the Direct Loan program and the FFEL program, irrespective of when an individual had borrowed a loan through either program. (Hereinafter, this version is referred to as the Original IBR p lan .) Amendments to the IBR plan were enacted in 2010 under the SAFRA Act (Title II of the HCERA; P.L. 111-152 ), and a revised version of the IBR plan was made available to individuals who, on or after July 1, 2014, became new borrowers of loans made through the Direct Loan program. (Hereinafter, this version is referred to as the IBR Plan for Post-July 1, 2014, New Borrowers .) \nEligibility. With certain exceptions, federal student loans made through both the Direct Loan program and the FFEL program are considered eligible loans for purposes of repayment according to the Original IBR plan, while only loans made through the Direct Loan program are eligible for repayment according to the IBR plan for Post-July 1, 2014, New Borrowers. In both cases, exceptions pertain to loans made to parent borrowers. Direct PLUS Loans and FFEL PLUS Loans that were made to a parent borrower and Direct Consolidation Loans and FFEL Consolidation Loans that that were used to repay either a Direct PLUS Loan or a FFEL PLUS Loan that was made to a parent borrower are ineligible to be repaid according to either of the IBR plans. These loans to parent borrowers are also excluded from being considered when determining a borrower's eligibility for IBR plan repayment. This discussion addresses the IBR plans available through the Direct Loan program.\nPartial Financial Hardship. To be eligible to begin repaying according to an IBR plan, a borrower must be determined to have a partial financial hardship . The criteria for determining whether a borrower has a partial financial hardship take into account the borrower's federal income tax filing status (e.g., single, married filing jointly), AGI, family size, multiples of the federal poverty guidelines applicable to the borrower's family size, and monthly payment amounts as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time the borrower elects to repay according to the IBR plan. \nIf a borrower is single, or is married and files an individual federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, are greater than the applicable percentage (15% or 10%) of his or her discretionary income. If a borrower is married and files a joint federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the eligible loans of the borrower and, if applicable, the eligible loans of the borrower's spouse, as calculated according to a standard 10-year repayment period, are greater than the applicable percentage of the combined discretionary income of the borrower and the borrower's spouse. Discretionary income is defined as the portion of a borrower's adjusted gross income that is in excess of 150% of the poverty guideline that is applicable to his or her family size. If the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, do not exceed 15% or 10% of his or her discretionary income, as applicable, the borrower is no longer considered as having a partial financial hardship.\nPayment Amounts. During periods while a borrower has a partial financial hardship and repays according to an IBR plan, monthly amounts due on his or her loans may range from $0, for a borrower with an AGI that is at or below 150% of the poverty guideline, to a maximum of one-twelfth of the specified percentage factor (15% or 10%) of a borrower's discretionary income. For example, based on the 2019 HHS Poverty Guidelines, 150% of the poverty guideline for a family of one in the 48 contiguous states and the District of Columbia is $18,735. (See Table 7 .) \nIn the Original IBR plan, a single borrower with an adjusted gross income of $40,000 would have a partial financial hardship if his or her annual student loan payments were greater than $3,189.75, or $265.81 per month. ($3,189.75 is 15% of the result of subtracting $18,735 from $40,000.) \nIn the IBR plan for post-July 1, 2014, New Borrowers, a single borrower with an adjusted gross income of $40,000 would have a partial financial hardship if his or her annual student loan payments were greater than $2,126.50, or $177.21 per month. ($2,126.50 is 10% of the result of subtracting $18,735 from $40,000.)\nFor a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year.\nIf a borrower who is repaying according to an IBR plan no longer demonstrates having a partial financial hardship or no longer desires to make payments based on income, he or she may remain in the IBR plan; however, the borrower's maximum required monthly payment amount will no longer be calculated according the formula described above. Nonetheless, the required payment amount may not exceed the monthly amount due, as calculated according to a standard 10-year repayment period based on the borrower's loan balance at the time he or she elected to begin repaying according to the IBR plan. However, in such a case the duration of the repayment period may exceed 10 years.\nJoint IBR Plan Repayment for Married Borrowers. Since July 1, 2010, the IBR plan has provided for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. Individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI. \nSubsidized Interest . As part of the IBR plans, an interest subsidy is available on subsidized loans during periods of negative amortization for a maximum of the first three years from the start of a borrower's repayment according to an IBR plan. If a borrower's required monthly payment is not sufficient to cover all of the interest that accrues on a Direct Subsidized Loan (or the subsidized component of a Direct Consolidation Loan), the portion of the accrued interest not covered by the borrower's monthly payment is subsidized, or paid by the Secretary. Any periods during which the borrower has received an interest subsidy under either the PAYE plan or the REPAYE plan are applied toward this three-year period. However, any periods during which a borrower has received an interest subsidy while qualifying for an economic hardship deferment (during which an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of a Direct Consolidation Loan) are excluded from the three-year period.\nApplication of Payments. Payments made by borrowers repaying under an IBR plan are first applied to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the three-year interest subsidy period described above, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the IBR plan and continues to have a partial financial hardship. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed until the borrower no longer has a partial financial hardship or leaves the IBR plan. Upon a borrower either no longer having a partial financial hardship or electing to no longer repay according to an IBR plan, any accumulated accrued interest that has not been paid will be capitalized.\nIf a borrower chooses to leave an IBR plan, he or she must change to the Standard Repayment Plan that is applicable to the loans\u00e2\u0080\u0094either the Standard Repayment Plan with a Maximum 10-Year Term or the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms. (The borrower may subsequently change to another repayment plan; however, he or she may not change to a repayment plan\u00e2\u0080\u0094other than a different IDR plan\u00e2\u0080\u0094that has maximum term that is less than the number of years the borrower's loans have already been in repayment. ) The monthly payment amount due on the borrower's loans must be calculated according to the applicable standard repayment plan based on the time remaining in the repayment period under such plan and the outstanding balance owed at the time the borrower ceased repaying according to the IBR plan. A borrower who changes from the IBR plan to a standard repayment plan must make at least one monthly payment according to the standard repayment plan before changing to another repayment plan for which the borrower may be eligible. Borrowers may request a forbearance that permits the making of a smaller payment amount than otherwise would be required for purposes of making that one required monthly payment according to the Standard Repayment Plan.\nFailure to Certify Income and Family Size . To qualify and remain eligible to repay according to the IBR plans, borrowers must annually provide certification of their income and family size to ED. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the IBR plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year.\nMaximum Repayment Period and Loan Forgiveness . The maximum repayment period for the Original IBR plan is 25 years, whereas the maximum repayment period for the IBR plan for post-July 1, 2014, New Borrowers is 20 years. If after having repaid according to an IBR plan a borrower obtains additional loans that are eligible to be repaid according to that IBR plan, a new repayment period will begin for the new loans when they enter repayment. A borrower who has participated in one of the IBR plans and has satisfied any combination of the following conditions for the duration of the applicable repayment period becomes eligible to have any balance that remains at the end of the maximum repayment period forgiven:\nmade reduced monthly payments (including payments of $0) according to an IBR plan while experiencing a partial financial hardship; made monthly payments in amounts calculated according to the Standard Repayment Plan with a Maximum 10-Year Term after no longer having a partial financial hardship; made monthly payments on Direct Subsidized Loans, Direct Unsubsidized Loans, or Direct PLUS Loans according to the Standard Repayment Plan with a Maximum 10-Year Term, or on Direct Consolidation Loans according to the Standard Repayment Plan for Direct Consolidation Loans with 10-Year to 30-Year Terms, as applicable, after choosing to no longer repay according to an IBR plan; made monthly payments according to any repayment plan in amounts not less than the amount required under the Standard Repayment Plan with a Maximum 10-Year Term; made monthly payments according to the Standard Repayment Plan with a Maximum 10-Year Term based on the amount owed at the time the borrower initially selected an IBR plan; made monthly payments (including payments of $0) according to the ICR plan, the PAYE repayment plan, or the REPAYE repayment plan; made monthly payments according to the REPAYE Alternative Repayment Plan prior to changing to an IDR plan; or received an economic hardship deferment.\n\n\t\t\t\tPay As You Earn (PAYE) Repayment Plan\n\nThe Pay As You Earn (PAYE) repayment plan is substantially similar to the IBR plan for post-July 1, 2014, New Borrowers (see above). The plan permits borrowers to repay eligible loans according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's AGI, family size, and monthly payment amount as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time he or she elects to repay according to the PAYE plan. For borrowers who repay according to this plan, any loan balance that remains after 20 years of repayment will be forgiven. The plan became available to eligible borrowers on December 21, 2012.\nThe PAYE repayment plan was established by the Obama Administration through the rulemaking process under authority provided in the HEA for the Secretary to establish an income-contingent repayment plan. With the establishment of the PAYE repayment plan, a set of benefits substantially similar to those that had been extended to a specific class of borrowers through the enactment of legislation (the IBR Plan for post-July 1, 2014, New Borrowers) was extended to a broader class of borrowers through the rulemaking process. \nEligibility. The PAYE repayment plan is available to individuals who are new borrowers on or after October 1, 2007, and have received a disbursement on a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan to graduate and professional students on or after October 1, 2011, or a Direct Consolidation Loan based on an application received by ED on or after October 1, 2011, and who are identified as having a partial financial hardship. Eligible borrowers may use the plan to repay loans made through the Direct Loan program, with the exceptions of Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers. \nPartial Financial Hardship. A borrower is considered as having a partial financial hardship if the total of his or her annual payments on all eligible loans, as calculated according to a standard 10-year repayment period based on the greater of the amount owed at the time the borrower initially entered repayment or the amount owed at the time he or she elects to repay according to the PAYE plan, is greater than 10% of the amount by which the borrower's AGI exceeds 150% of the poverty line applicable to his or her family size. \nIf a borrower is single, or is married and files an individual federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, are greater than 10% of his or her discretionary income. If a borrower is married and files a joint federal tax return, he or she is determined to have a partial financial hardship if the total annual payments for all of the borrower's eligible loans and, if applicable, the borrower's spouse's eligible loans, as calculated according to a standard 10-year repayment period, are greater than 10% of the combined discretionary income of the borrower and his or her spouse. If the total annual payments for all of the borrower's eligible loans, as calculated according to a standard 10-year repayment period, do not exceed 10% of his or her discretionary income, the borrower is no longer considered as having a partial financial hardship.\nPayment Amounts. While repaying according to the PAYE repayment plan, monthly amounts due on borrowers' loans may range from $0, for those with incomes at or below 150% of the poverty line, to a maximum of one-twelfth of 10% of any amount by which the borrower's AGI exceeds 150% of the poverty line. If a borrower who is repaying according to the plan no longer demonstrates having a partial financial hardship or no longer desires to make payments based on income, the monthly payment amount will be recalculated. In such a case, the maximum monthly payment amount may not exceed the amount due as calculated according to the Standard Repayment Plan with a Maximum 10-Year Term based on the borrower's loan balance at the time he or she elected to begin repaying according to the PAYE repayment plan. However, the duration of the repayment period may exceed 10 years.\nFor a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year.\nJoint PAYE Repayment for Married Borrowers. The PAYE repayment plan provides for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. For married borrowers repaying jointly according to the plan, individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI.\nSubsidized Interest . An interest subsidy is available on subsidized loans during periods of negative amortization for a maximum of the first three years from the start of repayment according to the PAYE repayment plan. If a borrower's calculated monthly payment is insufficient to pay all of the interest that accrues on a Direct Subsidized Loan (or the subsidized component of a Direct Consolidation Loan), the portion of the accrued interest that is not covered by his or her monthly payment is subsidized for a period not to exceed three years. Periods during which a borrower is receiving an economic hardship deferment are excluded from the three-year eligibility period. In general, the terms of this interest subsidy for subsidized loans are the same as the terms that apply to the IBR plans (see above).\nApplication of Payments. Payments made by borrowers repaying according to the PAYE repayment plan are credited first to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the plan and continues to have a partial financial hardship. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed until he or she no longer has a partial financial hardship or leaves the plan. \nIf a borrower no longer has a partial financial hardship but remains in the PAYE repayment plan, accumulated accrued interest is capitalized into the principal balance of the loan. In such a case, the amount of accrued interest that may be capitalized is limited to 10% of the outstanding principal balance at the time the borrower began repaying according to the plan. Any accrued interest beyond the 10% limit will remain due but will not be capitalized as long as the borrower remains in the plan. \nIf a borrower chooses to leave the PAYE repayment plan, he or she may change to any other repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum term that is not less than the number of years the borrower's loans have already been in repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to the PAYE repayment plan, any accumulated accrued interest that has not been paid will be capitalized.\nFailure to Certify Income and Family Size . To qualify and remain eligible to repay according to the PAYE repayment plan, borrowers must annually provide certification of their income and family size. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and his or her monthly payment amount will be recalculated to equal the amount the borrower would have paid according to the Standard Repayment Plan with a Maximum 10-Year Term, based on the amount owed at the time he or she first elected to repay according to the plan. The repayment period based on the recalculated payment amount may exceed 10 years. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year.\nMaximum Repayment Period and Loan Forgiveness . In the PAYE repayment plan, the maximum repayment period is 20 years. A borrower who at any time participates in the plan becomes eligible to have any balance that remains on his or her eligible loans forgiven if during the 20-year repayment period the borrower meets the loan forgiveness eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(a)(6). (These criteria are substantially similar to the provisions that are applicable to the IBR plan for post-July 1, 2014, New Borrowers, as described above.) If after having repaid according to the PAYE repayment plan a borrower obtains additional loans that are eligible to be repaid according to the plan, a new repayment period will begin for the new loans when they enter repayment.\n\n\t\t\t\tRevised Pay As You Earn (REPAYE) Repayment Plan\n\nThe Revised Pay As You Earn (REPAYE) repayment plan permits borrowers to repay eligible loans made through the Direct Loan program according to procedures that limit monthly payment amounts based on criteria that take into account a borrower's AGI and family size. For borrowers whose student loan debt was obtained exclusively for undergraduate education, the maximum repayment period is 20 years; for borrowers whose student loan debt includes any amounts obtained for graduate education, the maximum repayment period is 25 years. Any loan balance that remains after the maximum repayment period will be forgiven. The REPAYE repayment plan became available to eligible borrowers on December 17, 2015.\nLike the PAYE repayment plan, the REPAYE repayment plan was established by the Obama Administration through the rulemaking process under authority provided in the HEA for the Secretary to establish an income-contingent repayment plan. The REPAY repayment plan has a number of characteristics that are similar to the other IDR plans. It also has an enhanced interest subsidy that is unique to the plan. \nEligibility. The REPAYE repayment plan is available to borrowers of loans made through the Direct Loan program except for Direct PLUS Loans made to parent borrowers and Direct Consolidation Loans used to repay either Direct PLUS Loans or FFEL PLUS Loans that had been made to parent borrowers. The plan is available to borrowers irrespective of when an individual became a new borrower. A borrower's eligibility to repay according to the REPAYE repayment plan is not limited based on factors that take into account the relationship between his or her student loan debt and discretionary income (i.e., borrowers need not demonstrate anything akin to having a partial financial hardship to repay according to the REPAYE repayment plan).\nP ayment Amounts. While repaying according to the REPAYE repayment plan, monthly amounts due on borrowers' loans may range from $0, for those with incomes at or below 150% of the poverty line, to a maximum of one-twelfth of 10% of any amount by which a borrower's AGI exceeds 150% of the poverty line. For a borrower whose calculated monthly payment results in an amount that is greater than or equal to $5 but less than $10, the monthly payment is set at $10. For a borrower whose calculated monthly payment results in an amount that is less than $5, the monthly payment is set at $0. Monthly payment amounts are recalculated annually to take into account changes that may have occurred over the past year.\nFor purposes of calculating monthly payment amounts under the REPAYE repayment plan, if the borrower is unmarried his or her AGI is used. If the borrower is married, and unless certain exceptions apply, the AGI of both the borrower and his or her spouse is used irrespective of whether the borrower files a joint or separate federal tax return with his or her spouse. If a borrower is married and certifies that he or she is separated from his or her spouse, or is unable to access information on the income of his or her spouse, then the AGI of only the borrower is used.\nJoint REPAYE Repayment for Married Borrowers. The REPAYE repayment plan provides for the joint repayment of loans by married borrowers who both have eligible loans and who file a joint federal tax return. For married borrowers repaying jointly according to an IBR plan, individual payment amounts are proportional to each spouse's share of the couple's combined loan balances and combined AGI.\nSubsidized Interest . Under the REPAYE repayment plan, an interest subsidy is available on both subsidized loans and unsubsidized loans during periods of negative amortization. During the first three years from the start of repayment under the plan, for Direct Subsidized Loans and the subsidized component of Direct Consolidation Loans, if a borrower's calculated monthly payment is not sufficient to pay all of the interest that accrues, 100% of the portion of the accrued interest that is not covered by his or her monthly payment is subsidized. Periods during which a borrower receives an interest subsidy during an economic hardship deferment are excluded from the consecutive three-year period. After the three-year period for subsidized loans, and during all periods for Direct Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized component of Direct Consolidation Loans, 50% of the portion of the accrued interest that is not covered by the borrower's monthly payment is subsidized. \nGraduate students who are borrowers of Direct PLUS Loans may be able to qualify for the 50% interest subsidy while they are in school in lieu of receiving an in-school deferment while interest accrues at the otherwise applicable interest rate. For Direct PLUS Loans, the repayment period begins the day the loan is fully disbursed. However, borrowers who are enrolled on at least a half-time basis qualify for and typically receive an in-school deferment during which they are not required to make payments, but during which interest accrues. Student borrowers are placed in an in-school deferment upon requesting such a deferment or the Secretary receiving notification from the borrower's school or the National Student Loan Data System (NSLDS) that the student is enrolled on at least a half-time basis. Nonetheless, borrowers who receive an in-school deferment have the option to cancel it. Borrowers whose AGI while in school is low enough that it would result in the calculation of a monthly payment amount according to the REPAYE repayment plan that would be insufficient to pay all of the interest that accrues on their loan may consider choosing to cancel receipt of an in-school deferment in favor of receiving a 50% interest subsidy on the portion of the interest that would not be covered by his or her monthly payment amount.\nApplication of Payments. Payments made by borrowers repaying according to the REPAYE repayment plan are credited first to interest due on the loan, then to any fees, and then to principal. If a borrower's required monthly payment is for an amount that is less than the amount of interest that accrues on a loan other than a Direct Subsidized Loan or the subsidized component of a Direct Consolidation Loan, or that accrues on a subsidized loan type after the three-year interest subsidy period described above, the unpaid accrued interest will accumulate, but not be capitalized, so long as the borrower remains in the plan. If a borrower's required monthly payment is sufficient to pay the accrued interest but is insufficient to repay the amount of principal due, then the payment of any principal due in excess of the monthly payment amount owed will be postponed. \nIf a borrower chooses to leave the REPAYE repayment plan, he or she may change to any other repayment plan for which he or she is eligible, as long as the new repayment plan has a maximum term that is not less than the number of years the borrower's loans have already been in repayment, or is an available IDR plan. Upon a borrower electing to no longer repay according to the REPAYE repayment plan, any accumulated accrued interest that has not been paid will be capitalized.\nFailure to Certify Income and Family Size . To qualify and remain eligible to repay according to the REPAYE repayment plan, borrowers must annually provide certification of their income and family size. Certification of income is normally satisfied by providing the borrower's AGI. However, if the borrower's AGI does not reflect his or her current income, alternative documentation of income may be provided. If the borrower fails to provide certification of income, any unpaid accrued interest will be capitalized and he or she will be placed in the REPAYE Alternative Repayment plan. If the borrower fails to certify his or her family size, a family size of one will be assumed and used for the year.\nREPAYE Alternative Repayment Plan. Borrowers repaying according to the REPAYE repayment plan who fail to provide timely certification of their income are subject to being placed into the REPAYE Alternative Repayment plan. Under the REPAYE Alternative Repayment plan, monthly payment amounts are calculated to equal the amount necessary to repay the borrower's loans in full within the earlier of 10 years from placement into the REPAYE Alternative Repayment plan or the ending of the maximum repayment period of 20 years or 25 years, as applicable. Payments made during periods of repayment according to the REPAYE Alternative Repayment plan count as qualifying payments for loan forgiveness under the various IDR plans; however, they do not count as qualifying payments for the Public Service Loan Forgiveness program.\nMaximum Repayment Period and Loan Forgiveness . In the REPAYE repayment plan, the maximum repayment period is 20 years for borrowers whose student loan debt was obtained exclusively for undergraduate education; and 25 years for borrowers whose student loan debt includes any amounts obtained for graduate education. A borrower who at any time participates in the REPAYE repayment plan becomes eligible to have any balance that remains on his or her eligible loans forgiven if for 20 years or 25 years, as applicable, the borrower meets the loan forgiveness eligibility criteria specified in regulations at 34 C.F.R. Section 685.209(c)(5). (These criteria are substantially similar to the provisions that are applicable to the IBR plans, as described above.) If after having repaid according to the REPAYE repayment plan a borrower obtains additional loans that are eligible to be repaid according to the plan, a new repayment period will begin for the new loans when they enter repayment.\nAdjusted Payment Amounts for Borrowers Who Return to the REPAYE Repayment Plan. If a borrower seeks to return to the REPAYE repayment plan after having left and repaid according to any other repayment plan (including the REPAYE Alternative Repayment plan), he or she must provide documentation of income for the entire period that he or she repaid according to another plan. If it is determined that the borrower paid a lesser amount under the other repayment plan (or plans) than he or she would have been required to repay according to the REPAYE repayment plan, upon returning to the REPAYE repayment plan the borrower's monthly payment amounts will be adjusted upward to ensure that the difference between the two amounts will be paid before the end of the maximum repayment period of 20 or 25 years, as applicable.\n\n\t\t\tAlternative Repayment Plans\n\nAlternative repayment plans are available in more limited situations, on a case-by-case basis, to borrowers who demonstrate that due to exceptional circumstances they are unable to repay according to other available repayment plans. Loan servicers are provided with discretion in determining what constitutes \"exceptional circumstances\" for purposes of permitting individual borrowers to repay according to any of the alternative repayment plans. If a borrower is permitted to repay according to an alternative repayment plan, he or she is notified in writing of the terms of the plan and may either accept those terms or select one of the other available repayment plans discussed above. Four variations of alternative repayment plans are available: \nAlternative Fixed Payment Repayment, Alternative Fixed Term Repayment, Alternative Graduated Payment Repayment, and Alternative Negative Amortization Repayment.\nThe alternative repayment plans are established in accordance with general guidelines specified in regulations. Details on specific provisions of these plans are communicated to eligible borrowers by loan servicers. A borrower may be provided up to a maximum of 30 years to repay according to an alternative repayment plan, not including periods of deferment and forbearance. There is a minimum monthly payment amount of $5 and payments cannot vary by more than three times the amount of the smallest payment. Under the Alternative Negative Amortization Repayment plan, a borrower may be permitted for one year to make monthly payments of less than the amount of the interest that accrues on the loan. In such a case, any unpaid interest will be capitalized; however, capitalization of unpaid interest may not result in the loan balance exceeding 110% of the original principal amount. If this occurs, any additional interest that accrues must be paid by the borrower. Payments made according to an alternative repayment plan do not count toward the periods of repayment that may qualify a borrower for loan forgiveness under the IDR plans or the PSLF program.\n\n\t\tPrepayment\n\nThe portion of any payment that is in excess of the amount due is considered a prepayment . Borrowers of loans made through the Direct Loan program may prepay all or any part of their loans at any time without penalty. Borrowers may obtain information from their Direct Loan servicer on how to provide prepayment, with instructions regarding the application of overpayments. The procedures for applying prepayments to borrowers' accounts are specified in regulations issued by ED. \nThe procedures that apply for crediting a prepayment to a borrower's loan balance depend on the size of the prepayment amount relative to the borrower's scheduled monthly payment. A borrower with more than one loan who wants a prepayment to be applied to a certain loan or loans (e.g., the loan with the highest interest rate) must specify such when making the prepayment; otherwise, the prepayment will be applied in accordance with HEA regulations and guidelines, which, among other provisions, generally require all of a borrower's loans to be repaid together and under the same repayment plan. \nIn general, if the amount of a prepayment is less than the next scheduled monthly payment amount according to the borrower's repayment plan, the prepayment is applied in the following order: (1) to charges and collection costs, (2) to accrued interest, and then (3) to outstanding principal. However, if the amount of the prepayment is less than the next scheduled monthly payment amount and the borrower is repaying according to the IBR, PAYE, or REPAYE repayment plans and has a scheduled monthly payment of $0.00, the prepayment is applied in the following order: (1) to accrued interest, (2) to collection costs, (3) to late charges, and then (4) to outstanding principal. For example, consider a borrower whose next scheduled monthly payment was $200 in January and who was current on making payments. If at the time of making the January payment the borrower made a payment of $300, this would result in a prepayment of $100. The $100 prepayment would be applied toward reducing the outstanding principal balance on the borrower's loans, because he or she did not have any outstanding charges or accrued interest. The borrower's next scheduled monthly payment of $200 would remain due in February.\nIf the amount of the prepayment is equal to or greater than the next scheduled monthly payment amount under the borrower's repayment plan, the prepayment is applied in the same order as described above, and, unless the borrower requests otherwise, the due date of the borrower's next payment is advanced and he or she is notified of the due date for the next payment. For example, consider again a borrower whose next monthly payment was $200 in January and who was current on making payments. If at the time of making the January payment the borrower made a payment of $600, this would result in a prepayment of $400. Because this borrower did not have any outstanding charges or accrued interest, the $400 prepayment would be applied toward the next two payments due (i.e., the February and March payments) and the due date of the borrower's next payment would be advanced to April. If the borrower instead wanted the $400 prepayment to be applied toward reducing the outstanding principal balance and the next scheduled payment to remain due in February, he or she would need to request this at the time of making the prepayment. \n\n\t\tApplication of Payments on Delinquent Loans\n\nThe loans of borrowers who fall behind on making payments are considered to be delinquent. In general, a federal student loan is considered delinquent when the full payment amount is not satisfied by the payment due date. A borrower may restore a delinquent loan to current status by making payments that are applied to past due amounts. When borrowers make payments on delinquent loans, their payments are generally credited first to the oldest past due amounts owed. \nAn example of how a delinquent loan may be restored to current status is provided by ED in its contracts for its loan servicers. The example considers a borrower whose scheduled monthly payment amount of $225 is due on the 14 th of the month. If as of January 14 th , the borrower had paid only $200 for the January payment, the loan would become delinquent, as $25 would remain unpaid. However, if on February 14 th , the borrower paid $250, $25 would be applied to the past due amount for January and $225 would be applied to the amount due for February. This would restore the borrower's loan to current status.\n\n\tDeferment and Forbearance\n\nPeriods of deferment and forbearance provide borrowers with temporary relief from the obligation to make monthly payments that would otherwise be due on their loans. In certain instances, interest subsidies may be provided during periods of deferment; however, interest subsidies are not available during periods of forbearance. In general, periods during which borrowers are in a deferment or forbearance are excluded from the repayment period. However, for borrowers who are repaying according to any of the IDR plans, periods of up to three years while in receipt of an economic hardship deferment are included as part of the repayment period. The various forms of deferment and forbearance that are available to borrowers of loans made through the Direct Loan program are described below.\n\n\t\tDeferments\n\nA deferment is a temporary period during which a borrower's obligation to make regular monthly payments of principal and interest is suspended, and during which an interest subsidy may be provided. Deferments are available during periods while a student is pursuing postsecondary education, participating in a graduate fellowship program or a training program, unemployed or experiencing an economic hardship, performing or has recently completed military service, or receiving treatment for cancer. Deferments are not available to borrowers whose loans are in default status.\nIn most instances, a borrower must proactively apply for and request a deferment. To qualify for it, the borrower (or, in certain instances, the individual on whose behalf the loan was made for parent borrowers of Direct PLUS Loans) must satisfy certain eligibility criteria. Several deferment types have no maximum period of eligibility, while other types are initially granted for a limited period of time and may be subsequently renewed up to a maximum period of eligibility for the deferment type. Periods of eligibility for deferments are specific to the borrower, as opposed to the borrower's loans. Thus, for those deferment types that have a maximum period of eligibility, if a borrower exhausts his or her eligibility with one set of loans no eligibility would remain to qualify for the same type of deferment on any other loans for which he or she had not received the deferment.\nUnless an interest subsidy applies to a borrower's loans, interest will continue to accrue during a period of deferment. While in receipt of a deferment, borrowers have the option either to pay the interest as it accrues or pay it at a later time. In most instances, if the interest that accrues during a period of deferment is not paid as it accrues it will be capitalized at the end of the deferment period. However, if a borrower's deferment coincides with the individual having a partial financial hardship while repaying according to either of the IBR plans or the PAYE repayment plan, any interest that has accrued during the deferment will not be capitalized so long as the borrower continues to have a partial financial hardship.\nThe following types of deferments are available to borrowers of loans made through the Direct Loan program.\n\n\t\t\tIn-School Deferment\n\nA borrower is eligible to receive an in-school deferment for any period during which he or she is enrolled at an eligible institution on at least a half-time basis, as determined by the institution attended. Graduate student borrowers of Direct PLUS Loans first disbursed on or after July 1, 2008, (which enter repayment upon being fully dispersed) are also eligible to receive an in-school deferment while they are enrolled in school and during the six-month period after ceasing to be enrolled on at least a half-time basis. \nDuring an in-school deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. There is no maximum period of eligibility for an in-school deferment.\nEligible borrowers are typically placed in an in-school deferment automatically on the basis of being enrolled in an eligible institution on at least a half-time basis. However, eligible borrowers may also proactively request an in-school deferment. Borrowers who have been automatically placed in an in-school deferment have the option to cancel it. If these borrowers wish to do so, they have the option to pay any principal and interest that had already been deferred or they may let the interest that had accrued on the deferred payments be capitalized upon cancellation of the deferment. \n\n\t\t\t\tIn-School Deferment for Parent Borrowers of Direct PLUS Loans\n\nParent borrowers of Direct PLUS Loans for which the first disbursement was made on or after July 1, 2008, are eligible for a deferment for any period during which the student on whose behalf the loan was made would qualify for an in-school deferment. This deferment is also available during the six-month grace period after the student on whose behalf the loan was made first ceases to be enrolled on at least a half-time basis.\n\n\t\t\tGraduate Fellowship Deferment\n\nA borrower may receive a deferment while pursuing a course of study in a graduate fellowship program. Eligibility requirements include that the borrower has earned a bachelor's degree, and that the program operates on a full-time basis, provides financial support for at least six months, and requires the applicant to submit a written statement of objectives and periodic progress reports. There is no maximum period of eligibility for this deferment. It is not available to borrowers who are serving in medical residency or internship programs, except for residency programs in dentistry. \nDuring a graduate fellowship deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. \n\n\t\t\tRehabilitation Training Program Deferment\n\nA borrower may receive a deferment while pursuing a course of study in a rehabilitation training program for individuals with disabilities. For a borrower to be eligible, the rehabilitation training program must be licensed, approved, certified, or recognized by a state agency or the U.S. Department of Veterans Affairs. It also must provide services according to a written, individualized plan that specifies an expected completion date, and must require a substantial commitment by the borrower toward rehabilitation to the extent that it would normally prevent an individual from being employed full-time (i.e., 30 or more hours per week) for at least three months. There is no maximum period of eligibility for this deferment.\nDuring a rehabilitation training program deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. \n\n\t\t\tUnemployment Deferment\n\nA borrower who is seeking to obtain full-time employment and is either not employed or is employed less than full-time may be granted an unemployment deferment. To be eligible, a borrower must be either receiving unemployment benefits or must document that he or she has registered with a public or private employment agency (if one is available within 50 miles) and is diligently seeking to obtain full-time employment. A borrower may receive the deferment for a maximum cumulative period of three years, which may include one or more episodes of unemployment. He or she is not required to have been employed previously to qualify for it. \nA borrower may request that an unemployment deferment begin the date that he or she became unemployed or began working less than full-time, but that date may be no earlier than six months prior to requesting the deferment. The deferment may be granted for an initial period of six months and may be extended in six-month increments. \nDuring an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. \n\n\t\t\tEconomic Hardship Deferment\n\nA borrower may qualify for a deferment during periods while he or she is experiencing an economic hardship or is serving as a volunteer in the Peace Corps. To qualify for this deferment on a loan made through the Direct Loan program, a borrower must satisfy at least one of the following criteria: \nthe borrower has been granted an economic hardship deferment under the FFEL program or the Perkins Loan program for the same period of time for which the borrower requests an economic hardship deferment; the borrower is receiving payments under a federal or state public assistance program (e.g., Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), state general public assistance, other means-tested benefits); the borrower is working full-time and has a monthly income that does not exceed an amount equal to 150% of the poverty line applicable to the borrower's family size, (see Table 7 ) as calculated on a monthly basis; or the borrower is serving as a volunteer in the Peace Corps.\nThe deferment may be granted for periods of up to one year at a time, and may be extended up to a cumulative maximum of three years. Periods of up to three years while a borrower qualifies for an economic hardship deferment may be counted as part of the repayment period for each of the IDR plans. During an economic hardship deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans.\n\n\t\t\tMilitary Service Deferment\n\nA borrower may qualify for a military service deferment on the basis of serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency. The deferment is provided for the entire period of qualifying military service, and for an additional 180 days following the completion of military service for borrowers whose period of qualifying service includes or began after October 1, 2007.\nDuring a military service deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. \n\n\t\t\tPost-Active Duty Student Deferment\n\nA borrower may qualify for a post-active duty student deferment if he or she is a member of the National Guard or other reserve component of the Armed Forces (or is a member in retired status) and is called or ordered to active duty while he or she is enrolled on at least a half-time basis at an eligible institution, or within six months of being enrolled. To qualify, the borrower must have been required to perform at least 30 consecutive days of active duty service on or after October 1, 2007. The deferment is available for a period of up to the lesser of 13 months following the completion of active duty service or until the borrower re-enrolls in an eligible institution on at least a half-time basis. If a borrower qualifies for both the military service deferment and the post-active duty student deferment, the 180-day post-demobilization period and the 13-month post-active duty service period apply concurrently.\nDuring a post-active duty student deferment, an interest subsidy is provided on Direct Subsidized Loans and on the subsidized component of Direct Consolidation Loans. \n\n\t\t\tCancer Treatment Deferment\n\nA borrower may receive a cancer treatment deferment on eligible loans during periods while he or she is receiving treatment for cancer and for the six months thereafter. To qualify for the deferment, the borrower must submit an application on which a physician who is a Doctor of Medicine (M.D.) or a Doctor of Osteopathy (D.O.) certifies that the borrower is receiving treatment for cancer under the physician's care.\nDuring periods while a borrower receives a cancer treatment deferment, no interest accrues on the qualifying loans. Qualifying loans include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans that were either made on or after September 28, 2018, or had entered repayment status on or before September 28, 2018. Loans made prior to September 28, 2018, but had not yet entered repayment as of that date due to the borrower being enrolled in school on at least a half-time basis or being in the grace period, are not eligible for this deferment. However, as Direct Consolidation Loans made on or after September 28, 2018, are eligible for the deferment, borrowers of ineligible loans may consider including them in a Direct Consolidation Loan for purposes of qualifying for the deferment.\n\n\t\tForbearance\n\nForbearance constitutes permission for a borrower to temporarily cease making monthly student loan payments, to make payments in reduced amounts, or to make payments over an extended period of time. During periods of forbearance, no interest subsidies are provided and borrowers ultimately remain responsible for paying all of the interest that accrues on their loans. Borrowers have the option of either paying the interest as it accrues during forbearance or letting it be capitalized into the principal balance at the end of the forbearance period. In most instances, borrowers must apply for forbearance; and for certain types of it, borrowers must provide supporting documentation to their loan servicer. Forbearance may be granted for an initial period of up to 12 months, and may be renewed upon the borrower's request. Certain types of forbearance are limited to a maximum of 36 months.\nForbearance may be granted for a number of reasons. General or discretionary forbearance , may be granted at the discretion of the loan servicer to borrowers who are temporarily unable to make scheduled loan payments. Administrative forbearance is granted by the Secretary to borrowers during periods necessary to determine a borrower's eligibility for a number of borrower benefits and for certain other reasons. Certain types of forbearance, referred to as mandatory forbearance , are required to be granted to borrowers who satisfy applicable eligibility criteria. \n\n\t\t\tGeneral (Discretionary) Forbearance\n\nA borrower may request a general forbearance on the basis of experiencing a temporary hardship due to financial difficulties, a change in employment, medical expenses, or other reasons. A general forbearance may be granted at the discretion of a borrower's loan servicer for an initial period of up to 12 months and may be extended in increments of 12 months. A borrower's loan servicer may limit the maximum duration of forbearance; however, there is no statutory or regulatory limit.\n\n\t\t\tAdministrative Forbearance\n\nAdministrative forbearance may be granted during periods necessary to process requests by a borrower for certain benefits or to determine his or her eligibility. It may be granted for up to 60 days for the processing of requests for deferment, forbearance, change of repayment plan, and loan consolidation. (Interest that accrues during administrative forbearance for these purposes is not capitalized.) Administrative forbearance is also granted during periods necessary to determine a borrower's eligibility for a student loan discharge (e.g., death or total and permanent disability, closed school, false certification, unauthorized payment, unpaid refund, bankruptcy, borrower defense to repayment) or for loan forgiveness through the Teacher Loan Forgiveness program. \nAdministrative forbearance is provided to a borrower for up to three years if changes to variable interest rates preclude the borrower's ability to repay his or her loans in 10 years under the standard or graduated repayment plans. It may also be granted for short periods, such as when payments are overdue at the beginning of an authorized period of deferment or forbearance. \nThe Secretary may also authorize administrative forbearance in response to a national military mobilization or a local or national emergency. \n\n\t\t\tMedical or Dental Internship or Residency Forbearance\n\nA borrower who is a medical or dental intern or resident and does not or no longer qualifies for a deferment may receive mandatory forbearance. To qualify, the borrower must have been accepted into a medical or dental internship or residency program that either leads to a degree or certificate that is awarded by an IHE, a hospital, or a health care facility that offers postgraduate training, or that must be completed before the borrower may begin professional practice or service. This type of forbearance may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's internship or residency.\n\n\t\t\tAmeriCorps National Service Forbearance\n\nA borrower who is serving in a national service position for which he or she receives a Segal AmeriCorps Education Award may receive mandatory forbearance. It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's national service.\nWhereas borrowers are normally responsible for paying the interest that accrues during forbearance, the National Service Trust will pay all or a portion of the interest that accrues during forbearance for a borrower who has earned a Segal AmeriCorps Education Award.\n\n\t\t\tTeacher Loan Forgiveness Program Forbearance\n\nA borrower who is serving in a position that would qualify him or her for loan forgiveness under the Teacher Loan Forgiveness Program (described below) may receive mandatory forbearance. To be eligible, the borrower must be serving as a full-time teacher at an elementary school, secondary school, or educational service agency that serves low-income families. The borrower's outstanding loan balance is also considered in determining eligibility. This forbearance may be granted \"only if the Secretary believes, at the time of the borrower's annual request, that the expected forgiveness amount [i.e., up to $5,000 or up to $17,500, as applicable] will satisfy the anticipated remaining outstanding balance on the borrower's loan at the time of the expected forgiveness.\" It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the five consecutive years of teaching service required to qualify for loan forgiveness.\n\n\t\t\tStudent Loan Debt Burden Forbearance\n\nA borrower may receive mandatory forbearance on the basis of having a federal student loan debt burden that equals or exceeds 20% of his or her monthly total income. To qualify, a borrower must demonstrate that his or her required monthly payments on federal student loans made under Title IV of the HEA (e.g., loans made under the Direct Loan program, the FFEL program, or the Perkins Loan program) equal or exceed 20% of his or her total monthly taxable income. This type of forbearance may be granted for an initial period of 12 months and may be extended in increments of 12 months for a maximum duration of 36 months.\n\n\t\t\tNational Guard Duty Forbearance\n\nMandatory forbearance is available to a borrower who is a member of the National Guard and qualifies for a Post-Active Duty Student Deferment but does not qualify for a Military Service Deferment or other deferment, and is engaged in active state duty service for 30 or more consecutive days. This type of forbearance may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's qualifying National Guard service.\n\n\t\t\tDepartment of Defense Student Loan Repayment Program Forbearance\n\nMandatory forbearance is available during periods while a borrower is performing service that qualifies him or her for partial repayment under a U.S. Department of Defense student loan repayment program. Interest that accrues during this forbearance is not capitalized at the end of the forbearance period. It may be granted for an initial period of up to 12 months and may be extended in increments of up to 12 months for the duration of the borrower's qualifying service.\n\n\tLoan Discharge and Loan Forgiveness\n\nAn important benefit to borrowers of federal student loans made through the Direct Loan program is that their obligation to repay these loans may be discharged or forgiven in a variety of circumstances. Several types of loan discharge and loan forgiveness benefits are available. These may be grouped into three broad categories: loan discharge for borrower hardship, loan forgiveness following IDR plan repayment, and loan forgiveness for public service. \n\n\t\tLoan Discharge for Borrower Hardship\n\nA borrower who experiences certain types of hardship may have his or her loan discharged. Types of hardship discharges available to borrowers of loans made through the Direct Loan program are described below. Administrative forbearance (see above) is granted during the period necessary to determine a borrower's eligibility for these types of discharge.\n\n\t\t\tDischarge Due to Death\n\nA borrower's obligation to repay a loan is discharged if he or she dies; and in the case of a Direct PLUS Loan made to a parent borrower, the obligation to repay is discharged if the student on whose behalf the loan was made dies. In the case of a Direct Consolidation Loan that repaid either a Direct PLUS Loan or a FFEL PLUS Loan that was borrowed by a parent on behalf of a student, if the student dies a proportionate share of the Direct Consolidation Loan attributable to the applicable Direct PLUS Loan or FFEL PLUS Loan is discharged. In the case of a Joint Direct Consolidation Loan borrowed by two married individuals, upon the death of one spouse a proportionate share of the loan attributable to the individual who died is discharged. \n\n\t\t\tTotal and Permanent Disability Discharge\n\nA borrower's liability to repay a loan is discharged upon the individual being determined to have a total and permanent disability (TPD). A borrower may be determined to be have a total and permanent disability based on any of the following three criteria:\n1. Physician's Certification. Certification by a physician (M.D. or D.O.) licensed to practice in the United States that the borrower is unable to engage in any substantial gainful activity due to a physical or mental impairment that can be expected to result in death, has lasted continuously for at least 60 months, or can be expected to last continuously for at least 60 months. 2. SSA Disability Determination . Documentation from the Social Security Administration (SSA) that the borrower is receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that his or her next scheduled disability review will be within five to seven years from the date of the individual's most recent SSA disability determination. 3. VA Service Connected Disability or Unemployability . Documentation from the Department of Veterans Affairs (VA) that the borrower has a service connected disability (or disabilities) that is 100% disabling or that he or she is totally disabled based on an individual unemployability rating.\nOn a periodic basis, ED obtains information from SSA and VA on borrowers who might qualify for a TPD discharge on the basis of the second and third criteria, respectively, and contacts them to inform them of their potential eligibility. A borrower, or his or her authorized representative, may apply for a TPD discharge by submitting an application along with any required documentation of the borrower's disability. A borrower who has been identified as a veteran with a VA service-connected disability or unemployability determination will be granted a TPD discharge without needing to submit an application unless he or she decides to opt out of the process within 60 days of being notified by ED.\nIf a borrower's TPD discharge application is approved, he or she will be considered totally and permanently disabled as of the date of the physician's certification, the date that ED received an SSA notice of award for SSDI or SSI benefits or Benefits Planning Query (BPQY), or the effective date of a VA service-connected disability or unemployability determination, as applicable. Upon the determination of a borrower being totally and permanently disabled, his or her obligation to make any further payments on the loans will be discharged and any loan payments that were made after the aforementioned dates will be returned. \nA TPD discharge approved on the basis of a physician's certification or an SSA disability determination is granted on a conditional basis for a three-year period that begins on the date of discharge. During the three-year period, a borrower who has been granted a TPD discharge according to either of these two criteria is subject to having his or her loans reinstated if the borrower (1) has annual earnings from employment in excess of 100% of the federal poverty guideline for a family of two (see Table 7 ), (2) obtains a new Direct Loan program loan or a TEACH Grant, (3) fails to return any Direct Loan or TEACH Grant disbursements made between the TPD discharge application date and the discharge date, or (4) receives a notice from SSA that he or she is no longer disabled or that his or her next scheduled disability review will be sooner than five to seven years from the date of the borrower's most recent SSA disability determination. After the three-year period, the TPD discharge becomes permanent. A TPD discharge granted on the basis of a VA service connected disability or unemployability is permanent upon being granted and is not subject to a post-discharge monitoring period.\n\n\t\t\tClosed School Discharge\n\nA borrower's liability to repay a loan is discharged if the borrower (or the student on whose behalf a Direct PLUS Loan is made to a parent borrower) does not complete the program of study for which the loan was made because the school he or she attended has closed. In the case of a Direct Consolidation Loan, the portion of the loan attributable to loans borrowed to finance the program of study at the closed school is discharged. \nWith regard to loans made before July 1, 2020, to qualify for a closed school discharge, a borrower generally must submit an application and certify that the school attended closed either while the student was enrolled or within 120 days of the student withdrawing, and the student must not have completed the program of study for which the loan was obtained through a teach-out agreement at another school or by transferring credits earned at the closed school to another school. However, if based on information available to the Secretary, a borrower qualifies for a closed school discharge with respect to a school that closed on or after November 1, 2013, and before July 1, 2020, and the borrower did not subsequently re-enroll in any Title IV-eligible IHE within three years of the school having closed, the Secretary is to discharge the borrower's loan without the borrower needing to submit an application for a discharge.\nFor loans made on or after July 1, 2020, to qualify for a closed school discharge, a borrower must submit an application and must certify that the school attended closed either while the student was enrolled or within 180 days of the student withdrawing, that he or she has not completed the program of study for which the loan was obtained through a teach-out agreement at another school or by transferring credits earned at the closed school to another school, and that he or she has not accepted the opportunity to complete the program of study or a comparable program at another school through either a teach-out plan performed by the closing school or a teach-out agreement at another school. Upon being granted a closed school discharge, a borrower is reimbursed for any amounts he or she had already repaid on the loan. If the borrower had previously defaulted on the loan, upon being granted a closed school discharge his or her eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan. Any discharged loans do not count against the borrower's annual and aggregate loan limits, nor against his or her Subsidized Usage Period applicable under the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers.\n\n\t\t\tFalse Certification and Unauthorized Payment Discharges\n\nA borrower's liability to repay a loan is discharged if the eligibility of the borrower (or of the student in the case of a Direct PLUS Loan made to a parent borrower) to receive the proceeds of the loan was falsely certified by the IHE attended, or if the loan proceeds were disbursed without his or her authorization (e.g., unauthorized signature, identity theft). In the case of a Direct Consolidation Loan, a borrower's liability to repay the portion of the loan that is attributable to loans that were falsely certified by the IHE attended, or that were disbursed without his or her authorization, is discharged. Upon being granted a false certification or unauthorized payment discharge, the borrower is reimbursed for any amounts he or she had already repaid on the loan. If the borrower had previously defaulted on the loan, upon being granted a false certification or unauthorized payment discharge his or her eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan.\n\n\t\t\tUnpaid Refund Discharge\n\nIf a borrower is owed a refund by an IHE that has not been paid, his or her liability to repay an amount equal to the unpaid refund and any associated accrued interest and other charges is discharged. An unpaid refund discharge is only available in instances where a borrower is owed a refund by a school that has closed, or by an open IHE that the borrower (or the student on whose behalf a Direct PLUS Loan is made to a parent borrower) is no longer attending.\n\n\t\t\tBorrower Defense to Repayment Discharge\n\nA borrower's liability to repay a loan is discharged in whole or in part, and previous loan payments are refunded, if the borrower (or the student on whose behalf a Direct PLUS Loan was made to a parent borrower) successfully asserts a defense to repayment of the loan. A borrower may assert certain acts or omissions by the IHE for which the loan was borrowed that relates to the making of the loan as a defense to repayment. \nA borrower may assert a defense to repayment according to procedures specified in regulations that are specific to the period during which his or her loans were made. There are three distinct periods applicable to borrower defense claims. In the case of a Direct Consolidation Loan, the procedures to be used for adjudicating a defense to repayment claim depend on the types of loans that were repaid by it (e.g., loans made through the Direct Loan program, other types of eligible loans) and when it was made.\nFor loans disbursed prior to July 1, 2017, a borrower defense to repayment \"refers to any act or omission of the school attended ... that would give rise to a cause of action against the school under applicable state law.\" For loans disbursed on or after July 1, 2017, and before July 1, 2020, a borrower defense to repayment refers to a nondefault, contested judgment against the school; a breach of contract by the school; or a substantial misrepresentation by the school to the borrower that the borrower had relied on to his or her detriment when he or she decided to attend or continue attending the school, or decided to borrow a loan. \nFor loans disbursed on or after July 1, 2020, a borrower defense to repayment refers to a misrepresentation of material fact made by the borrower's school about enrollment or the provision of educational services that the borrower relied upon in deciding to borrow a loan and from which he or she suffered financial harm. For loans disbursed on or after July 1, 2020, a borrower must assert a defense to repayment within three years of ceasing to be enrolled at the IHE.\nIn the instance that a borrower had previously defaulted on a loan, upon being granted a defense to repayment discharge the borrower's eligibility to receive additional Title IV federal student aid will be restored and consumer reporting agencies will be instructed to delete any adverse credit history related to the loan.\n\n\t\t\tBankruptcy Discharge\n\nSection 523(a)(8) of the Bankruptcy Code provides that student loans (e.g., loans made through the Direct Loan program) are presumed to be not dischargeable in bankruptcy proceedings, unless the debtor is able to demonstrate to the court that \"excepting such debt from discharge ... would impose an undue hardship on the debtor and the debtor's dependents.\" In general, to discharge student loan debt in bankruptcy, the debtor must file a separate lawsuit against the holder of the debt and must prove by a preponderance of the evidence that repayment of the debt would impose an undue hardship. If a borrower's liability to repay a loan made through the Direct Loan program is discharged in bankruptcy, the Secretary will cease to require the borrower to make payments on the loan. \n\n\t\tLoan Forgiveness Following IDR Plan Repayment\n\nA borrower who has repaid a loan made through the Direct Loan program according to one or more of the Income-Driven Repayment (IDR) plans for the duration of the applicable maximum repayment period (including periods of repayment according to certain other eligible plans and periods while in receipt of an economic hardship deferment) is relieved of the obligation to repay any balance of principal and interest that remains outstanding. The applicable maximum repayment period varies by IDR repayment plan as follows:\nIncome-Contingent Repayment Plan: 25 years; Original IBR Plan: 25 years; IBR Plan for Post-July 1, 2014, New Borrowers: 20 years; PAYE Repayment Plan: 20 years; REPAYE Repayment Plan for borrowers with debt only for undergraduate education: 20 years; and REPAYE Repayment Plan for borrowers with any debt for graduate education: 25 years.\nFor detailed information on the requirements for a borrower to qualify for loan forgiveness following IDR plan repayment, see the descriptions of the maximum repayment period and loan forgiveness in the prior sections on each of the various IDR plans.\n\n\t\tLoan Forgiveness for Public Service\n\nThe Direct Loan program makes loan forgiveness benefits available to borrowers who have engaged in certain types of public service for a specified period of time and meet program-specific requirements, as described below. \n\n\t\t\tTeacher Loan Forgiveness Program\n\nA borrower who has completed five consecutive complete academic years of teaching service in a low-income school or educational service agency (ESA) may be relieved of the obligation to repay up to $5,000 for service as a highly qualified teacher, or up to $17,500 for service as a highly qualified special education teacher or secondary school teacher of mathematics or science. Teacher Loan Forgiveness benefits are only available to borrowers who had no outstanding balance on any federal student loan made through the Direct Loan program (or the FFEL program) as of the date the borrower first obtained such a loan after October 1, 1998. \nStudent loan debt attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Consolidation Loans (to the extent that the Direct Consolidation Loan repaid a Direct Subsidized Loan, a Direct Unsubsidized Loan, a FFEL Subsidized Stafford Loan, or a FFEL Unsubsidized Stafford Loan) may be forgiven. Loans must have been obtained prior to the end of a borrower's fifth year of qualifying service and may not be in default, unless satisfactory repayment arrangements have been made. A borrower may receive Teacher Loan Forgiveness Program Forbearance during the five years of teaching service required to qualify for benefits. \nA borrower becomes eligible for loan forgiveness benefits upon completion of the fifth year of qualifying service. If a borrower's student loan debt exceeds the amount to be forgiven, unless otherwise requested by the borrower, loan forgiveness benefits are applied first to Direct Unsubsidized Loans, then to Direct Subsidized Loans, then to the unsubsidized component of Direct Consolidation Loans, and finally to the subsidized component of Direct Consolidation Loans. Loan forgiveness benefits may not be provided for the same service used to qualify for benefits under the Public Service Loan Forgiveness (PSLF) program, the Loan Forgiveness for Service in Areas of National Need Program, or a Segal AmeriCorps Education Award.\n\n\t\t\tPublic Service Loan Forgiveness (PSLF) Program\n\nA borrower may be relieved of the obligation to repay the balance of principal and interest that remains outstanding on eligible loans upon having made 120 qualifying monthly payments on or after October 1, 2007, concurrent with the borrower being employed full-time by one or more public service organizations or serving full-time in an AmeriCorps or Peace Corps position. To qualify, a borrower must make 120 separate, full, on-time scheduled monthly payments on loans that are not in default. In general, qualifying payments are those made within 15 days of the due date according to certain repayment plans; however, borrowers using Segal AmeriCorps Education Award benefits, Peace Corps transition payments, or certain Department of Defense student loan repayment benefits may make lump sum payments. Qualifying payments include those made according to one or more of the following repayment plans: \nIncome-Contingent Repayment (ICR) plan; Income-Based Repayment (IBR) plans; Pay As You Earn (PAYE) repayment plan; Revised Pay As You Earn (REPAYE) repayment plan; Standard Repayment Plan with a Maximum 10-Year Term; and any other of the loan repayment plans (except for the alternative repayment plans [discussed above]) if the monthly payment amount is not less than what would be paid under the Standard Repayment Plan with a Maximum 10-Year Term.\nA borrower must be employed by or serving full time with a public service organization at the time he or she makes each of the required 120 payments, applies for loan forgiveness benefits, and has forgiveness granted. Public service organizations are federal, state, local, or tribal government agencies, organizations, or entities; tribal colleges and universities; public child or family service agencies; nonprofit entities organized under Section 501(c)(3) of the Internal Revenue Code (IRC) that are tax-exempt under IRS Section 501(a); and certain other private nonprofit entities that are providers of public services. Public service organizations exclude labor unions, political organizations, and religious organizations (except to the extent that activities do not relate to religious instruction, worship services, or proselytizing). Eligible private nonprofit entities include providers of any of the following public services: emergency management, military service, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities and the elderly, public health, public education, public library services, and school library or other school-based services. Loan forgiveness benefits may not be provided for the same service used to qualify for benefits under the Teacher Loan Forgiveness Program, the Civil Legal Assistance Attorney Loan Repayment Program, or the Loan Forgiveness for Service in Areas of National Need Program.\n\n\t\t\t\tTemporary Expanded Public Service Loan Forgiveness (TEPSLF) Program\n\nThe TEPSLF program was established in response to concerns that some borrowers were experiencing difficulty in deciphering and complying with the requirements for establishing eligibility for loan forgiveness through the PSLF program. A borrower who would qualify for loan forgiveness under the PSLF program except for the fact that, under certain circumstances, some or all of the required 120 monthly payments were nonqualifying may be relieved of the obligation to repay the balance of principal and interest that remains outstanding upon the borrower otherwise satisfying the requirements of the PSLF program as well as the following criteria:\nAll of the borrower's nonqualifying monthly payments must have been made according to any of the Extended Repayment Plans or the Graduated Repayment Plans, but in an amount that was less than what would have been paid under the Standard Repayment Plan with a Maximum 10-Year Term. The amount of both the borrower's most recent monthly payment and the monthly payment made 12 months prior to application for relief through the TEPLSF program must equal or exceed the monthly payment amount that would have been calculated under one of the IDR plans for which the borrower would have otherwise qualified. (An exception to this criterion is provided to a borrower who would otherwise qualify for TEPSLF benefits but over the past five years demonstrates an \"unusual fluctuation of income.\" )\nOnly a borrower whose applications for PSLF benefits was denied due to some or all of the required payments not being made according to a qualifying repayment plan may apply for TEPSLF benefits. Benefits are available on a first-come, first-served basis and are subject to the availability of funds. \n\n\t\tTax Treatment of Discharged and Forgiven Debt\n\nThe IRC provides that, in general, student loan debt (as well as other types of debt) that is discharged, forgiven, or repaid on a borrower's behalf is included as part of the individual's gross income for the purposes of federal income taxation. In certain instances, however, discharged or forgiven student loan debt may be excluded from an individual's gross income and, therefore, exempted from consideration in determining federal income tax liability. If loan discharge or loan forgiveness benefits are not specifically excluded from an individual's gross income, he or she may be responsible for paying any income tax liability associated with the benefits received. In the circumstances described below, discharged or forgiven student loan debt may be excluded from an individual's gross income:\nDischarge Due to Death. Student loan debt that is discharged due to the death of the borrower, or due to the death of the student on whose behalf a Direct PLUS Loan was made to a parent borrower, if the discharge occurs after December 31, 2017, and before January 1, 2026. Total and Permanent Disability Discharge . Student loan debt that is discharged due to the total and permanent disability of the borrower, if the discharge occurs after December 31, 2017, and before January 1, 2026. Closed School Discharge . Student loan debt that is discharged on the basis of the school attended having closed while the student was enrolled or within 120 days of the student withdrawing and the student also having not completed the program of study for which the loan was obtained through a teach-out plan at another school or by transferring credits earned at the closed school to another school. False Certification and Unauthorized Payment Discharges . Student loan debt that is discharged on the basis of the proceeds of the loan having been falsely certified by the IHE the borrower attended or having been disbursed without his or her authorization. Unpaid Refund Discharge . Student loan debt that is discharged on the basis of a school that has closed or that a borrower no longer attends having not refunded amounts owed to the borrower. Bankruptcy Discharge . Student loan debt that is discharged in bankruptcy proceedings. Insolvency. Student loan debt that is discharged while an individual is insolvent. Depending on an individual's unique circumstances, it may be possible for a borrower who receives Loan Forgiveness Following IDR Plan Repayment to be considered insolvent at the time of discharge. Loan Forgiveness for Public Service . Discharged or forgiven student loan debt may be excluded if a loan was made by certain types of lenders (e.g., the federal government), was borrowed to assist an individual in attending a qualified educational institution, and contains terms providing that some or all of the balance will be cancelled for work for a specified amount of time in certain professions or occupations and for any of a broad class of employers (e.g., public service organizations). Student loan debt that is discharged through the Teacher Loan Forgiveness program, the PSLF program, and the TEPSLF program may be excluded.\n\n\tLoan Default, Its Consequences, and Resolution\n\nA loan made through the Direct Loan program is considered to be in default once the borrower has failed to make payments when due or has otherwise not adhered to the terms of the promissory note for 270 days. Defaulting on a federal student loan can result in a number of adverse consequences for the borrower. Upon default, the borrower's obligation to repay the loan is accelerated (i.e., the entire unpaid balance of principal and accrued interest becomes due in full). In addition, upon defaulting a borrower loses eligibility for certain borrower benefits (e.g., deferment, forbearance, loan forgiveness), as well as eligibility to receive additional Title IV federal student aid.\nDefaulting may also result in other adverse effects for the borrower and may present a major obstacle to the borrower's future economic well-being. The Secretary will report defaulted loans to consumer reporting agencies and will take action to collect on them through one or more means. The borrower of a defaulted loan may be assessed a variety of charges for the costs of collecting on it.\nSeveral options are available to borrowers to bring defaulted loans back into good standing. A borrower may remove a loan from default status by rehabilitating the loan, consolidating the loan into a new Direct Consolidation Loan, or paying off the defaulted loan balance.\n\n\t\tConsequences of Default for Borrowers\n\nA borrower who defaults on a loan made through the Direct Loan program becomes subject to many consequences, which are briefly described below:\n Ineligibility for Federal Student Aid . The borrower becomes ineligible to receive federal student aid made under Title IV of the HEA. A defaulted borrower may regain eligibility by voluntarily making six consecutive, on-time, full monthly payments. A borrower may restore eligibility for Title IV aid though this method only once. Capitalization of Interest. Any unpaid interest that has accrued (e.g., during periods of negative amortization, during delinquency) may be capitalized into the principal balance of the loan. Acceleration. The entire unpaid balance owed on the borrower's loan becomes due in full. Transfer to Private Collection Agencies. Upon default, student loan accounts are initially transferred from the borrower's student loan servicer to the Office of Federal Student Aid's Default Management and Collection System (DMCS), which may then transfer defaulted loans to private collection agencies (PCAs) that are under contract with FSA for collections. A PCA will first contact the borrower before pursuing efforts to collect on the debt. The PCA may offer the borrower the opportunity to rehabilitate the loan or to enter into a voluntary repayment agreement. If the borrower accepts neither offer, or does not honor a voluntary repayment agreement, the PCA may seek to collect on the defaulted loans by means of administrative wage garnishment (AWG). The PCA may also refer defaulted loans to the Treasury Offset Program (TOP) for collection, or may recommend litigation. Assessment of Collection Charges. The borrower may be charged for the costs of collecting on the loan, including loan collection fees, TOP processing fees, court costs, and attorney's fees. Administrative Wage Garnishment . Up to 15% of the borrower's disposable pay may be garnished to repay the defaulted student loan. Disposable pay is defined as that part of a borrower's compensation that remains after deducting amounts required by law to be withheld. Defaulters must be given written notice of the intent to garnish wages; and they have rights to examine the debt record, have a hearing concerning the existence and amount of the debt or repayment terms, and establish a repayment schedule before garnishment begins. Federal Salary Offset. Similar to AWG, up to 15% of the disposable pay (including retirement pay) of a borrower who is a current or former federal employee may be offset to repay a defaulted student loan. Treasury Offset Program. Defaulters become subject to having their federal income tax returns, Social Security benefits, and certain other federal benefits offset through the Treasury Offset Program (TOP) as payment on their student loans. Up to 100% of federal tax refunds may be offset. Social Security benefits may be offset in an amount up to the lesser of 15% of the borrower's monthly benefit amount, or the amount that his or her monthly benefit exceeds $750. Special rules apply with regard to the offset of Social Security Disability Insurance (SSDI) benefits. If a recipient has a disability rating of medical improvement not expected (MINE), the offset of SSDI benefits will be suspended. However, if a recipient's disability benefits are converted to retirement benefits, the offset of Social Security benefits may resume. Civil Lawsuit . Litigation is employed as a last resort to collect on a defaulted loan. If this option is pursued, the U.S. Department of Justice may sue the defaulter, on behalf of the Office of Federal Student Aid, to compel repayment. Reporting to Consumer Reporting Agencies . Information on student loans, including amounts borrowed, amounts owed, and repayment status, is regularly exchanged with consumer reporting agencies. Upon default, information about it will also be shared. Consumer reporting agencies may report information on the status of a borrower's defaulted student loan for seven years from the date of the default.\n\n\t\tResolution of Default\n\nA number of options are available to borrowers to get out of default. As noted above, a borrower may rehabilitate the defaulted loan, obtain a Direct Consolidation Loan and use the proceeds to pay off the defaulted loan, pay the amount owed on the defaulted loan in full, or, in limited circumstances, enter into a compromise agreement. \nRepaying a defaulted loan in full may be beyond the means of many borrowers. However, options to do so may include obtaining financing from outside the Direct Loan program to pay off the defaulted debt. A compromise agreement or debt settlement may permit a borrower to satisfy the debt by making a lump sum payment in an amount that is less than the full balance due. Compromise agreements and settlements are offered only after other repayment options have been exhausted.\nLoan rehabilitation and loan consolidation are more widely available to and used by borrowers. Each is described below. \n\n\t\t\tLoan Rehabilitation\n\nLoan rehabilitation offers borrowers who have defaulted on a student loan an opportunity to have their loan(s) reinstated as active and to have their borrower benefits and privileges restored. A defaulter must contact the PCA to whom the debt has been transferred to request loan rehabilitation. If during a period of 10 consecutive months a borrower voluntarily makes nine reasonable and affordable monthly payments on a defaulted loan within 20 days of the due date, the defaulted loan is rehabilitated. \nOne of two methods may be used to determine what constitutes a reasonable and affordable payment amount for purposes of rehabilitating a defaulted loan. It is initially determined as being an amount equal to the greater of either one-twelfth of 15% of any portion of the borrower's AGI that is in excess of 150% of the poverty line applicable to the borrower's family size (see Table 7 ), or $5. However, a borrower is permitted to object to the initial determination and may instead elect to have the amount calculated according to an alternative formula that is based on an itemized accounting of his or her monthly income and expenses. In either case, the borrower is required to provide documentation of income and, as applicable, expenses for purposes of determining a reasonable and affordable payment amount.\nOnly payments that are voluntarily made by a borrower may be counted as among the nine reasonable and affordable payments required for loan rehabilitation. Involuntary payments may continue to be collected (e.g., through administrative wage garnishment or the TOP) while a borrower pursues loan rehabilitation.\nUpon a loan being rehabilitated, the borrower again becomes eligible for full borrower privileges, such as deferments and loan forgiveness, and other means of collecting on the loan while it was in default will cease. The borrower's loan will then be transferred by DMCS to a nondefault loan servicer and he or she will be placed in one of the alternative repayment plans (discussed above) for a period of 90 days. The borrower may then apply for another repayment plan for which he or she is eligible; if the borrower does not apply for a repayment plan, he or she will be placed in a standard repayment plan. Consumer reporting agencies will also be instructed to remove any record of the default from the borrower's credit history; however, records of late or missed payments that led to the loan defaulting will not be removed. \nA defaulted loan may be rehabilitated only once. Defaulted loans upon which a court judgement has been obtained through a civil lawsuit are not eligible to be rehabilitated. \n\n\t\t\tLoan Consolidation\n\nA borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more defaulted loans. To become eligible to do so, a borrower must make what are considered satisfactory repayment arrangements. \nOne approach is for the borrower, prior to consolidation, to make three voluntary, consecutive, on-time, full monthly payments that are considered reasonable and affordable, based on the borrower's total financial circumstances. These payments must be made within 20 days of the due date and may not be involuntary payments (e.g., payments collected through administrative wage garnishment or the TOP). A borrower who chooses this approach may repay the new Direct Consolidation Loan according to any available repayment plan. \nAnother approach is for the borrower to agree to repay the new Direct Consolidation Loan according to one of the IDR plans for which the borrower is eligible. If the borrower obtains a Direct Consolidation Loan for purposes of repaying a Direct PLUS Loan or a FFEL PLUS Loan made to a parent borrower, he or she must repay the new loan according to the Income-Contingent Repayment plan, which is the only IDR plan available to borrowers of parent loans. \nSeveral restrictions limit the availability of loan consolidation as an option for borrowers to bring defaulted loans into good standing. If the borrower's loan was subject to AWG, this must first be lifted for the loan to be eligible for consolidation. A loan on which a court judgment has been secured through litigation is not eligible for loan consolidation. If the borrower's defaulted loan is a Direct Consolidation Loan, the borrower must include at least one other eligible loan in the new Direct Consolidation Loan. If the borrower's defaulted loan is a FFEL Consolidation Loan, the borrower may include the loan in a new Direct Consolidation Loan without including any other loans; however, the borrower must repay according to one of the IDR plans.\nIf a borrower consolidates a loan out of default, collection fees will be assessed on the outstanding principal and interest of the defaulted loan, and these fees will be included as part of the original principal balance of the new Direct Consolidation Loan. Upon a defaulted loan being repaid by a Direct Consolidation Loan, the borrower regains eligibility for full borrower privileges, such as deferments and loan forgiveness, as well as eligibility for additional federal student aid. However, in contrast to loan rehabilitation, repaying a defaulted loan with a Direct Consolidation Loan will not remove the record of default from the borrower's credit history.\n\n\tLoan Counseling and Disclosures\n\nThis report seeks to provide a comprehensive overview of the terms and conditions of federal student loans made through the Direct Loan program. These loan terms and conditions are voluminous and complex. For many individuals, the process of borrowing a federal student loan may be among their first experiences with making a major financial transaction; thus, it is imperative for borrowers to understand the terms and conditions of the loans they obtain and their associated rights and responsibilities as borrowers. \nAs part of the process of obtaining a federal student loan, borrowers are required to undergo financial counseling that provides them with information about their loans and the obligations they assume as borrowers. First-time borrowers must be provided with entrance counseling, which provides them with comprehensive information on the loans they are about to obtain. Borrowers who have received an adverse credit determination but have been able to establish eligibility to borrow Direct PLUS Loans must receive PLUS Loan credit counseling. At the time of obtaining a loan, borrowers are required to sign a promissory note, which is a contract that establishes the borrower's legal obligation to repay. The promissory note is accompanied by a rights and responsibilities statement that uses plain language to disclose the terms and conditions of the loan. Prior to a borrower ceasing to be enrolled on at least a half-time basis, he or she must be provided with exit counseling. \n\n\t\tEntrance Counseling\n\nThe institution attended by a first-time borrower of a Direct Subsidized Loan or a Direct Unsubsidized Loan, or by a first-time graduate or professional student borrower of a Direct PLUS Loan is required to ensure that he or she receives entrance counseling prior to the first installment of the loan being disbursed. Entrance counseling may be provided through an in-person counseling session, a written document provided to the borrower, or an online interactive medium. Irrespective of the means through which entrance counseling is provided, the institution must ensure that an individual who has expertise in federal student aid is available shortly after the session to respond to any questions a borrower might have. \nEntrance counseling is designed to provide a borrower with comprehensive information on both the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the loan. Entrance counseling must satisfy the following requirements:\nexplain the master promissory note; emphasize to the borrower the seriousness and importance of the obligation to repay the loan; describe the likely consequences of default, which include adverse credit reports, the collection of delinquent debt, and litigation; emphasize that the borrower is required to repay the loan in full, irrespective of whether he or she completes the program of study on time or at all, is unable to obtain employment, or is dissatisfied with the program; provide the borrower with sample monthly payment amounts based on either a range of amounts that might be borrowed or the average cumulative amount borrowed by other students in the same program; explain potential implications that accepting the loan might have on the borrower's eligibility to receive other forms of student aid; provide information on interest accrual and capitalization; inform the borrower of the option to pay the interest that accrues on Direct Unsubsidized Loans and Direct PLUS Loans while he or she is enrolled in school; explain the meaning of half-time enrollment and the consequences of not maintaining half-time enrollment; explain the importance of informing the school if the borrower chooses to withdraw so that exit counseling can be provided; provide information about, and how the borrower can access, the National Student Loan Data System (NSLDS); provide the name of and contact information for an individual the borrower may ask any questions about the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the loan; explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct Subsidized Loans and its implications; and explain to first-time graduate student borrowers of a Direct PLUS Loan who have previously borrowed a Direct Subsidized Loan or a Direct Unsubsidized Loan the differences between these loan types with regard to interest rates, the accrual of interest, and the start of the repayment period.\n\n\t\tPLUS Loan Credit Counseling For Borrowers with Adverse Credit\n\nAny parent borrower or graduate or professional student borrower with an adverse credit determination who becomes eligible to borrow a Direct PLUS Loan, either by obtaining an endorser or by providing documentation of extenuating circumstances, must receive special PLUS Loan credit counseling. The counseling is also available on a voluntary basis to Direct PLUS Loan borrowers who have not received an adverse credit determination. This counseling includes information similar to what is currently provided in PLUS Loan entrance counseling. \n\n\t\tMaster Promissory Note and Plain Language Disclosure\n\nThe terms and conditions of federal student loans made through the Direct Loan program are specified in a promissory note, which is a contract that establishes the borrower's obligation to repay the loan. A master promissory note (MPN) is a type of promissory note under which loans may be made to a borrower for a single academic year or for multiple academic years. One type of MPN is used for making Direct Subsidized Loans and Direct Unsubsidized Loans and another type of MPN is used for making Direct PLUS Loans. A different type of promissory note is used for making Direct Consolidation Loans. \nThe MPN must be read and signed by a student or parent borrower before loan funds may be disbursed. The IHE a student attends may choose to use a MPN with either a single-year or a multiyear feature. IHEs that use a single-year MPN may only make loans under the MPN for one academic year. IHEs that use the multiyear feature may make one or more loans under the same MPN for up to 10 academic years. \nIHEs that use a multiyear MPN must confirm a borrower's acceptance of a new loan for each subsequent year by either obtaining a borrower's written confirmation of acceptance (affirmative confirmation) or by not receiving a borrower's notification that he or she is specifically declining the loan in whole or in part (passive confirmation). Under current regulations, IHEs are encouraged, but not required, to obtain affirmative confirmation from the student that he or she accepts the loan before disbursing loan funds.\nAttached to the MPN is a Plain Language Disclosure (PLD) form that explains loan terms and conditions and the borrower's rights and responsibilities in simplified terms. The PLD is provided to borrowers prior to each disbursement of a loan made through the Direct Loan program, regardless of whether an IHE uses a single-year or multiyear MPN.\n\n\t\tExit Counseling\n\nPrior to a student borrower ceasing to be enrolled on at least a half-time basis, the institution a borrower attends must provide him or her with exit counseling. It may be provided through an in-person counseling session, an audiovisual presentation, or an online interactive medium. Irrespective of the means through which exit counseling is provided, the institution must ensure that an individual who has expertise in federal student aid is available shortly after the session to respond to any questions a borrower might have. \nExit counseling is designed to provide the borrower with comprehensive information on both the terms and conditions of the loan and the borrower's rights and responsibilities with regard to the obligation to repay the loan. Exit counseling must satisfy the following requirements:\ninform the borrower of the average anticipated monthly payment amount based on either the individual's actual student loan debt or the average cumulative amount borrowed by other students at the same school; provide a review of the repayment plan options available to the borrower, along with a description of the various features of each plan and sample information showing average anticipated monthly payment amounts and differences in interest and total payments under each plan; explain options to prepay a loan, to repay according to a shorter schedule, and to change repayment plans; provide information on loan consolidation and how it affects the length of repayment and total interest paid; how it affects borrower benefits, such as grace periods, loan forgiveness, loan cancellation, and deferment; and options to prepay a loan or change repayment plans; explain how to contact the borrower's loan servicer; explain the master promissory note; emphasize to the borrower the seriousness and importance of the obligation to repay the loan; emphasize that the borrower is required to repay the loan in full, irrespective of whether he or she completes the program of study on time or at all, is unable to obtain employment, or is dissatisfied with the program; describe the likely consequences of default, which include adverse credit reports, the collection of delinquent debt, and litigation; provide a general description of the terms and conditions under which a borrower may receive full or partial discharge or forgiveness of principal and interest, may defer repayment of principal or interest, or may be granted forbearance; and descriptions of federal student assistance programs and other information and ED publications as required by HEA Section 485(d); review information on the availability of the FSA Ombudsman Group; provide information about, and how the borrower can access, the NSLDS; explain to post-July 1, 2013, first-time borrowers the Direct Subsidized Loan Limitations for Post-July 1, 2013, First-Time Borrowers provision for Direct Subsidized Loans and its implications; provide a general description of tax benefits that may be available to borrowers; and require the borrower to provide current and expected future contact information, next of kin, and (if known) expected employer. \n\n\t\tAdditional Information on Loan Terms and Conditions\n\nThe loan counseling and disclosures described above are designed to ensure that borrowers are provided with information about the terms and conditions of their loans, as required by law. Appendix A presents a list of additional resources that may be accessed by policymakers and others who may be interested in obtaining more detailed information about borrowers' rights, responsibilities, and obligations with regard to Direct Loan program loans. \nAppendix A. Directory of Resources\nDirectory of Resources\nAppendix B. Glossary of Terms\nAppendix C. Historical Tables on Selected Loan Terms and Conditions","output":null}
{"id":"gao_GAO-19-269","pid":"gao_GAO-19-269_0","input":"\tBackground\n\n\t\tTax-Time Financial Products\n\nTable 1 provides an overview of tax-time financial products based on  information gathered during our review.\n\n\t\tParticipants in the Tax- Time Financial Products Industry\n\nThe tax-time financial products industry consists of four main groups of  participants: banks, paid providers of tax preparation services, settlement  service providers, and software developers.\nProviders of tax preparation services include paid tax return preparers  or electronic return originators (ERO). Not all tax preparers are  EROs, but because IRS generally requires returns to be filed  electronically for tax preparers filing more than 10 returns, tax  preparers generally work with or for an ERO that also may be a tax  preparer. Paid preparers and EROs offer their services in-person, on  the Internet, or through software sold to taxpayers. They generally  offer different refund disbursement options to taxpayers and may  partner with banks to offer tax-time financial products.\nSoftware developers provide software needed to file tax returns  electronically and offer tax-time financial products through their  software to taxpayers. The largest tax preparation companies have  their own software that allows them to prepare returns as well as offer  tax-time financial products. Applications for the products generally can  be completed through the same software used to file the return.\nBanks provide tax-time financial products. They also may approve  and process product applications and perform settlement services  (discussed below).\nSettlement service providers serve as intermediaries in transactions to  deliver tax-time products. They work with banks to accept and  process applications for tax products; allocate payments due to paid  preparers, other providers, banks, and taxpayers; and provide  distribution instructions to banks. Some banks have affiliates that  perform settlement services, and some banks perform these functions  themselves.\nFigure 1 illustrates the roles of these groups, using the example of a  refund transfer transaction.\n\n\t\tRegulators\n\n\t\t\tFederal Banking Regulators\n\nThe purpose of federal banking supervision is to help ensure that banks  throughout the financial system operate in a safe and sound manner and  comply with banking laws and regulations in the provision of financial  services. At the federal level, banks are supervised by one of the  following three prudential regulators and CFPB:\nThe Federal Reserve supervises state-chartered banks that opt to be  members of the Federal Reserve System, bank holding companies  and savings and loan holding companies (and the nondepository  institution subsidiaries of those organizations), and nonbank financial  companies designated for Federal Reserve supervision by the  Financial Stability Oversight Council.\nFDIC supervises all FDIC-insured state-chartered banks that are not  members of the Federal Reserve System as well as state savings  associations and insures the deposits of all banks and thrifts approved  for federal deposit insurance.\nOCC supervises federally chartered national banks, federal savings  associations (federal thrifts), and federally chartered branches and  agencies of foreign banks.\nCFPB has rulemaking authority to implement provisions of federal  consumer financial law and enforces various federal laws and  regulations governing consumer financial protection. CFPB also  examines banks with more than $10 billion in assets and their  affiliates and certain nonbanks for compliance with federal consumer  financial laws, accepts consumer complaints on topics such as debt  collection and other consumer financial products or services, and  educates consumers about their rights under federal consumer  financial laws.\nFDIC, the Federal Reserve, and OCC are required to conduct a full- scope, on-site risk-management 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 $3 billion in total assets and that meet certain  conditions (for example, if they have satisfactory ratings, are well  capitalized, and are not subject to a formal enforcement action).\nThe prudential regulators generally conduct consumer compliance  examinations every 12\u201336 months and Community Reinvestment Act  examinations every 12\u201372 months. The specific timing depends on a  bank\u2019s size and its previous consumer compliance and Community  Reinvestment Act rating. But the Dodd-Frank Wall Street Reform and  Consumer Protection Act transferred consumer protection oversight and  other authorities over certain consumer financial protection laws from  multiple federal regulators to CFPB. Additionally, for the transferred laws  such as Truth in Lending Act (TILA) and Equal Credit Opportunity Act,  CFPB has examination and primary enforcement authority for banks with  assets of more than $10 billion and any affiliates of such institutions.\nThe three prudential regulators also are responsible for supervising for  compliance with federal consumer financial laws for insured depository  institutions with total assets of $10 billion or less. For example, they  examine depository institutions for compliance with consumer financial  laws including the Fair Housing Act, the Servicemembers Civil Relief Act,  and Section 5 of the Federal Trade Commission Act.\nFTC can enforce Section 5 of the Federal Trade Commission Act, which  prohibits unfair or deceptive acts or practices affecting commerce, and  TILA, which seeks to promote the informed use of consumer credit. TILA  requires disclosures about the terms and cost of credit and standardizes  the manner in which costs associated with borrowing are calculated and  disclosed.\nFTC can enforce a number of additional statutes against certain entities;  they include portions of the Gramm-Leach-Bliley Act, which requires  financial institutions, including those providing tax-time financial products,  to protect consumer data; the Telemarketing and Consumer Fraud and  Abuse Prevention Act, which prohibits telemarketers from making  misrepresentations in the sale of goods or services, which could include  tax-time financial products; and the Military Lending Act, which provides  important protections for servicemembers and their dependents seeking  and obtaining certain types of consumer credit, including refund  anticipation loans.\nThe Office of Professional Responsibility within IRS is responsible for  ensuring all tax practitioners (defined as certified public accountants,  attorneys, enrolled agents, enrolled actuaries, appraisers, and enrolled  retirement plan agents) and other individuals authorized to practice before  IRS adhere to regulations relating to Circular 230, which governs practice  before IRS.\nAccording to IRS, IRS is neither involved in offering, nor responsible for,  tax-time financial products. Nonetheless, IRS stated that it addresses  these types of products on its website because it is important for  taxpayers to understand the terms of the loan products, which constitute  an agreement between them and the third-party lender. Although IRS is  not statutorily required to collect data on tax-time products, according to  IRS officials, the agency retains information on use of the products.  Specifically, IRS compiles information from tax returns that indicates  whether the taxpayer also applied for a financial product. IRS also issues  guidance to EROs on reporting these data through its Handbook for  Authorized IRS e-File Providers of Individual Income Tax Returns (Pub.  1345). IRS makes the usage data publicly available on its website, and  provides it on a biweekly basis to industry participants that are members  of an IRS working group on security issues. In addition to researchers  and consumer advocacy groups, federal entities also use these data,  including the National Taxpayer Advocate, who leads IRS\u2019s Taxpayer  Advocate Service\u2014an independent office in IRS whose objectives include  mitigating systemic problems that affect large groups of taxpayers. As  industry data on product use are generally limited, agencies and  researchers rely on IRS for this information.\n\n\t\tTax Credits and Protecting Americans from Tax Hikes Act of 2015\n\nRefundable tax credits include the Earned Income Tax Credit (EITC) and  the Additional Child Tax Credit (ACTC). The credits are termed  refundable because, in addition to offsetting tax liability, any excess credit  over the tax liability is refunded to the taxpayer. EITC provides tax  benefits to eligible workers earning relatively low wages. For tax year  2018, the maximum EITC amount available was $6,431 for taxpayers  filing jointly with three or more qualifying children, and $519 for individuals  without children. In 2017, EITC provided more than $65 billion to about 27  million taxpayers. ACTC is the refundable portion of the Child Tax Credit  and provides tax relief to low-income families with children.\nThe Protecting Americans from Tax Hikes Act of 2015 (PATH Act) made  several changes to the tax law. One of its provisions stipulates that funds owed taxpayers claiming EITC or ACTC refunds for a tax year cannot be  released before February 15 to allow IRS time to review these returns for  potential fraudulent activity. This change became effective on January 1,  2017. For the 2018 tax filing season (January through April 2018),  refunds for taxpayers who claimed these tax credits were not available in  bank accounts or prepaid cards until February 27, 2018.\n\n\tIRS Data on Use of Tax-Time Financial Products Have Some Limitations, but When Combined with Other Available Data Suggest Product Offerings Have Evolved IRS Data for 2016\u20132018 Do Not Accurately Reflect Product Use and IRS Has Not Updated Reporting Guidance to Tax Preparers\n\nIRS data on tax-time financial products for 2016\u20132018 do not accurately  reflect product use and IRS has not updated reporting guidance to tax  preparers. IRS data for 2008\u20132016 and information from industry  participants and a consumer advocacy group\u2019s reports suggest that  trends in the market for tax-time financial products include the decline of  refund anticipation loans and that refund transfers became the most used  product. Industry data also indicate that product fees for refund transfers  increased in 2018; multiple other fees can be associated with tax-time  products. New tax-time products and product features continue to be  introduced.\nData collected by IRS are the primary source of information on the use of  tax-time financial products and are used by federal entities, policymakers,  regulators, researchers, and consumer groups. However, we identified  some limitations in the IRS data related to use of refund anticipation  loans, refund advances, and refund transfers.\n\n\t\tTax-Time Financial Products Have Evolved Since 2012\n\nDespite limitations with IRS data on product use by tax year, our analysis  of multiyear trends from these data, supplemented with data collected by  the National Consumer Law Center and from Securities and Exchange  Commission filings, suggests that use of refund anticipation loans  declined, the refund advance was introduced while refund transfers have  become the most used tax-time product.\n\n\t\t\tRefund Anticipation Loans\n\nApplications for refund anticipation loans declined sharply from 2010 to  2012, according to IRS data and consumer groups reports. According to a  2010 study, the volume of refund anticipation loans peaked in 2002 with  12.7 million taxpayers. Volume began to decline at a faster rate  between 2010 and 2011. According to a report by the National Consumer  Law Center and the Consumer Federation of America, banks stopped  offering the products in 2012 after the loans came under the scrutiny of  federal banking regulators. IRS data continued to show use of refund  anticipation loans after 2012 but with banks out of the market for refund  anticipation loans, it is unclear what types of financial institutions were  offering the loans. Consumer advocates with whom we spoke agree that  nonbank lenders such as payday lenders likely offered the loans;  however, we were not able to identify any. The consumer advocates,  researchers, and industry participants with whom we spoke also were not  able to provide us with any current information about these lenders.\nThe IRS Taxpayer Advocate Office, the Financial Crimes Enforcement  Network, and consumer advocates have long raised concerns about  refund anticipation loans. For example, in 2007 the National Taxpayer  Advocate expressed concerns about how the loans were offered to  consumers and whether consumers adequately understood the product.  Consumer advocates questioned the high interest rates the loans could  carry, how loan fees reduced EITC benefits taxpayers received, and the  ramifications of borrower default. In a 2008 advance notice of proposed  rulemaking, IRS and the Department of the Treasury also shared concerns that refund anticipation loans offered tax preparers an incentive  to fraudulently inflate refund claims and to market the loans to taxpayers  who might not understand the full cost of the product.\nBanking regulators raised concerns as well. OCC and FDIC noted  consumer protection and safety and soundness risks to banks that  offered refund anticipation loans. FDIC encouraged consumers to have  tax refunds directly deposited into their own bank accounts and raised  concerns about other options that claimed to speed up a refund for a  sizable cost, according to FDIC officials. The Office of Thrift Supervision,  which had supervisory authority over federal thrifts at the time, ordered a  medium-sized thrift to cease making refund anticipation loans in 2010.  In part due to concerns expressed by OCC, national banks stopped  offering the loans by 2010 and FDIC-supervised banks stopped offering  them by 2012.\nAn IRS decision also contributed to FDIC enforcement actions on refund  anticipation loans. Before 2011, IRS used a tool called the debt indicator  that acknowledged whether any of a taxpayer\u2019s refund could be used to  pay certain outstanding debts. IRS provided the debt indicator to tax  preparers at the time the taxpayer\u2019s return was filed electronically. Banks  used the debt indicator in their underwriting tools to help determine a  borrower\u2019s likelihood of loan repayment. FDIC determined that without the  debt indicator, a bank would have to develop and adopt a more robust  underwriting process to make these loans in a safe and sound manner.  According to FDIC, IRS\u2019s elimination of the debt indicator created a safety  and soundness concern because it removed a key data element used for  determining a borrower\u2019s ability to repay. Losing this information  increased the risk of loss for lenders and at that time helped inform  FDIC\u2019s consent orders with two banks under its supervision to stop  offering refund anticipation loans. In 2011 (the first tax season without the  debt indicator), the number of returns with a refund anticipation loan  indicator reported by IRS decreased to 1.17 million from 6.9 million in the  prior year.\nIRS data continue to show use of refund anticipation loans after 2012,  albeit at a much lower volume. For example, in 2016, IRS data show  about 468,500 returns with a refund anticipation loan indicator and in  2017 the number appeared to spike to about 1.7 million. However, as  discussed earlier, the data for these two years may be misleading  because they likely conflate refund anticipation loans with refund  advances. In 2018, IRS created a separate reporting category for refund  advances and the 2018 data show about 356,000 returns with a refund  anticipation loan indicator as of October 2018.\n\n\t\t\tRefund Transfers\n\nUse of refund transfers\u2014which allow for direct deposit of refund checks  through temporary accounts that banks open for taxpayers\u2014far exceeded  use of refund anticipation loans and refund advances since 2008,  according to IRS data. The number of taxpayers who used a refund  transfer more than doubled from 2008 through October 2018 to exceed  21 million. As banks stopped offering refund anticipation loans in 2012,  refund transfers (also known as refund anticipation checks) began to  increase. Unlike other tax-time financial products generally only available  early in the tax season (which generally runs through mid-April), refund  transfers are usually available after April.\nHowever, IRS data on refund transfers since 2016 have limitations.  Although a refund transfer is not required to get a refund advance, a  number of industry experts told us that almost all taxpayers who apply for  a refund advance also apply for a refund transfer. But because tax  preparers could select only one product indicator when reporting use of  tax-time financial products, they could report a refund advance or a  refund transfer, but not both. As discussed previously, IRS made changes  in 2018 to allow preparers to add information about other product use but  has not issued explanatory material about the changes.\n\n\t\t\tRefund Advances\n\nIn 2016, a few banks began offering refund advances to taxpayers.  Refund advances are no-fee, nonrecourse loans.\nIt is difficult to determine usage trends for this product, although available  data indicate an increase in use from 2016 to 2017.\nFirst, accurate IRS data on refund advances are not available for  2016 and 2017 because IRS did not provide an option for tax  preparers to report refund advance products. As previously discussed,  IRS added a separate reporting category for refund advances in 2018.  As of October 17, 2018, IRS data show about 1.65 million returns with  a refund advance indicator.\nSecond, publicly available data from industry and other sources  (consumer advocacy and research organizations) are limited.  According to data reported by the National Consumer Law Center,  major tax preparation companies facilitated the sale of about 365,000  refund advances in 2016. According to industry sources, use  increased to about 1.63 million in 2017, when one of the largest tax  preparation companies began offering refund advances. Industry data  for 2018 were not yet publicly available at the time of this report.\nThird, taxpayers often obtain refund advances and refund transfers in  tandem. But as discussed previously, IRS reporting indicators did not  include an option for reporting use of multiple products until 2018.\nUse of refund advances also may have increased in 2017 because tax  preparers increased the size of the advances. One lender that offers  refund advances to tax preparers told us that the driving factor in demand  for refund advances was the available loan amount. The maximum  advance amount that tax preparers offered taxpayers in 2016 was $750.  In 2017, the maximum increased to $1,300.\nMost industry participants and consumer groups told us that they believe  that provisions of the PATH Act requiring IRS to delay issuance of EITC  or ACTC returns and associated refunds until after February 15 led to an  increase in demand for refund advances. They said that the delay puts  pressure on taxpayers eligible for EITC or ACTC who depend on getting  their refund early in the tax season (a refund advance can help mitigate  the impact of this delay). Others stated that an increase in demand due to  the PATH Act is possible, but the correlation between the two cannot be  determined. One industry provider suggested that increased demand for  refund advances also could be the result of marketing by tax preparation  companies.\n\n\t\tLimited Public Data Suggest Refund Transfer Fees Generally Increased in 2018\n\nOur analysis of publicly available data about product fees for refund  transfers showed that fees increased in 2018. In particular, our analysis of  fee data collected by the National Consumer Law Center shows that in  2014\u20132017 refund transfer fees charged by paid tax preparers remained  generally unchanged at between $32.95 and $34.95. According to fee  information we were given during our undercover visits, paid tax  preparers generally charged their customers $39.95 or $49.95 during the  2018 tax filing season for a refund transfer that sometimes included both  federal and state tax refunds. In one case the fee was $65, which  included a paper check disbursement. Also in 2018, we found that online  providers of tax filing services and software charged online filers who  prepared their own returns between $12 and $39.99 for a refund  transfer.\nAccording to our analysis, factors that can affect the fee a taxpayer pays  for a refund transfer include the following:\nFiling method. Our review of providers\u2019 websites shows that  taxpayers who filed their own returns online using preparer software  paid an average fee of $31.13 in 2018, which was lower than the  $39.95 or $49.95 that paid preparers charged their customers.\nDisbursement method. The manner in which the taxpayer chooses  to receive a tax refund may affect the fee. For example, our review of  industry literature indicates that one bank set the fee at $29.95 if the  refund was disbursed to a prepaid card offered by an affiliate vendor  or at $39.95 if the refund was directly deposited or disbursed as a  check. Another bank gave tax preparers the option to offer a free  refund transfer for disbursement onto a prepaid card, $15 for a direct  deposit, or $20 for a paper check.\nIncentives offered to tax preparers by banks. Incentives from  banks for tax preparers can increase fees for taxpayers. Our review of  banks\u2019 promotional materials for tax preparers also indicates that  some bank providers offer tax preparers different fee structures for a  product\u2014that is, the preparers can charge a higher fee to earn a  rebate. For example, one bank offered a tax preparer the option to  provide a refund transfer to clients for $39 (which includes an $8  incentive paid to the tax preparer) or for $29 (no incentive payment).  On their websites, two banks marketed the no-incentive option to tax  preparers as a way to be competitive (by offering low-cost options to  their customers).\nUsing a refund advance. According to a report by the National  Consumer Law Center, one bank set a higher fee for a refund transfer  if taxpayers also applied for a refund advance. When taxpayers used  only a refund transfer, the fee was $29.95 for the federal refund and  an additional $9.95 for the state refund, for a total of $39.90. If the  taxpayer also applied for a refund advance (a no-fee product), the  refund transfer fee was $44.95. Thus, taxpayers paid $5.05 more for a  refund transfer if they also received a refund advance.\nOur analysis found that, in addition to the product fee, taxpayers may be  charged other fees when they use a refund transfer.\nState refund transfer. In some cases, the refund transfer fee covered  the deposit of a federal and a state refund. In other cases, the fee only  covered the federal refund. In these cases, if the taxpayer received a  state refund, the tax preparer charged an additional fee of $10 or $12.\nDisbursement services. According to documentation we reviewed, a  tax preparer may charge an additional fee of $25 if taxpayers choose  to get their refund as a paper check or $7 for a cash transfer to a third  party.\nPrepaid card use. The long-term use of prepaid cards used to  disburse a refund may add to the overall cost of getting a tax product.  We reviewed cardholder agreements and fee schedules for several  prepaid cards commonly used to disburse funds from a tax refund and  found they generally carry monthly fees of about $5. The issuer of the  prepaid cards also may charge consumers a fee every time they  access cash at automated teller machines, deposit more money onto  the card, or do not use the card for a certain period of time.\nSoftware fees. Companies that design tax preparation software may  charge a fee or fees associated with the tax product. Taxpayers may  pay one or more of these fees when they use a refund transfer to  receive their tax refund. The bank deducts these fees from the  taxpayer\u2019s refund after receiving funds from IRS or the state taxing  authority. The fee categories are technology fee (up to $18 in our  review), a transmission fee that may be a fixed amount (such as $2)  or a variable amount, and a processing fee of $6.\n\n\t\t\tComparative Fee Scenarios\n\nTo determine how the fees associated with a refund transfer can affect  the total tax preparation fees a provider may charge a taxpayer, we  reviewed fee data we collected. We then identified the types and totals of  fees generally associated with tax products and created four possible  scenarios based on this analysis (see fig. 2). We designed two scenarios  with online self-filers (taxpayer uses a refund transfer and taxpayer does  not use a refund transfer) and two scenarios with paid preparers  performing the filing (taxpayer uses a refund transfer and taxpayer does  not use a refund transfer).\n\n\t\tTax-Time Financial Products Have Continued to Evolve Since 2016\n\nRecent and emerging developments in the market for tax-time financial  products include higher loan amounts and new products, according to our  analysis of selected tax preparers\u2019 websites and marketing materials, and  information we were given during our undercover visits. For example, in  2018 refund advances became available to online filers. They previously  were offered only to taxpayers who obtained paid tax preparation services  in person (at a \u201cstorefront\u201d).\nThe maximum amount for a refund advance has continued to increase. In  2016, the maximum loan amount available to a taxpayer was $750. In  2018, the maximum loan amount available was $3,250 and for 2019, one  preparer has offered an advance of up to $3,500. One industry participant  told us that the industry in general is in a race to increase borrowing limits  to remain competitive and attract more customers.\nIn 2018, banks offered a new product that combines the features of a  refund anticipation loan and a refund advance. The product allows the  taxpayer to apply for a refund advance (up to a fixed amount) with no fee  or finance charges, the option to apply for an additional loan with a fee  (similar to a refund anticipation loan), or a combination of the two  products known as a hybrid. For 2018, two banks offered this additional  loan (not to exceed $1,000) at an annual percentage rate of 29.9 percent.  For 2019, one bank offered taxpayers the option of a no-fee advance of  up to $1,000, or an interest-bearing loan of $2,000, $3,000, or $5,000  based on the expected refund. The interest-bearing loans would carry an  annual percentage rate of 26.07 percent in addition to a fee of $30\u2013$75,  depending on the loan amount. Also for 2019, one national tax  preparation company has offered the option of a no-fee advance of up to  $3,500 or a fee-based advance of up to $7,000, which would carry an  annual percentage rate of 35.9 percent.\nIn addition, demand for refund transfers has increased among online self- filers. As more people file their own tax returns by using web-based  software, the number of refund transfers used by self-filers may continue  to increase. Because few tax preparers offer refund advances to online  self-filers, taxpayers are still more likely to get a refund advance from a  paid tax preparer.\nFinally, issues relating to the applicability of TILA disclosure requirements  to refund transfers could affect the market for tax-time products.  According to representatives of two consumer advocacy organizations,  deferment of tax preparation fees until the refund is received constitutes  an extension of credit; therefore, refund transfers should be treated as  loan products. Tax preparers and a policy research and education  organization with whom we met do not believe that refund transfer fees  meet the definition of a loan.\nShould regulators decide that a refund transfer constitutes an extension  of credit, and would therefore be a credit transaction with a finance  charge, refund transfers would become subject to provisions of TILA.  These changes could affect taxpayers\u2019 access to this product as well as  product pricing. According to Securities and Exchange Commission filings  of some tax preparers, if refund transfers were successfully characterized  as such, the additional requirements and costs could limit their ability to  offer these products to clients.\nRefund advances were promoted by providers as a fee-free, interest-free  credit product, and thus TILA disclosure requirements are generally not  considered applicable for them. However, new interest-bearing credit  products announced for 2019 may be subject to consumer protection  regulations.\n\n\tLower-Income and Some Minority Taxpayers Were More Likely to Use Tax- Time Financial Products for Various Reasons\n\n\t\tOur Analysis Found That Lower-Income, African- American, and Single Taxpayers Were More Likely to Use Tax-Time Financial Products\n\nUsing FDIC data, we conducted a multivariate regression analysis to  examine the relationship between economic and demographic variables  and tax-time financial product use. This approach allowed us to test the  significance of the relationships between each variable and the likelihood  of using tax-time financial products, while controlling for other factors.\n\n\t\t\tIncome-Related Characteristics\n\nLower-income households were more likely to use tax-time financial  products than higher-income households, particularly when they used  paid tax preparers to file their taxes, according to our analysis of 2017  FDIC data. More specifically, we estimated that households with  incomes between $20,000 and $39,999 were more likely to use tax-time  financial products to receive their tax refunds more quickly through paid  tax preparers than households with incomes of $60,000 or more. For  example, we estimated that households with incomes between $20,000 and $29,999 were 34  percent more likely to use tax-time financial products than households  with incomes of $60,000 or more; and households with incomes between $30,000 and $39,999 were 61  percent more likely to use the products than households with income  of $60,000 or more.\nMoreover, our analysis of FDIC data suggests that households that  received EITC were more likely to use tax-time financial products,  compared to households that did not receive EITC.\nOur results also suggest that wealth, as measured by homeownership,  was associated with the household decision whether to use tax-time  financial products. Homeowners were 34 percent less likely to use tax- time financial products than non-homeowners, controlling for other  factors.\n\n\t\t\tOther Characteristics, Including Race, Age, and Household Head\n\nHouseholds of some minority groups were more likely to use tax-time  financial products when filing tax returns than white households. For  example, using FDIC data, we estimated that African-American  households were 36 percent more likely to use tax-time financial products  than white households after controlling for other factors. Other research  (a 2013 study) found that African Americans were more likely to use  refund anticipation loans than white individuals.\nAccording to our analysis of 2016 IRS data, which included information  about tax-time financial product use and locality, use of tax-time financial  products was more concentrated in some areas of the South and the  West (see fig. 3).\nOur analysis of FDIC data further suggests that other characteristics  associated with use of tax-time financial products include age and  household type. For example, households headed by younger persons  (15\u201339 years old) were more than twice as likely to use the products as  households headed by older persons (60 or older), controlling for other  factors.\nHouseholds headed by single adults with families were more likely to use  tax-time financial products than households headed by married couples.  For example, according to our analysis of FDIC data, we estimated that  households headed by unmarried females with families were 76 percent  more likely to use tax-time financial products than households headed by  married couples, controlling for other factors. Using IRS data from 2016,  we found that a higher proportion of product users filed as unmarried  heads of household, compared to the general tax filing population. Among  those who used tax-time financial products, about 39 percent filed as  single, 22 percent filed as married, and 37 percent as unmarried heads of  household.\n\n\t\tReasons for Using Refund Products Include Obtaining Cash Faster and Not Paying Tax Preparation Fees Up Front\n\nReasons to use tax-time financial products include more quickly obtaining  cash from the expected tax refund, not having to pay tax preparation fees  out of pocket, and obtaining cash more cheaply than with alternative  short-term funding options, according to our review of federal and industry  reports.\n\n\t\t\tQuick Access\n\nTaxpayers generally might have to wait weeks for refunds from IRS:\nTaxpayers who file paper returns can expect to receive their refund  about 6\u20138 weeks after the date on which IRS receives their return,  according to IRS guidance.\nTaxpayers who file electronically generally can expect to receive their  refunds within 21 days, or faster if they opt to have refunds deposited  directly into their bank accounts.\nAs previously discussed, IRS must delay payments of refunds on  which EITC, ACTC, or both are claimed until at least February 15 of  each year. Effectively, the refunds might not be disbursed to bank  accounts (or prepaid cards) of tax filers until the end of the month.\nIn contrast, users of tax-time products can obtain cash very quickly. For  example, refund advance recipients generally receive loan funds within  24 hours of applying, and in some instances within the same hour they  apply, according to selected tax preparer documents and websites that  we reviewed. Refund transfer products also allow those who do not have  the option of directly depositing refunds into a temporary account instead  of waiting longer to receive a paper check. According to our analysis of  IRS data from 2016, tax-time financial product users were more likely  than other taxpayers to receive their tax refunds by direct deposit.\nTaxpayers may use tax-time financial products because they need cash  quickly. Studies we reviewed found that product recipients tend to have  pressing financial obligations. One study\u2019s review of available literature  from 2010 found that product recipients tend to live paycheck-to- paycheck or lack sufficient savings to cover prior, current, or future  spending. Another study published in 2010 found that recipients use the  products to pay for pressing financial obligations, both expected and  unexpected, and for their tax preparation. According to the study, many  users of tax-time products become delinquent on rent, utilities, and other  expenses during the winter with the expectation that they will be able to  pay obligations after receiving tax refunds. As one study found, the  annual tax refund represents the largest single cash infusion received all  year by about 40 percent of checking account holders.\n\n\t\t\tTax Preparation Fees Not Paid Out of Pocket\n\nLower-income taxpayers also use tax-time financial products to defer  payment of fees related to tax return preparation, according to federal  government and industry reports that we reviewed. Tax preparation fees  vary greatly based on the tax forms used, including the EITC worksheet.  One of the largest national tax preparation chains reported that its  average tax preparation fee was between $205 and $240 in 2017.\nFree Filing Services   The Internal Revenue Service (IRS) offers the  following free filing services:  Fillable forms. IRS offers forms that can be  completed online and electronically submitted  to IRS. The forms are available without age,  income, or residency restrictions.  Free file software. IRS, in partnership with  the Free File Alliance (members of the tax  software industry), provides free online filing  options to eligible taxpayers. Twelve leading  tax software providers make a version of their  products available exclusively at IRS.gov for  taxpayers with an adjusted gross income up  to $66,000 (in 2018).  Volunteer Income Tax Assistance. The  program provides free basic income tax  preparation with electronic filing by IRS- certified volunteers to qualified individuals,  including to persons who earn $55,000 or  less, have disabilities, or have limited  proficiency in English.  Tax Counseling for the Elderly. The  program provides free tax preparation by IRS- certified volunteers to all taxpayers,  particularly those 60 or older. Program  volunteers specialize in pension and  retirement-related issues unique to seniors.\nConsumers may perceive any costs associated with tax-time financial  products and tax return preparation as lower than they actually may be  because the costs are not paid out of pocket. Fees for the products and  tax return preparation are deducted from the refund before it reaches the  consumer. In general, studies have found that the transparency of a  payment method affected the payer\u2019s willingness to spend. One  consumer advocacy organization representative posited that paying for  tax-time financial products and tax preparation from a refund makes  consumers less sensitive to the real cost of tax-time products and  preparation services.\nInstead of using tax-time financial products to defer payment of tax  preparation fees, lower-income taxpayers can access free filing services  through several IRS programs (see sidebar). However, these options do  not allow taxpayers to use tax-time financial products to access refunds  faster.\nIRS estimates that about 70 percent of taxpayers are eligible to access its  free filing software, and we estimated about 3 percent of taxpayers use  this service. According to IRS officials, while IRS does not have a  marketing budget to promote the free file programs, the predominant  reason so few taxpayers use them is because there are many free tax  preparation options on the market, such as tax preparation software.\n\n\t\t\tHigher Refunds and Tax Preparation Assistance\n\nTaxpayers also may use paid tax preparers because they do not think  they can fill out tax returns on their own, believe that preparers will help  them receive higher refunds, or both, according to federal government  and industry reports we reviewed. For taxpayers who did not use tax-time  financial products, we did not find a clear association between paid tax  preparation and higher average refunds. On the other hand, for taxpayers  who used tax-time financial products, we found that average tax refunds  were higher for taxpayers who filed through paid tax preparers than for  taxpayers who self-filed online (see table 2). According to IRS data,  nearly all taxpayers who used refund loan products filed their taxes  through paid tax preparers, as refund advances were not available online  until the 2018 tax filing season. There may be various reasons for the  association between higher refunds, paid tax preparation, and product  use. Those who use tax-time financial products tend to be eligible for tax  credits such as EITC, which can increase the size of tax refunds. Fifty- four percent of EITC claimants used a paid preparer. However, a 2017  study found that the combination of paid tax preparation and tax-time  financial product use was associated with relatively high incorrect tax  payments (specifically, overpayments of EITC compared to online self- filing and product use or no product use).\nFurthermore, our analysis of IRS data found that taxpayers who used tax- time financial products received higher refunds on average than those  who did not use tax-time financial products, regardless of tax filing  method\u2014although other factors might explain this association. For  example, taxpayers who have high refunds have a greater incentive to  use the products than taxpayers who have relatively small refunds or owe  taxes.\n\n\t\t\tTax-Time Financial Products Cheaper Than Alternatives\n\nFor lower-income taxpayers, tax-time products generally provide more  cash at a lower cost than other small-dollar loan alternatives such as  payday loans, auto title loans, and pawnshop loans, according to our  review of federal government and industry reports. The amounts of  alternative loan products are based on the value of the collateral the  consumer provides. Average loan amounts are $150 for pawnshops,  about $500 for payday loans, and under $1,000 for automobile title loans,  according to industry statistics and CFPB and other studies. In contrast,  refund advances were offered for up to $3,250 for the 2018 tax filing  season.\nFurthermore, the alternative products generally include fees, unlike refund  advances. For example, fees for payday loans generally range from $10  to $30 per $100 borrowed. Automobile title lenders generally charge a  fixed price per $100 borrowed, with a common fee limit of 25 percent of  the loan per month. In contrast, refund advances are offered at no cost to  the consumer.\nTax-time financial products also may be easier to access because, unlike  alternative loans, they generally can be obtained without regard to credit  history. However, tax-time financial products generally are only available  during tax season.\nLoans provided by nonfinancial companies (often called fintech firms) are  another source of short-term financing. However, fintech firms generally  provide much larger loan amounts than tax-time financial products, and  include fees, unlike refund advances.\n\n\tProviders We Reviewed Generally Disclosed Required Information but Some Disclosure Practices May Hinder Consumer Decision- Making\n\nThe federal banking regulators oversee banks that offer tax-time financial  products and IRS sets standards of practice for certain service providers  (including some tax preparers). While our nongeneralizeable review found  that selected banks and tax preparers generally followed existing OCC  and IRS disclosure requirements, some tax preparers\u2019 disclosure  practices may present challenges for consumers trying to compare  product options.\n\n\t\tIndustry Participants Are Subject to Varying Levels of Oversight\n\n\t\t\tBanks and Settlement Service Providers\n\nFDIC, the Federal Reserve, or OCC are responsible for the safety and  soundness supervision of banks within their authority (which offer tax-time  financial products) and may have supervisory authority over third-party  service providers (which provide settlement services). We identified five  banks that partnered with several national tax preparation chains in  recent years to offer tax-time financial products (refund transfers and  refund advances). Of the five banks, FDIC supervised one medium-sized  and one small bank, OCC supervised two medium-sized banks, and  Federal Reserve supervised one medium-sized bank.\nAs previously discussed, FDIC, the Federal Reserve, and OCC are to  conduct full-scope, on-site risk-management examinations of each of their  supervised banks at least once in each 12\u201318 month period. FDIC  officials told us that its regular safety and soundness examinations may  include an examination of the bank\u2019s tax-time financial product offerings.  OCC officials told us that they examine tax-time financial products in  every annual examination of the banks they supervise that offer these  products.\nBecause the five banks each has total assets of less than $10 billion, the  three regulators also are responsible for enforcing compliance with federal consumer financial laws (such as TILA and the Electronic Fund  Transfer Act) that govern disclosure requirements for certain tax-time  financial products. Officials from the regulators told us that they received  few complaints about tax-time financial products offered by their  supervised banks. We discuss the disclosure requirements and  compliance with the requirements in more detail later in this section.\nThe regulators\u2019 consumer compliance examiners also may review a  bank\u2019s tax-time financial products\u2014if, for example, a bank offers a new  product or there are a number of consumer complaints about a current  product. Examiners employ a risk-focused approach with a focus on  consumer harm in selecting products to evaluate for compliance with  applicable consumer laws and regulations. Furthermore, compliance  examiners may decide, based on the potential for consumer harm and a  bank\u2019s compliance management system, that there is enough residual  risk to scope the product into the examination. FDIC officials said that a  bank with a lot of activity in the market for tax-time financial products  would have to assure examiners that it had performed appropriate due  diligence.\nRegulators also can take other oversight actions, ranging from  enforcement to raising awareness among consumers. In 2015, CFPB  took an enforcement action, along with the Navajo Nation, to ban an  owner of four tax preparation franchises from the market and levy civil  penalties for understating refund anticipation loan rates and deceiving  customers about the status of their tax refunds. Our search of CFPB\u2019s  complaint database did not identify any consumer complaints on tax-time  financial products. CFPB published a blog post in February 2018 that  describes the different tax-time financial product options and the process  for obtaining them, and cautions consumers to consider all fees, charges,  and timing associated with the products.\nFTC staff we interviewed told us that supervision authority over many  financial services providers has been given to CFPB, but that FTC still  has the authority to enforce many financial statutes and rules, including  rules administered by CFPB. FTC brought an enforcement action in  2017 against an online tax preparation provider alleging that it failed to  secure consumer accounts. FTC officials also told us that, while they  received numerous complaints on tax-related issues, FTC\u2019s complaint  database does not separately classify complaints based exclusively on  tax-time financial products.\nFTC also has issued guidance to educate consumers regarding tax- related scams and other consumer protection issues that arise during tax  time, and to businesses, including tax professionals, to help them detect  cyber threats. FTC also co-sponsors a series of educational events for  consumers and businesses surrounding tax identity theft awareness  week.\n\n\t\t\tSoftware Developers\n\nSoftware companies we interviewed stated that they are subject to IRS  regulations relating to electronic filing of tax returns. Software developers  provide tax software to tax preparers so that they may file tax returns  electronically and assist taxpayers in obtaining tax-time financial  products. One software company told us that this involves working with  IRS to ensure that returns can be electronically submitted, IRS can  receive data, and the software is in compliance with IRS\u2019s required data  schemas.\n\n\t\t\tTax Return Preparers\n\nIRS officials said that IRS does not monitor or have direct oversight  authority over tax-time financial products, but requires some paid tax  preparers to meet standards of practice or other requirements. The extent  to which IRS has oversight over paid preparers depends partly on  whether the preparer is a tax practitioner or unenrolled preparer.\nTax practitioners are subject to regulations (Circular 230) that establish  standards of practice. For example, practitioners must return tax records  to clients, exercise due diligence in preparing tax returns, and submit  records and requested information to IRS in a timely manner. IRS officials  told us that they monitor the suitability of these practitioners and their  adherence to the rules. Additionally, certain tax practitioners known as  enrolled agents generally are required to pass a three-part examination  and complete annual continuing education, while attorneys and certified  public accountants are licensed by states but are still subject to Circular  230 standards of practice if they represent taxpayers before IRS.\nAlternatively, unenrolled preparers\u2014the remainder of the paid preparer  population and the majority of paid preparers\u2014generally are not subject  to these requirements. In 2011, IRS issued final regulations to establish a  new class of registered tax return preparers to support tax professionals,  increase confidence in the tax system, and increase taxpayer compliance.  However, the U.S. District Court for the District of Columbia ruled in 2013  and the U.S. Court of Appeals for the District of Columbia Circuit affirmed  in 2014 that IRS lacked sufficient authority to regulate all tax preparers.  IRS officials also told us that all authorized IRS e-file providers have to  follow certain requirements to be able to file tax returns electronically.\n\n\t\tBanks and Tax Preparers in Our Review Generally Followed Guidance for Disclosing Product Fees, but All Related Fees Were Not Always Disclosed Clearly or Early in Process\n\nWe found selected authorized IRS e-file providers generally followed the  requirements established by IRS on the disclosure of product fees, and  banks generally followed the disclosure guidance relating to tax-time  financial products issued by OCC. (We conducted nongeneralizeable  reviews of website content, industry documents, and disclosures made  during our undercover visits.) Two of the five banks we reviewed are  regulated by OCC. One of the two FDIC-supervised bank and the Federal  Reserve-supervised bank told us that they voluntarily follow OCC  guidance.\nMore specifically, IRS established the following disclosure requirements  for authorized IRS e-file providers, generally known as EROs, that relate  to tax-time financial products:\nEROs must obtain taxpayers\u2019 written consent before disclosing any  tax return information to other parties in relation to an application for a  tax product.\nEROs must ensure taxpayers understand that if they use a tax  product, the refund will be sent to the bank and not to them.\nIf taxpayers choose to use a fee-based loan, EROs must advise that  the product is an interest-bearing loan and not an expedited refund.\nEROs must advise taxpayers that the bank may charge them interest,  fees, or both, in the case of any shortages on the refund.\nEROs also must disclose all deductions to be made from the expected  refund and the net amount of the refund.\nIn 2015, OCC issued risk-management guidance for national banks that  offer tax refund-related products. This guidance advises that banks  should specify to customers, as applicable,  the total cost of the tax product, separately from the tax preparation  cost;  that total costs will be deducted from and reduce the refund amount;  that tax refunds can be sent directly to the taxpayer without the  additional costs of a tax product;  that customers with deposit accounts can receive their refund without  incurring fees through direct deposit in about the same time as it  would take to receive a tax refund-related product; and  the ongoing periodic maintenance and transaction fees related to any  product intended for long-term use.\nIn addition, OCC\u2019s guidance establishes that banks should clearly  disclose all material aspects of the product in writing before the consumer  applies or pays any fees for a tax-time financial product.\nAlso, representatives of the American Coalition for Taxpayer Rights, a  group representing the leading tax preparation, tax software, and bank  providers, told us that its members signed a joint statement with attorneys  general from six states on disclosure practices for refund transfers. The  member providers agreed to explain to taxpayers the different options for  filing and receiving a tax refund, including no-cost options, and the  associated costs and features of each option. The providers also agreed  to disclose the optional nature of the products, the timing of the refund,  and to present the disclosures in a clear and conspicuous manner  understandable by a reasonable consumer.\nOur nongeneralizeable review of documents received from selected  banks and tax preparers found disclosures generally followed OCC  guidance or IRS requirements, respectively. However, our review of these  documents and selected tax preparer websites also found\u2014and our  undercover visits of selected tax preparers suggested\u2014that the level of transparency on product fees varied and product fees and information  were not always clearly disclosed.\nBank documents were more likely than information provided by paid  preparers (in person or online) to include more disclosures about the  fees and terms of tax-time financial products. For example, of the 12  bank documents we reviewed, all disclosed that funds would be sent  to the bank if the taxpayer used a tax product. Almost all the bank  documents disclosed the fees associated with the product and all  disclosed that the fees would be deducted from the refund. In  contrast, while written disclosure is not required, less than one third of  ERO documents disclosed that the taxpayer using a tax-time financial  product would receive funds from the bank instead of IRS.\nHowever, almost all the documents are presented to taxpayers after  returns have been prepared and preparers have determined that  taxpayers qualified for a product. The timing of when a tax preparer  makes these disclosures would pose a challenge for taxpayers  looking to compare prices for different providers. That is, they would  not learn of the total fees\u2014partly because the paid preparer could not  determine the amount of some tax preparation fees until well into the  preparation of the tax return.\nA taxpayer trying to determine the cost of using a tax refund to pay for  online tax preparation services only would be able to compare the  prices of two of the eight online providers we reviewed. The remaining  six did not disclose this fee in a prominent way\u2014with some  disclosures made in small print or requiring navigation through several  pages after the product page\u2014or at all.\nA taxpayer choosing to file taxes using the services of a paid tax  preparer in a brick-and mortar-location, and opting to use the refund  to pay for tax preparation fees, would be unlikely to be able to  compare prices among different providers. For example, during six  of our undercover visits, our investigators explicitly requested  literature on product fees. However, the preparers stated that they did  not have the literature available or only provided us with business  cards and other promotional material.\nOur analysis shows that providers do not consistently explain  products or disclose fees to taxpayers. For example, providers told us,  and industry documents show, that a refund transfer is not required to  get a refund advance. However, during our site visits, tax preparers  tied the use of a refund transfer to a refund advance four out of five  times. In two of these cases, the tax preparer included the fee for a  refund transfer as part of processing an advance product, while in  another two cases the tax preparer said that a refund transfer was  required with the advance. Also, during our site visits, three of the  nine tax preparers did not disclose the cost of a refund transfer.\nAppendix III provides more information on our analysis of bank and tax  preparer disclosure practices.\nAccording to industry participants, only taxpayers expecting a refund can  qualify for a tax product; consequently, the tax preparer generally cannot  determine whether the taxpayer qualifies until after the tax return is  completed. Once this is determined, the tax preparer must request the  taxpayer\u2019s consent to offer a tax product. EROs with whom we met told  us they may disclose fee information at various points throughout the  process of tax preparation, and do so verbally or through their in-store  computer interface. Bank disclosures are provided to the taxpayer before  the product application has been submitted.\nSome researchers and representatives from consumer advocacy  organizations with whom we met were concerned about the timing of  disclosures of tax-time financial product fees. Consumer advocates said  disclosures given to taxpayers were inadequate, unhelpful, or timed in  such a way as to prevent meaningful comparison shopping. Specifically,  one consumer advocacy organization said that taxpayers they serve do  not understand the fees associated with filing through preparers.  Representatives from another consumer advocacy organization said that  taxpayers do not know the total cost for tax-related financial products and  services until they already have taken steps to file their returns. In its  2017 Report to Congress, the National Taxpayer Advocate recommended  that IRS require all e-file participants offering tax-refund financial products  to provide a standard \u201ctruth-in-lending\u201d statement to help taxpayers better  understand the terms of the refund anticipation loan product. IRS did not  adopt the National Taxpayer Advocate\u2019s recommendation but agreed that  e-file providers should be transparent about the costs associated with the  loan products offered to taxpayers as part of the return preparation  process.\nAs previously discussed, courts have determined that IRS does not have  sufficient authority to regulate individuals who are solely tax preparers  and not licensed by IRS\u2014in effect, the majority of the paid preparer  population. Previously, we asked Congress to consider legislation  granting IRS the authority to regulate paid tax preparers, if it agreed that  significant paid preparer errors existed. As of March 2019, this  Congressional action we have recommended remains open. The lack of  consistency about the timing of fee disclosures for tax-time financial  products may add to the rationale for Congress to consider regulating  preparers. Such statutory authority could allow IRS to require that tax  preparers make tax-time financial product disclosures or ensure  meaningful transparency in the sale of the products.\n\n\tConclusions\n\nFor lower-income taxpayers with pressing financial obligations, tax-time  financial products can offer an alternative to higher-cost short-term  products such as payday loans. Taxpayers can purchase tax-time  financial products from many tax preparers; however, according to our  review of selected tax preparers and banks, the price and associated fees  of these products can vary. And disclosure practices by some paid tax  preparers may pose challenges for consumers looking to compare prices  for different providers.\nIRS is an essential source for data on tax-time financial products, but to  date IRS has offered limited options to tax preparers for accurately  reporting usage of all available tax-time products. Furthermore, IRS has  not informed tax preparers about changes made in reporting options and  has not informed users of IRS\u2019s product data about known issues with the  data. Consequently, data on product usage are not reliable. Improving the  quality of data collected on these products would help ensure that federal  agencies, policymakers, regulators, consumer advocacy groups, and  researchers have quality information to report on tax policy and consumer  protection issues and inform their decision-making.\n\n\tRecommendations for Executive Action\n\nWe are making a total of two recommendations to IRS.\nThe Commissioner of Internal Revenue Service should communicate data  issues regarding the refund anticipation loan indicators for tax years 2016  and 2017 and the refund transfer indicators since tax year 2016\u2014for  example, by attaching explanatory material to the dataset.  (Recommendation 1)\nThe Commissioner of Internal Revenue Service should improve the  quality of tax-time financial product data collected; for example, by  allowing authorized e-file providers to indicate more than one type of tax- time financial product for each return or by informing tax preparers of the  addition of new product definitions and instructions on how to accurately  code the products. (Recommendation 2)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to IRS, FDIC, Federal Reserve, OCC,  CFPB, and FTC for review and comment. IRS provided written  comments, which are reproduced in appendix IV and discussed below.  FDIC, Federal Reserve, OCC, CFPB, and FTC provided technical  comments, which we incorporated as appropriate.\nIn its comments, IRS concurred with both recommendations, and  described how it planned to address them. In response to our first  recommendation, IRS stated that it plans to provide the appropriate  notations with the datasets. In response to our second recommendation,  IRS stated that it plans to pursue programming changes and clarify  instructions for tax return preparers to promote accurate coding of refund- related products. We believe that these actions, if implemented, would  address our recommendations and improve the quality of data IRS  reports on these products.\nAs 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 IRS, FDIC, Federal Reserve, OCC, and  FTC. This report will also be available at no charge on our website at  http:\/\/www.gao.gov.\nIf 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 V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report (1) describes trends in the market for tax-time financial  products and product fees and examines the reliability of IRS data on  these trends, (2) describes characteristics of those who use tax-time  financial products and factors that influence the decision to obtain the  products, and (3) describes regulatory oversight of industry participants  and the disclosure of information on product fees and terms.\nTo examine trends in the use of tax-time financial products, we used  2008\u20132018 Internal Revenue Service (IRS) data compiled from tax filings  to determine the types and use of these products. We assessed the  reliability of these data by interviewing IRS officials about the controls and  quality assurance practices they used to compile these data. We  determined the data alone did not provide a reliable count of refund  transfers, refund anticipation loans, or refund advances in 2016, 2017,  and 2018, but were adequate to suggest general trends when  supplemented with other information. To supplement the IRS data, we  collected information from reports issued by the National Consumer Law  Center, reviewed Securities and Exchange Commission filings for two  selected tax preparers, and interviewed representatives from National  Consumer Law Center and both tax preparers on the offerings of tax-time  financial products. We selected these preparers because they are major  providers of tax preparation services and tax products.\nTo identify and review trends in product offerings, we reviewed the  websites, promotional materials, and other industry literature including  Securities and Exchange Commission filings of a nongeneralizeable  selection of four providers of online tax preparation services, three tax  preparers with physical locations that also offer services online, and four  banks. We also discussed changes in the market and product offerings  with nine of the industry providers with whom we met. We accessed  provider websites before and during the 2018 tax season. The tax  preparation firms were selected because they are national tax preparation  chains, and the five banks were selected because they partnered with the  national tax preparation chains and major developers of tax preparation  software. In addition, we reviewed studies related to these products  published by GAO, federal agencies, four consumer advocacy and  research groups, and two academic researchers. We used these studies  primarily to corroborate findings from our data analysis. We focused on studies from 2010 and later; however, we also reviewed an older report to  gain a greater understanding of how the market for tax-time financial  products evolved. We identified these studies through expert  recommendations and citations in studies.\nTo examine trends in fees for tax-time financial products, we collected  fee-related information from several different sources (because of limited  publicly available industry data). All of the information cannot be used to  generalize our findings to the retail tax preparation industry.\nProduct fees. For 2018, we collected information on product fees  from six paid tax preparers and four banks. For tax years 2014 to  2017, we used product fee information as reported by the National  Consumer Law Center. For 2018, we also reviewed fee data from six  providers of online tax preparation software, two that provide services  in person and online, and four that only provide services online. We  selected these providers after conducting internet searches and  reviewing reports by consumer advocates and federal agencies. Data  elements included fees for refund transfers and refund advances. For  2018, data elements also included the dollar amount for the incentives  banks offered tax preparers for each refund transfer sold.\nAncillary product fees. We collected information on ancillary product  fees from four tax preparers, four banks, and three software  developers for tax years 2017 and 2018. Data elements included fees  for disbursement methods such as prepaid cards and paper checks  and other charges related to the use of a tax-time financial product  such as technology and transmission fees.\nTax preparation fees. We collected information on tax preparation  fees from eight tax preparers with physical locations and eight online  providers of tax preparation services for 2018. Data elements included  fees for federal and state filing.\nAggregate fees. We collected aggregate tax-time financial product,  ancillary product, and tax preparation fee information from studies  issued by consumer protection advocates.\nWe collected the above information from websites, advertising materials,  and public filings with the Securities and Exchange Commission of tax  preparers, banks, and software developers.\nTo identify some of the demographic and economic characteristics of  product users, we used data from the Bureau of the Census and the  Federal Deposit Insurance Corporation (FDIC) from 2011, 2013, 2015,  and 2017 to conduct a multivariate regression analysis to determine the  influence of individual characteristics on the decision to obtain a product.  We statistically controlled for various income, education, and  demographic factors. While the FDIC data contain a rich set of  demographic and economic variables, they include limited data on  characteristics specifically related to tax filing. To identify specific tax-filing  characteristics associated with product use, we also used a probability  sample of data from IRS from the 2014, 2015, and 2016 tax years to  calculate the percentages of taxpayers who used tax-time financial  products according to various tax-filing characteristics, including tax filing  status and tax filing method. We also used the sample data to calculate  the percentage of taxpayers who used free filing services, including free  file software, programs, and fillable forms. We reviewed documentation  on and conducted testing of the data we used and determined they were  sufficiently reliable for reporting economic, demographic, and tax-filing  characteristics associated with product use. For more detailed information  on our analysis of characteristics associated with tax-time financial  product use, see appendix II.\nTo better understand user characteristics associated with the decision to  obtain a tax-time financial product identified by our analysis, we reviewed  relevant federal and industry reports on the financial needs of individuals  with characteristics similar to taxpayers who obtained these products. We  focused on reports from 2010 and later. We also reviewed our prior  studies and studies from the Consumer Financial Protection Bureau  (CFPB) on alternative credit products and compared their features and  fees to those of tax-time financial products. In addition, we interviewed  representatives from consumer groups, four Low-Income Taxpayer  Clinics, and IRS\u2019s Taxpayer Advocate Service to obtain their perspectives  on characteristics associated with tax-time financial product users.\nTo describe the regulatory oversight of industry participants associated  with tax-time financial products, we reviewed relevant federal laws and  regulations, and reports and guidance documents from IRS and federal  regulators, including the CFPB, FDIC, the Board of Governors of the  Federal Reserve System, Office of the Comptroller of the Currency  (OCC), and Federal Trade Commission. We inquired about consumer  complaint data related to tax-time financial products at the federal  regulators and interviewed officials from the federal agencies and  representatives from five tax preparation providers, five banks and bank  affiliates such as settlement service providers, four consumer advocacy  organizations, three software developers, two researchers, one provider  of alternative financial services, and one industry group to gain their  perspectives on the benefits and risks of the tax-time financial products  and how any related concerns were being addressed. The tax preparation  firms were selected because they are national tax preparation chains, and  the five banks and three software developers were selected because they  partnered with the national tax preparation chains. The four consumer  advocacy organizations, two researchers, alternative financial service  provider, and industry group were selected for their experience and to  provide a range of perspectives.\nTo review how product terms and fees are disclosed by tax preparers, in  February 2018 GAO investigators acting in an undercover capacity visited  a nongeneralizeable sample of nine randomly selected tax preparers in  Washington, D.C., Maryland, and Virginia to inquire about tax-time  financial products. We selected the two states and Washington, D.C. to  ensure a mixture of state and local laws governing the products and  providers. From the two states and Washington, D.C., we selected one  metropolitan statistical area based on the concentration of product users  and the proximity to lower-income households. We randomly selected  three individual tax preparers in each of the three metropolitan statistical  areas to visit, based on proximity to taxpayers in lower-income  households and to ensure a mixture of urban and rural communities and  company sizes. We visited offices of large tax preparation chains and  single-office tax preparation businesses. Results cannot be used to  generalize our findings to the retail tax preparation industry. Our  investigators posed as taxpayers seeking tax preparation services who  wanted to pay for the tax preparation fees with the expected refund or  obtain an advance based on their anticipated tax refund. They requested  available documents associated with tax preparation, refund advance and  refund transfer products, and different disbursement options and fees.  Because GAO investigators did not experience the tax preparation or the  product application process, we were not able to assess the timing of any  disclosures typically made after the tax return preparation process would  begin. In addition, we received some consumer-facing disclosures and  product agreements that were typically provided during the product  application process from two tax preparers and two banks.\nWe also conducted a content analysis of websites of eight selected tax  preparers that offer tax-time financial products. The tax preparers were  selected as national providers of tax preparation services with an online  presence, and the results are not generalizeable to the retail tax  preparation industry. Three of the providers offer tax preparation services  online and through physical retail locations and five of the providers offer  their services online only. We reviewed these websites to understand the  extent to which they disclose fees to the taxpayer for tax preparation  services, tax-time financial products, disbursement, and additional  products or services, and to review the ease with which these disclosures  are accessible.\nIn addition to consumer-facing disclosures we received from providers  with whom we met, we searched online for additional disclosures  provided by the tax preparers and banks in our review and reviewed  seven disclosures from two national tax preparation chains and 12  disclosures from five banks offering tax-time financial products. We then  compared the disclosures against IRS and OCC requirements for  disclosure for product terms and conditions. IRS established certain  disclosure requirements for authorized IRS e-file providers. OCC  instructs banks it supervises to make certain disclosures to product  consumers. More specifically, we analyzed tax products and fee  disclosures obtained from our undercover visits of selected tax preparers,  online reviews, and directly from tax preparers and banks to determine  the type and timing of disclosures made in these instances and whether  they were consistent with IRS disclosure requirements and followed OCC  guidance.\nWe conducted this performance audit from July 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. We conducted our related  investigative work in accordance with standards prescribed by the Council  of the Inspectors General on Integrity and Efficiency.\n\nAppendix II: Analysis of Characteristics Associated with Tax-Time Financial Product Use\n\nThis technical appendix outlines the development, estimation, results, and  limitations of the econometric model and other data analysis we  described in the report. We undertook this analysis to better understand  the characteristics associated with the decision to obtain a tax-time  financial product.\n\n\tData\n\nFederal Deposit Insurance Corporation. To assess the characteristics  associated with tax-time financial product use, we used data from the  Federal Deposit Insurance Corporation\u2019s (FDIC) National Survey of  Unbanked and Underbanked Households for 2011, 2013, 2015, and  2017, which is a supplement of the Current Population Survey. We used  the following variables on households and heads of households to  examine how various demographic and economic characteristics are  related to the use of tax-time financial products:\nHousehold income.\nHousehold type.\nHomeownership status.\nRace and ethnicity of the head of household.\nEducational attainment of the head of household.\nAge of the head of household.\nHead of household has children.\nHousehold used refund anticipation loan or a tax preparation service  to receive a tax refund faster than the Internal Revenue Service (IRS)  would provide it in the past 12 months. This is a dummy variable,  which equals 1 if the household used products and 0 otherwise.\nA refund anticipation loan is a tax-time financial product. Based on  our interviews and other research reports, refund anticipation  loans and other tax-time financial products (including refund  anticipation checks) may be used by consumers to get their tax  return faster than IRS could provide it. We refer to this variable as  \u201cused tax-time financial product\u201d for simplicity in the report, and we  explain the relevant caveats and limitations below.\nThis variable is the basis for the sample used for this analysis.\nSee table 3 for the estimated distributions of these variables for all  households, as well as households that used tax-time financial products  in 2017.\nWe also examined the relationship between the use of tax-time financial  products and being unbanked, as well as the association between using  tax-time financial products and alternative financial services (those  offered outside the banking system). We used additional data from  FDIC\u2019s National Survey of Unbanked and Underbanked Households on  the following variables:\nHousehold used other alternative financial services in the past 12  months, including nonbank check cashing, nonbank money orders,  payday loans, and pawn shops.\nHousehold used prepaid card(s) in the past 12 months.\nHousehold was unbanked in the past 12 months.\nSee table 4 for estimated distributions of household responses to  questions related to unbanked status and usage of other alternative  financial services for all households, as well as households that used tax- time financial products in 2017.\nIRS. To further identify tax-filing characteristics associated with tax-time  financial product use and trends, we also used data from a probability  sample of 2 percent of all electronically filed tax returns from IRS for tax  years 2014, 2015, and 2016. In 2016, the sample size was 2,952,418,  representing a population of 147,625,598 tax returns. According to IRS,  the sample is representative of all electronically filed tax returns for the  relevant tax years. In this sample, IRS provided data on the following  variables:\nTax filing method, including online (self-filed using tax software) or  through a paid practitioner (including tax preparers with physical  storefronts).\nTaxpayer used free filing services from IRS, including the Free File  program and free fillable forms.\nTax filing status, including single, married, and head of household.\nDisbursement options for tax refunds (direct deposit or paper check)  or tax balance due.\nTax refund amount.\nTax year.\nTax-time financial product use, including refund anticipation loans,  refund anticipation checks, or no tax-time financial products. In tax  year 2016, we estimated that about 18 percent of taxpayers used a  tax-time financial product, plus or minus less than 1 percentage point.\nWe also used IRS data from the Statistics of Income division for tax year  2016 to assess the geographical concentration of product use at the zip- code level. Zip code data from the IRS Statistics of Income division are  based on population data that was filed and process by IRS in tax year  2016. Due to some data suppression from IRS for privacy purposes, zip  codes with less than 100 tax returns are excluded from the data. As a  result, in 2016 the total returns represented in the IRS zip code data are  145,302,140 and the number of tax returns with a tax-time financial  product was 21,654,760, meaning about 15 percent of tax filing units in  these data used a tax-time financial product.\n\n\tMethodology\n\nRegression analysis using FDIC data. Using FDIC data, we conducted  a multivariate regression analysis to examine the relationship between  each explanatory variable and tax-time financial product use. Specifically,  we estimated multivariate logistic regression models. Regression models  allow us to test significant relationships between economic and  demographic variables and the likelihood of using tax-time financial  products, while controlling for other factors.\nWe used logistic regression models because our dependent variable is  binary. The dependent variable represents whether a household used  tax-time financial products. We collapsed \u201cno\u201d and \u201cdid not know\/refused\u201d  into a single category for our regression analysis, so that the dependent  variable is equal to 1 if the household used tax-time financial products  and 0 otherwise.\nLogistic regressions allow the relationships between various  characteristics and tax-time financial product usage to be described as  odds ratios. Odds ratios that are statistically significant and greater than  1.00 indicate that households or heads of households with those  characteristics are more likely to use tax-time financial products. Odds  ratios that are less than 1.00 indicate that households or heads of  households with those characteristics are less likely to use tax-time  financial products. For categorical variables, this increase or decrease in  the likelihood of product use is in comparison to an omitted category, or  reference group. For example, the odds ratio for households headed by  African Americans is statistically significant and 1.36. This implies that the  odds of tax-time financial product use for households headed by African  Americans are 1.36 times the odds of use for households headed by  whites, holding other factors constant. Put another way, households  headed by African Americans are about 36 percent more likely to use tax- time financial products than households headed by white individuals, if  other conditions remain constant. This result and others are discussed  further in the results section below. We also present 95 percent  confidence intervals, which helps clarify the statistical significance of the  odds ratios.\nOur baseline estimates were derived from logistic regressions that  accounted for the survey features of the FDIC data. Our main regression  results used data from the 2017 survey year. We also estimated logistic  regressions using data from the 2015, 2013, and 2011 survey years,  using the same variables when possible. Our baseline specification  includes explanatory variables for race and ethnicity, education, age,  household type, income, and homeownership. We used groups of  indicator variables or categorical variables to control for all characteristics.  In other specifications, we included controls for children, unbanked status,  use of alternative financial services other than tax-time financial products,  state indicators, and region indicators to check the robustness of our  results.\nWe also assessed the sensitivity of our analyses by restricting the  analysis to households that only answered \u201cyes\u201d or \u201cno\u201d to tax-time  financial product use. We excluded answers of \u201cdid not know\/refused,\u201d so  that the dependent variable is equal to 1 if the household used tax-time  financial products and 0 if the household did not use tax-time financial  products.\nIn a more limited analysis, we merged data from the 2017 FDIC data,  which is the June 2017 supplement of the Current Population Survey,  with the 2017 Annual Social and Economic Supplement, which is the  March 2017 supplement of the Current Population Survey. We performed  the additional analysis because the March 2017 supplement has data on  tax-filing characteristics, including tax credits used by households. Given  the structure of the Current Population Survey, some households were  surveyed in both the March and June 2017 supplements, and those  households comprise the sample used in this part of the analysis. We  identified those represented in both supplements using household and  person identifiers, as well as data on sex, race and ethnicity, and age.  Using this merged sample, we estimated logistic regressions that both did  and did not account for the survey features of the data. We included the  same explanatory variables as our baseline estimates, along with  indicators for use of the Earned Income Tax Credit, Additional Child Tax  Credit, and Child Tax Credit.\nAnalysis of IRS data. Using the 2 percent sample of IRS data, we  estimated the percentages of tax filers with varying tax-filing  characteristics by year and average refund amounts by year. All  estimates are weighted at the tax filing unit level. Using the IRS\u2019s zip code  data from the Statistics of Income division for 2016, we calculated the  number of total tax filing units and tax filing units who used tax-time  financial product at the zip code level.\n\n\tCaveats and Limitations\n\nRegression analysis using FDIC data. Our results have limitations and  should be interpreted with caution. For example, our analysis identifies  correlations between characteristics and tax-time financial product use  and not causal relationships. Moreover, there may be variables that are  correlated with tax-time financial product use that are not included in our  models. For example, we are not able to account for community  characteristics that may influence the decision to use the products due to  data limitations. We used statistical tests for multicollinearity (high  intercorrelations among two or more independent variables) and  goodness of fit to check the validity of the model to the extent possible,  given the use of complex survey data.\nOur analysis of the characteristics associated with the use of tax-time  financial products uses a relatively small number of observations. For  example, we observe 798 households that used these products in the  2017 survey year, representing about 2.4 percent of households (plus or  minus 0.2 percentage points), and that is the benchmark utilization rate  against which the results should be interpreted. Moreover, IRS data  indicate that more than 20 million tax filers used tax-time financial  products in 2016, representing about 20 percent of tax filers who filed  their taxes electronically. These data sets use different units of analysis,  and there can be multiple tax filers in one household, especially for those  who use Earned Income Tax Credit. However, comparing the two  suggests that the survey data may not include all users of tax-time  financial products. Given the question used to measure the dependent  variable, our analysis focuses on those who use tax-time financial  products to get their tax refund more quickly. While a key reason people  use tax-time financial products is to meet cash needs, there may be other  reasons people use the products, including covering the cost of tax  preparation.\nOur results may not generalize to other time periods. There have been a  number of changes in the market for tax-time financial products in recent  years. Our results may not generalize to all products currently available in  the market. However, our results from 2017 are generally similar with the  2015, 2013, and 2011 survey years, despite a number of changes to the  tax-time financial product market during these years. Our findings suggest  that similar types of households have utilized tax-time financial products  regardless of industry and market changes, particularly if households  used paid preparers and tax-time financial products to expedite their tax  refunds.\nOur analysis focuses on households that used tax-time financial products  and accessed them through paid preparers. However, taxpayers also  may have accessed specific types of tax-time financial products when  they used online software to file their own taxes. For example, individuals  who file their own taxes online may use the products to cover the cost of  the software that helps them prepare their taxes. The characteristics of  people who use products for these reasons may be different than what  we found in our analysis.\nAnalysis of IRS data. The IRS data are representative of tax returns filed  electronically and not of tax returns filed by other means, including by  paper. The results may not generalize to years for which we do not have  data.\nThe indicators in the data for specific types of tax-time financial products,  including the indicators for refund anticipation loans and refund  anticipation checks have some significant limitations. In tax years 2014\u2013 2016, IRS only allowed tax-time financial products to be coded as refund  anticipation loans or refund anticipation checks (that is, there was no  code to indicate that two or more products were used together). However,  there were some major changes in the industry during this period,  particularly with regards to refund anticipation loans, that suggest that  these indicators do not measure the same types of products over time.  Given the limitations of the definitions of specific tax-time financial  products, most of our analysis focuses on the universe of tax-time  financial products in the IRS data and not on differences by specific types  of products.\n\n\tResults\n\nRegression analysis using FDIC data. Our analysis suggests a number  of economic and demographic characteristics are associated with tax- time financial product use, particularly when purchased through a tax  preparer to expedite the tax refund, after controlling for other factors. In  2017, relatively lower-income households were more likely to use the  products than higher-income households. Households headed by single  women with families were more likely to use tax-time financial products  than households headed by married couples. Furthermore, householders  who owned their homes were less likely to use tax-time financial  products. African American households were more likely to use the  products compared to white households. Finally, relatively younger  households were more likely to use the products than older ones. The  results of the main specification of our logistic regression are presented in  table 5.\nOur results for other specifications using 2017 data were generally  similar. For example, adding an additional control for unbanked status did  not substantively change the results. In alternative specifications that  included an indicator for use of other alternative financial services, we  found a significant and positive correlation between using tax-time  financial products and other alternative financial services, including  nonbank check cashing, nonbank money orders, payday loans, and pawn  shops. Moreover, including state and region indicators did not  substantively affect the results. Using the sample restricted to just \u201cyes\u201d  and \u201cno\u201d responses also did not substantively change the results.\nOur results for other years were generally similar, with some exceptions.  For example, in other survey years prior to 2017, we found that in addition  to African American households, Native American households also were  more likely to use tax-time financial products than white households.  Moreover, education and children were significant correlates in prior  survey years.\nAnalysis of IRS data. We found that nearly 1 in 5 taxpayers who filed  their taxes electronically used tax-time financial products each year from  2014 to 2016, while less than 3 percent of filers used free filing services  available through IRS during the same period.\nWe also found that in 2016, tax-time financial product use was associated  with receiving tax refunds through direct deposit, which is a faster way to  receive a tax refund than paper check. Users of tax-time financial  products also were more likely to file as heads of household (tax filing  status) than taxpayers who did not use tax-time financial products.  Moreover, taxpayers who used the products received higher tax refunds  on average than taxpayers who did not use the products, especially when  they used paid tax preparers to file their taxes.\nFinally, analyzing the zip code of the filers, we found that use of tax-time  financial product was concentrated in some areas of the South and the  West.\n\nAppendix III: Disclosure of Product and Related Fees and Terms\n\n\tDisclosure of Product Fees and Terms\n\nOur limited nongeneralizeable review of documents received from  selected banks and tax preparers found disclosures generally followed  Office of the Comptroller of the Currency (OCC) guidance or Internal  Revenue Service (IRS) requirements for fees disclosure, respectively.  However, we noted from our undercover visits of selected tax preparers  that the extent and clarity of the disclosures offered to customers varied.  Furthermore, in our review of selected tax preparers\u2019 websites, we found  that fees and information about products were not always clearly  disclosed.\n\n\t\tUndercover Visits\n\nAll nine tax preparers we visited offered the option to pay for the tax  preparation fees with the tax refund by using a refund transfer, but they  did not always clearly communicate how these options work. For  example, three preparers did not disclose the refund transfer fee, and in a  few instances, the refund transfer was provided alongside a refund  advance and we were not given the option to pay for the tax preparation  fees out of pocket. In other cases, the refund transfer fee was disclosed,  but the product was not always identified as optional (that is, not required  for tax preparation).\nDuring six of our undercover visits, our investigators explicitly requested  literature on product fees. However, the preparers either stated they did  not have the literature available or only provided us with business cards  and promotional material. The other three times we did not ask for, and  were not offered literature on product fees, features, or terms.\nIn two of our visits, the tax preparers offered our investigators a refund  advance after we expressed an interest in getting the refund quickly. In  another two visits, we were offered unsolicited refund advances. When  offering the product, these four tax preparers bundled the refund advance  with a refund transfer (an optional product). By adding a refund transfer,  the tax preparer effectively added a fee-based product to the refund  advance, a product that otherwise is free to the taxpayer. During one of  the visits, we were offered a refund advance only after we specifically  asked for it.\n\n\t\tWebsite Content Analysis\n\nWe reviewed the websites of eight selected providers of tax preparation  services. We found that while these providers generally disclosed product fees, these disclosures were not made in a consistent manner. For  example, all eight of the websites we reviewed offered taxpayers the  option to use the expected refund to pay for tax preparation fees. Most of  the time, the fee associated with this option was not clearly disclosed on  the website. Only two of the eight providers clearly disclosed this fee on  the products page; the other six did not disclose the fee in a prominent  way or at all. In addition, all five providers that offered refund advances  fully disclosed fee information for this product.\nThree of the eight online tax preparation service providers had physical  locations in addition to their online presence. Of these three, only one  disclosed on its website the refund transfer fee for taxpayers who filed a  return in-person at one of their offices. For the second preparer with a  physical presence, the refund transfer fee quoted for the online service  was significantly lower than the fee we were quoted for in-person services  at an office. The third preparer with a physical and online presence did  not disclose the refund transfer fee for either the in-person service or  online filing.\n\n\t\tDocument Review\n\nWe received and reviewed seven disclosure documents originated by two  national tax preparation companies both of which are electronic return  originators (ERO) and 12 bank documents from five banks in the industry.  We compared the disclosure documents against IRS requirements for  disclosure of fees for tax products and we compared the bank documents  to OCC guidance related to disclosure of product, disbursement, and  additional fees. Both sets of documents in our nongeneralizeable review  generally disclosed the product fees in accordance with IRS requirements  or OCC guidance as appropriate. Bank forms, including disclosures, are  presented to taxpayers once they have decided to apply for a tax product.  This practice is consistent with OCC\u2019s guidance, which states that the  details of a product should be provided to consumers before they apply  for it. However, our analysis found that almost all of these documents are  presented to taxpayers after returns have been prepared and tax  preparers have determined the taxpayers were qualified for a tax-time  financial product. The timing of when a tax preparer make these  disclosures would make it challenging for a taxpayer to compare product  prices from different providers or make more informed purchasing  decisions.\nMoreover, all the ERO documents we reviewed with information on refund  advances disclosed that the taxpayer would be receiving a loan and not a  refund. However, of the six ERO disclosure documents that disclosed  fees, four disclosed additional fees that might be associated with tax  refund products, such as disbursement fees.\nOf the 12 bank documents we reviewed, all disclosed that funds would be  sent to the bank if taxpayers used a tax product. Almost all the  documents disclosed the fees associated with the tax product and that  the fees would be deducted from the refund. And four of five documents  related to a loan product disclosed that the taxpayer would be receiving a  loan and not a tax refund. The majority of the documents also disclosed  that the taxpayer may receive the refund directly from the taxing authority  without incurring additional costs and within the same time frame without  using a tax product.\nAll the tax preparer documents and the banks\u2019 disclosure documents  were brief and written in plain language. However, almost all the bank  application documents were longer than four pages and included  technical and industry language.\n\n\tDisclosure of Disbursement Fees, Including on Prepaid Cards\n\nBased on our document reviews of selected tax preparers and banks and  as suggested by our undercover visits of nine selected tax preparers, the  disclosure of fees for disbursing funds was inconsistent, particularly  around prepaid cards. Prepaid cards are often used to disburse funds  from a tax-time product. Based on our analysis of providers\u2019 promotional  content, in some cases a tax preparer will offer prepaid cards as the only  disbursement option. The cards generally carry additional fees for long- term use (such as monthly, withdrawal, reload, and inactivity fees).  Prepaid cards usually are reloadable and can be used to pay bills and  make retail purchases. IRS does not have guidelines for disclosing fees  for the long-term use of prepaid card. However, OCC requires that banks  disclose if a tax product may be used on a long-term basis and disclose  fees associated with extended use of the product.\nDuring our visits, seven of the nine tax preparers provided the option to  have the tax refund deposited on a prepaid card. However, only two of the seven preparers noted any potential fee information associated with  the short or long-term use of prepaid cards. These two preparers said that  there was no additional charge to have the taxpayer\u2019s refund deposited  on a prepaid card, and the other five did not explain whether any fees  would be charged for this transaction.\nFive of the seven preparers that offered a prepaid card explained that the  card could be used for transactions other than receiving the tax refund.  However, only two of the five disclosed any fee information associated  with long-term use of the card. Another two of the five preparers referred  our undercover agents to the issuer of the card for additional information.  The remaining preparer did not disclose that additional fees would apply  to long-term use of the card.\nFour of the eight tax preparation websites we reviewed disclosed partial  information about fees related to the disbursement of funds to the  taxpayer. Three of the eight websites only disclosed disbursement fee  information related to use of prepaid cards. We found fee information in  one of the eight websites only after doing a word search. Fees associated  with the long-term use of prepaid card fees were not disclosed by three of  the six preparers that offered this disbursement option. Two websites  disclosed partial fee information and only one disclosed all the fees and  terms associated with the long-term use of a prepaid card. Six of these  websites advised the taxpayer to see the terms and conditions of the  card, four included a link to the terms and conditions of the card, and two  did not include a link.\nBank documents generally disclosed the fees associated with different  disbursement methods such as paper checks and prepaid cards;  however, fees related to the long-term use of prepaid cards were not  always disclosed. Almost half of the documents we reviewed that include  the use of a prepaid card did not acknowledge that fees were associated  with the long-term use of prepaid cards, while others included only partial  information or a general statement that \u201cfees may apply.\u201d\n\nAppendix IV: Comments from the Internal Revenue Service\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Karen Tremba (Assistant  Director), Nathan Gottfried (Analyst in Charge), Jessica Artis, Maurice  Belding, Evelyn Calder\u00f3n, Farrah Stone, Kathleen McQueeney, Marc  Molino, Neil Pinney, Barbara Roesmann, Jessica Sandler, Erinn Sauer,  Erin Saunders-Rath, Michael Walton, and Helina Wong made significant  contributions to this report.","output":null}
{"id":"gao_GAO-19-275T","pid":"gao_GAO-19-275T_0","input":"\tBackground\n\nAccording to the President\u2019s budget, the federal government planned 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 resulted in failed projects  that incurred cost overruns and schedule slippages, while contributing  little to the desired mission-related outcomes. For example:\nThe tri-agency National Polar-orbiting Operational Environmental  Satellite System was disbanded in February 2010 at the direction of the White House\u2019s Office of Science and Technology Policy after the  program spent 16 years and almost $5 billion.\nThe 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.\nThe 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.\nThe 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.\nThe 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.\nOur 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.\nSuch 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.\nIn addition to failures when acquiring IT, security deficiencies can  threaten systems. As we previously reported, in order to counter security  threats, the 23 civilian Chief Financial Officers (CFO) 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.\nIn September 2018, we reported that the Department of Education\u2019s  Office of Federal Student Aid exercises minimal oversight of lenders\u2019  protection of student data and lacks assurance that appropriate risk- based safeguards are being effectively implemented, tested, and  monitored.\nIn 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.\nIn July 2017, we reported that information 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.\nIn 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.\nIn August 2016, we reported that the information 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.\n\n\t\tFITARA Increases CIO Authorities and Responsibilities for Managing IT\n\nCongress 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:\nAgency 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.\nFederal 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.\nEnhanced 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.\nPortfolio 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.\nExpansion 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.\nGovernment-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.\nMaximizing the benefit of the Federal Strategic Sourcing Initiative.\nFederal agencies are required to compare their purchases of services  and supplies to what is offered under the Federal Strategic Sourcing  Initiative.\nIn 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 requirements; 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; and  strengthen CIO accountability for IT costs, schedules, performance, and  security.\nThe 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.\nIn 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  directed agencies to develop a data center consolidation and optimization  strategic plan that defined the agency\u2019s data center strategy for fiscal  years 2016, 2017, and 2018. This strategy was to include, among other  things, a statement from the agency CIO indicating whether the agency  had complied with all data center reporting requirements in FITARA.  Further, the guidance states that OMB is to maintain a public dashboard  to display consolidation-related costs savings and optimization  performance information for the agencies.\n\n\t\tCongress Has Undertaken Efforts to Continue Selected FITARA Provisions and Modernize Federal IT\n\nCongress 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 dates for the 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.\nIn 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.\nFurther, in February 2018, OMB issued guidance for agencies on  implementing 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 encouraged 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 IT 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.\n\n\t\tFISMA Establishes Responsibilities for Agencies to Address Federal Cybersecurity\n\nCongress 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.  Toward this end, the act clarifies and assigns specific responsibilities to  entities such as OMB, DHS, and the federal agencies. Table 1 describes  a selection of the OMB, DHS, and agency responsibilities.\n\n\t\tThe Administration Has Undertaken Efforts to Improve, Modernize, and Strengthen the Security of Federal IT\n\nBeyond the implementation of FITARA, FISMA, and related actions, the  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.\nIn 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.\nIn 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 cybersecurity  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.\nAs 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.\nFurther, 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.\nThe 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. This goal establishes 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.\nMore 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 CFO Act agencies: the Department of Defense and the Nuclear  Regulatory Commission are exempt.\nFor the covered agencies, the executive order strengthens the role of  agency CIOs by, among other things, requiring them to report directly to  their agency head; serve as their agency head\u2019s primary IT strategic  advisor; and 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.\n\n\tAgencies Have Not Fully Addressed the IT Acquisitions and Operations High-Risk Area\n\nIn 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 includes enhancing CIO authority,  consolidating data centers, and acquiring and managing software  licenses.\nOur 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,  since fiscal year 2010, we have made 1,242 recommendations to OMB  and federal agencies to address shortcomings in IT acquisitions and  operations.\nAs 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. As  of November 2018, OMB and agencies had fully implemented 732 (or  about 59 percent) of the 1,242 recommendations. Figure 1 summarizes  the progress that OMB and agencies have made in addressing our  recommendations compared to the 80 percent target.\nOverall, 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, reviewing IT acquisitions; improving data center  consolidation; and managing software licenses.\n\n\t\tAgencies Need to Address Shortcomings and Challenges in Implementing CIO Responsibilities\n\nIn 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.\nIn August 2018, we reported 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 had  fully or substantially addressed the role of their CIOs for the area of  leadership and accountability. In addition, a majority of the agencies had  substantially or partially addressed the role of their CIOs for two areas:  information security and IT budgeting.\nHowever, most agencies partially or minimally addressed the role of their  CIOs for two areas: investment management and strategic planning.  Further, the majority of the agencies minimally addressed or did not  address the role of their CIOs for the remaining area: IT workforce. Figure  2 depicts the extent to which the 24 agencies addressed the role of their  CIOs for the six areas.\nDespite the shortfalls in agencies\u2019 policies addressing the roles of their  CIOs, most agency officials stated that their CIOs are implementing the  responsibilities even if the agencies do not have policies requiring  implementation.\nNevertheless, the CIOs of the 24 selected agencies acknowledged in  responses to a survey that we administered that they were not always  very effective in implementing the six IT management areas. Specifically,  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.\nFigure 3 depicts the extent to which the CIOs reported their effectiveness  in implementing the six areas of responsibility.\nBeyond the actions of the agencies, however, shortcomings in agencies\u2019  policies also are partially attributable to two weaknesses in OMB\u2019s  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.\nSecond, 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.\nIn response to the survey conducted for our August 2018 report, the 24  agency CIOs also identified a number of factors that enabled and  challenged their ability to effectively manage IT. 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.\nAs shown in figure 4, the five enabling factors were identified by at least  half of the 24 CIOs and the three factors cited as major challenges were  identified by at least half of the CIOs.\nAlthough 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. In the absence of such  guidance, agencies have created varying definitions of CIO authority.  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.\nIn order to address challenges in implementing CIO responsibilities, we  made three recommendations to OMB and one recommendation to 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. Most agencies agreed with or had no comments on the  recommendations. As of November 2018, all 27 of the recommendations  had not been implemented. We will continue to monitor the  implementation of these recommendations.\n\n\t\tAgencies Need to Ensure That IT Acquisitions Are Reviewed and Approved by CIOs\n\nFITARA 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:\nCIOs may review and approve IT acquisition strategies and plans, rather  than individual IT contracts;\nCIOs can designate other agency officials to act as their representatives,  but the CIOs must retain accountability;\nCAOs are responsible for ensuring that all IT contract actions are  consistent with CIO-approved acquisition strategies and plans; and\nCAOs are to indicate to the CIOs when planned acquisition strategies  and acquisition plans include IT.\nIn 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.\nHowever, we identified 31,493 additional contracts with $4.5 billion  obligated, raising the total amount obligated to IT contracts by these  agencies 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.\nThe 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, eight  agencies did not identify over 40 percent of their IT contract obligations.\nMany of the selected agencies that did not identify these IT contract  obligations also 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 such acquisitions. Without  proper identification of IT acquisitions, these agencies and CIOs cannot  effectively provide oversight of these acquisitions.\nIn 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 contracts  not reviewed had a total possible value of approximately $23.8 billion.\nUntil 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 effectively  use the increased authority that FITARA\u2019s contract approval provision is  intended to provide. Further, agencies will likely miss an opportunity to  strengthen their CIOs\u2019 authority and the oversight of acquisitions. As a  result, agencies may award IT contracts that are duplicative, wasteful, or  poorly conceived.\nAs a result of these findings, we made 39 recommendations in our  January 2018 report. Among these, we recommended 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. As of November 2018, 27 of the recommendations  had not been implemented.\n\n\t\tAgencies Have Made Progress in Consolidating Data Centers, but Need to Take Action to Achieve Planned Cost Savings\n\nIn our February 2017 high-risk update, we stressed 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.\nIn addition, in August 2016, OMB issued a memorandum which  established the Data Center Optimization Initiative (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.\nAccording to agencies, data center consolidation and optimization efforts  have resulted in approximately $4.5 billion in cost savings through 2018.   However, additional work remains to fully carry out the initiative.  Specifically, in a series of reports that we issued from July 2011 through  May 2018, 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 November 2018, 47 of these 160  recommendations remained unimplemented.\nIn addition, in a draft report on data center optimization that we have  provided to the agencies for comment and plan to issue in early 2019, our  preliminary results indicate that agencies continued to report mixed  progress toward achieving OMB\u2019s goals for closing data centers and  realizing the associated savings by September 2018. Specifically, as of  August 2018, over half of the agencies reported that they had met, or  planned to meet, all of their OMB-assigned closure goals for tiered data  centers by the deadline. However, 6 agencies reported that they did not  plan to meet their goals for tiered data centers. In addition, as of August  2018, 11 agencies reported that they had already met the goal for closing  60 percent of their non-tiered centers, 3 agencies reported that they  planned to meet the goal by the end of fiscal year 2018, and 9 agencies  reported that they did not plan to meet the goal by the end of fiscal year  2018.\nIn all, the 24 agencies reported a total of 6,250 data center closures as of  August 2018, which represented about half of the total reported number  of federal data centers. In addition, the agencies reported 1,009 planned  closures by the end of fiscal year 2018, with an additional 191 closures  planned through fiscal year 2023, for a total of 1,200 further closures.\nFurther, in August 2018, 22 agencies reported that they had achieved  $1.94 billion in cost savings for fiscal years 2016 through 2018, while 2  agencies reported that they had not achieved any savings. In addition to  that amount, 21 agencies identified a further $0.42 billion in planned  savings through fiscal year 2018\u2014for a total of $2.36 billion in planned  cost savings from fiscal years 2016 through 2018. Nevertheless, this total  is about $0.38 billion less than OMB\u2019s goal of $2.74 billion for overall  DCOI savings.\n\n\t\tAgencies Need to Better Manage Software Licenses to Achieve Savings\n\nIn 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.\nAs part of its PortfolioStat initiative, OMB has developed a 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.\nIn 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.\nFurther, 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.\nAccordingly, 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.\nMost agencies generally agreed with the recommendations or had no  comments. As of December 2018, 27 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.\n\n\tAgencies Need to Address Shortcomings in Information Security Area\n\nSince information security was added to the high-risk list in 1997, we  have consistently identified shortcomings in the federal government\u2019s  approach to cybersecurity. In particular, in a September 2018 report, we  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.\nTo address these challenges, we identified 10 critical actions that the  federal government and other entities need to take. For example, in order  to address the challenge of securing federal systems and information, we  identified 3 actions that the agencies should take: (1) improve  implementation of government-wide cybersecurity initiatives, (2) address  weaknesses in federal information security programs, and (3) enhance  the federal response to cyber incidents. Figure 6 depicts the 10 critical  actions to address the four major cybersecurity challenges.\nAs we have previously noted, in order to strengthen the federal  government\u2019s cybersecurity posture, agencies should fully 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 should include 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.\nSince fiscal year 2010, we have made over 3,000 recommendations to  agencies aimed at addressing the four cybersecurity challenges. 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. Of the  roughly 3,000 recommendations made since 2010, 73 percent had been  implemented as of November 2018; leaving 688 recommendations  unimplemented.\n\n\t\tAgencies\u2019 Inspectors General Are to Identify Information Security Program Weaknesses\n\nIn order to determine the effectiveness of the agencies\u2019 information  security programs and practices, FISMA requires federal agencies\u2019  inspectors general to 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.\nIn these evaluations, the inspectors general are to frame the scope of  their analyses, 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. The  maturity model aligns with 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 provide agencies with a meaningful independent  assessment of their information security programs.\nThe 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:\nLevel 1 Ad-hoc: Policies, procedures, and strategy are not formalized;  activities are performed in an ad-hoc, reactive manner.\nLevel 2 Defined: Policies, procedures, and strategy are formalized and  documented but not consistently implemented.\nLevel 3 Consistently Implemented: Policies, procedures, and strategy are  consistently implemented, but quantitative and qualitative effectiveness  measures are lacking.\nLevel 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.\nLevel 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.\nIn 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.\n\n\t\tOMB Requires Agencies to Meet Targets for Cybersecurity Metrics\n\nIn 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, their associated targets, and the 23 civilian CFO Act agencies\u2019  progress in meeting those targets, as of June 2018.\nIn 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 reviews 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 the recommendations.\nChairmen 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.\n\n\tGAO Contacts and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact Carol C. Harris, Director, Information Technology, 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 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).\nThis 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.","output":null}
{"id":"gao_GAO-19-553T","pid":"gao_GAO-19-553T_0","input":"\tBackground\n\n\t\tPost-9\/11 GI Bill Benefits\n\nVA has been providing veterans educational assistance benefits since  1944. We previously reported that these benefits have been put in place  over time to compensate for compulsory service, encourage voluntary  service, avoid unemployment, provide equitable benefits to all who  served, and promote military retention. The Post-9\/11 GI Bill, which took  effect on August 1, 2009, is now VA\u2019s largest educational program. This  program generally provides benefits to veterans who served on active  duty for at least 90 days beginning on or after September 11, 2001. Full  benefits are generally available to those who served on active duty for 36  months, for which VA will pay the net cost for in-state tuition and fees at  public schools and up to an annual maximum amount at nonprofit and for- profit schools ($24,477 in academic year 2019-2020). VA pays schools  directly for tuition and fees and sends additional payments for housing  and books directly to veterans who are eligible for these payments. To  receive education benefits through the Post-9\/11 GI Bill, students submit  applications to VA, schools certify enrollments, and VA processes claims  and payments.\n\n\t\tOther Sources of Student Aid\n\nFor help covering the costs of their postsecondary education, veterans  may also be eligible for grants and loans available from federal student  aid programs administered by Education, such as Pell Grants and Direct  Loans. According to Education data, an estimated 32 percent of student  veterans had received Pell Grants and 28 percent had taken out Direct  Loans, during school year 2015-16. VA education payments, such as  Post-9\/11 GI Bill benefits, are not considered when calculating eligibility  for federal student aid and do not affect the amount of aid a veteran can  receive from Education. Student veterans may also be eligible for state  and institutional aid (scholarships from state governments or schools, for  example).\n\n\tStudent Veterans Attend a Wide Range of Schools, but a Small Number of Schools Receive a Large Share of Post- 9\/11 GI Bill Payments\n\nNearly 700,000 student veterans received Post-9\/11 GI Bill tuition and fee  benefits to attend almost 6,000 schools in fiscal year 2017. VA paid  about 40 percent of the Post-9\/11 GI Bill tuition and fee payments to  public schools, 30 percent to nonprofits, and 30 percent to for-profits (see  fig. 1).\nMost student veterans used Post-9\/11 GI Bill tuition and fee payments to  attend schools that provided 4-year undergraduate programs (see fig. 2).  Veterans may also use Post-9\/11 GI Bill benefits for training opportunities  at schools that do not offer college degrees, including training in areas  such as driving, emergency medical training, and barber or beautician  skills. These programs received about $360 million Post-9\/11 GI bill  tuition and fee payments in fiscal year 2017.\nA relatively small number of schools received a large share of Post-9\/11  GI Bill tuition and fee payments. In fiscal year 2017, the 50 schools that  received the highest total amount of Post-9\/11 GI Bill tuition and fee  payments accounted for over 30 percent of all such benefits, collectively  receiving $1.4 billion for over 190,000 beneficiaries. These 50 schools  consisted of 14 public, 16 nonprofit, and 20 for-profit schools (see fig. 3).  In fiscal year 2017, the 50 schools received between $11 million and  $191 million each in tuition and fee payments and enrolled between  around 350 and 28,000 Post-9\/11 GI Bill beneficiaries. In contrast, among  all schools receiving Post-9\/11 GI Bill benefits in fiscal year 2017, the  majority of them enrolled fewer than 15 veterans.\n\n\tStudent Outcomes Varied Among Schools That Received a Large Share of Post-9\/11 GI Bill Payments\n\nStudent outcomes at the 50 schools that received the most Post-9\/11 GI  Bill tuition and fee payments were, on average, generally comparable to  the national average, but varied more widely across sectors. Since  available data on student veteran outcomes is currently limited, we  analyzed common outcome measures for the broader student populations  at each school:\n4-year program graduation rates: the percent of first-time full-time  students who completed a 4-year program within 6 years.\nFull- and part-time retention rates: the percent of first-time students  who enrolled in one fall and either successfully completed their  program or re-enrolled in the next fall.\nWhen examined as a whole, the average student outcomes for the 50  schools that received the most Post-9\/11 GI Bill tuition and fee payments  were generally comparable to the national average. For example, the  average 4-year program graduation rate at the top 50 schools was 61\u2014 the same as the national average. For one of the outcome measures\u2014 full-time retention rate\u2014the average was higher for the top 50 schools (83  percent) than the national average (75 percent).\nWithin the 50 schools that received the most Post-9\/11 GI Bill tuition and  fee payments, student outcomes varied across schools in different  sectors (see fig. 4). For-profit schools had lower 4-year program  graduation and retention rates compared to public and nonprofit schools  among these 50 schools, although there was wide variation among  schools in each sector.\n\n\tSchool Closures Affect Thousands of Student Veterans\n\nAlthough a relatively small number of schools close each year, these  closures can affect thousands of student veterans. In 2017 we reported  that about 95 schools closed in school year 2015-16, according to  Education data, which was higher than in previous years, primarily due to  a rise in for-profit school closures (see fig. 5).\nSchools can close in different manners and for a variety of reasons,  including declining enrollments, financial problems, loss of accreditation,  and legal actions. When a school ceases operations in an orderly process  over several months it gives students time to complete the current school  term and make arrangements to transfer and continue their education at  another school. The effect of school closures is often worse when the  closures occur abruptly with little or no advance warning, because these  schools generally do not have time to establish transfer arrangements  that allow students to easily continue their education at another school.\nAbrupt closures of large schools, although infrequent, can affect  thousands of student veterans and result in large financial losses for the  federal government and taxpayers. For example, Corinthian Colleges  Inc. (Corinthian) enrolled more than 72,000 students before its closure in  April 2015. The following year, ITT Educational Services Inc. (ITT),  another large for-profit provider of higher education, closed all of its 136  campuses in September 2016, affecting more than 35,000 students. More  than 7,000 Post-9\/11 GI Bill students were pursuing educational  programs at schools operated by ITT and Corinthian at the time of their  closures, according to VA. More recently, closures at Education  Corporation of America in 2018 and Dream Center Education Holdings in  2019, which operated schools under multiple brands, including Argosy  University and several campuses of The Art Institutes, affected tens of  thousands of students, including thousands of Post-9\/11 GI Bill recipients.\nStudent veterans attending a school that closes may be eligible to have  some or all of their Post-9\/11 GI Bill benefits restored. As a result of the  Harry W. Colmery Veterans Educational Assistance Act of 2017, VA  restores GI Bill entitlements to eligible beneficiaries affected by recent  and future school closures. Student veterans may also be entitled to a  discharge on eligible federal student loans they may have received from  Education or to have their Pell Grant eligibility restored if they are unable  to complete a program because their school closed.\nDespite these options for having benefits restored and loans discharged,  school closures can still create hardships for veterans. As we have  previously reported, college students in general can face challenges  transferring credits and continuing their education at a new school under  any circumstances. Students who transferred lost, on average, an  estimated 43 percent of their credits, and credit loss varied depending on  the transfer path, based on data from 2004 to 2009. For example,  students who transferred between public schools\u2014the majority of transfer  students\u2014lost an estimated 37 percent of their credits. In comparison,  students who transferred from for-profit schools to public schools\u2014which  happens less frequently\u2014lost an estimated 94 percent of their credits.  Even if a student\u2019s credits transfer, they may not apply toward fulfilling  degree requirements for their intended major. In these cases, a student  will likely have to take additional courses at their new school, which could  potentially delay graduation and result in additional costs to pay for  repeated courses. Further, some student veterans with credits that do not  transfer may exhaust their Post-9\/11 GI Bill benefits before completing  their degree.\nSchool closures can also exacerbate other challenges veterans may face  pursuing their education. As we have previously reported, many student  veterans already cope with challenges transitioning from the military to an  academic environment. For example, they can face challenges  navigating the academic bureaucracy, whether in attempting to receive  transfer credit for previous college courses or in determining what other  sources of financial aid may be available to them. Many student veterans  are also trying to balance school with family and work obligations or  dealing with the effects of combat-related physical and psychological  injuries. When a school closes, the burden of finding and enrolling in a  new school may be especially difficult for these veterans.\nClosures can also pose a financial risk for the government and taxpayers  to the extent that Post-9\/11 GI benefits are restored and federal student  loans are discharged. For example, in 2017 the Congressional Budget  Office estimated that restoring Post-9\/11 GI Bill benefits and other VA  education benefits to student veterans who attend schools that closed will  increase direct spending by $320 million over the 10 year period from  2018 to 2027. School closures can also result in hundreds of millions of  dollars in financial losses for the federal government and taxpayers due to  discharged federal student loans.\nIn conclusion, the Post-9\/11 GI Bill has provided valuable education  benefits to millions of veterans who attend a wide range of schools.  However, when schools abruptly shut their doors, it can leave student  veterans\u2014who already face unique challenges in an academic  environment\u2014without a clear path to continuing their education and can  force taxpayers to cover the cost of restoring their benefits and  discharged student loans. Student veterans who continue their education  at another school may also find that many of the credits they earned will  not ultimately help them after they transfer, delaying their degrees and  resulting in additional costs. As the number of school closures has  increased in recent years, the risks and challenges associated with such  closures are particularly salient for student veterans, their families, and  the federal government.\nChairman Levin, Ranking Member Bilirakis, 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.\n\n\tGAO Contact and Staff Acknowledgements\n\nIf you or your staff have any questions about this testimony, please  contact Melissa Emrey-Arras, Director, Education, Workforce, and  Income Security Issues 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 statement. GAO staff who  made key contributions to this testimony include Will Colvin (Assistant  Director), Brian Schwartz (Analyst-in-Charge), and Jeffrey G. Miller. In  addition, key support was provided by James Bennett, Deborah Bland,  Benjamin DeYoung, Alex Galuten, Theresa Lo, John Mingus, Corinna  Nicolaou, and Michelle St. Pierre.\nThis 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.","output":null}
{"id":"gao_GAO-19-255T","pid":"gao_GAO-19-255T_0","input":"\tThe Coast Guard Did Not Establish a Sound Business Case for the Polar Icebreaker Program\n\nIn September 2018, we found the Coast Guard did not have a sound  business case when it established the acquisition baselines for its polar  icebreaker program in March 2018 due to risks in four main areas\u2014 design, technology, cost, and schedule. Our prior work has 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\u2014needed to transform the concept into a  product, which in this case is a ship with polar icebreaking capabilities.  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.\nAt the heart of a business case is a knowledge-based approach. We 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).\nWe provide additional information below on each of the four main risks  that affect the soundness of the polar icebreaker program\u2019s business  case.\n\n\t\tThe Coast Guard Plans to Have a Stable Design before Starting Construction but Did Not Assess Design Maturity Prior to Setting Program Baselines\n\nThe Coast Guard expressed a commitment to having a stable design for  the polar icebreaker program prior to the start of lead ship construction,  but it set the program\u2019s 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.\nShipbuilding best practices we identified in 2009 found that design  stability on a ship is achieved upon completion of the basic and functional  designs. The 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.  The functional design includes further iteration of the basic design, such  as providing information on the exact position of piping and other outfitting  in each block, and completing a 3D product model. 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 plans to 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.\nAlthough the Coast Guard plans to have a stable design prior to ship  construction, it set the program\u2019s acquisition program baselines prior to  gaining knowledge on the feasibility of the selected shipbuilder\u2019s design.  Program baselines inform DHS\u2019s and the 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.\nThe Coast Guard has yet to conduct a preliminary design review for the  program because DHS\u2019s current acquisition policy does not require  programs to do so until after setting program baselines. 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. 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. As of June 2018, DHS  indicated that it had completed its study and was in the process of  updating its acquisition policies. GAO will review the policies once  complete to determine if the updates meet the intent of this  recommendation.\nBy setting the polar icebreaker program\u2019s 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 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.\n\n\t\tCoast Guard Intends to Use Proven Technologies for the Polar Icebreaker Program but Has Not Assessed Their Maturity\n\nThe Coast Guard intends to use what it refers to as \u201cstate-of-the-market\u201d  or \u201cproven\u201d technologies for the polar icebreaker program, but it has not  yet conducted a technology readiness assessment to determine the  maturity of key technologies prior to setting program baselines. This  approach is inconsistent with our best practices for technology  readiness. 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. According to  our best practices, a technology readiness assessment should be  conducted prior to program initiation.\nAt the time of our earlier review, Coast Guard officials told us the polar  icebreaker program does not have any critical technologies and thus,  does not need to conduct a technology readiness assessment. From  design studies and industry engagement, Coast Guard officials  determined that the key technologies required for the polar icebreakers,  such as the integrated power plant and azimuthing propulsors, are  available commercially and do not need to be developed. Figure 2  provides additional information on the risks for these key technologies, as  well as design risks for an icebreaker\u2019s hull form.\nCoast Guard officials 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 show that ice-qualified azimuthing propulsors in the power  range required have been used on foreign icebreakers.\nHowever, according to our best practices, 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. Based on our analysis of available Coast Guard information, we  believe the polar icebreaker program\u2019s planned integrated power plant  and azimuthing propulsors should be considered critical technologies  given their criticality in meeting key performance parameters, how the  technologies are being reapplied to a different operational environment  from prior uses of the technologies, and the extent to which they pose  major cost risks. By not conducting a technology readiness assessment  and identifying, assessing, and maturing its critical technologies prior to  setting the program\u2019s program baselines, the Coast Guard is potentially  underrepresenting technical risk and understating its cost, schedule, and  performance risks.\n\n\t\tPolar Icebreaker Program\u2019s Cost Estimate Substantially Met Best Practices but Is Not Fully Reliable\n\nWe found that the Navy\u2019s lifecycle cost estimate used to inform the polar  icebreaker program\u2019s $9.827 billion cost baseline substantially adheres to  most of our cost estimating best practices; however, the estimate is not  fully reliable. The cost estimate is not fully reliable because it only  partially met best practices for being credible. Highlights from our  assessment of the polar icebreaker program\u2019s lifecycle cost estimate are  detailed below:\nComprehensive: substantially met. The estimate includes  government and contractor costs over the full lifecycle of all three  ships and documents detailed ground rules and assumptions, such as  the learning curve used to capture expected labor efficiencies for  follow-on ships. However, 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.\nWell-documented: substantially met. The 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.\nAccurate: substantially met. 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, Navy officials provided us with additional  information regarding those data characteristics.\nCredible: partially met. The Navy 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. Without  performing a sensitivity analysis on the entire life cycle cost of the  three ships, it is not possible for the Navy 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 the Navy to determine a level of confidence  associated with the overall cost estimate.\nBy not quantifying important risks, the Navy may have underestimated the  range of possible costs for about three-quarters of the entire program.  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.\n\n\t\tPolar Icebreaker Program\u2019s Optimistic Schedule Is Driven by Capability Gap and Does Not Reflect Robust Analysis\n\nThe 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 Polar Star reaches the end of its  service life (see figure 3).\nThe 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 4).\nFurther, we compared the program\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, the Coast Guard\u2019s only medium polar icebreaker. We found that  the polar icebreaker\u2019s lead ship construction cycle time of 2.5 to 3 years is  optimistic, as only 3 of the 10 ships in our analysis were constructed in 3  years or less. Further, as another point of comparison, the Healy was  constructed in just under 4.5 years.\nAn unrealistic schedule puts the Coast Guard at risk of not delivering the  icebreakers when promised and the potential gap in icebreaking  capabilities could widen. Just as importantly, 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, which can lead to work being  performed concurrently, costly rework, and further delays.\nTo address the risks we identified and establish a sound business case,  we made a number of recommendations in our September 2018 report to  DHS, Coast Guard, and the Navy, including:\nConducting a technology readiness assessment in accordance with  best practices, identifying critical technologies, and developing a plan  to mature any technologies not designated to be mature before detail  design of the lead ship begins;\nUpdating the program\u2019s cost estimate in accordance with best  practices before the contract option for construction of the lead ship is  awarded;\nDeveloping a program schedule in accordance with best practices to  set realistic schedule goals for all three ships before the contract  option for construction of the lead ship is awarded; and\nUpdating the program\u2019s 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.\nDHS concurred with all of our recommendations and identified actions it  planned to take to address them. For example, earlier this month, the  Coast Guard indicated that it has identified a preliminary list of potential  critical technologies and is in the process of developing a technology  readiness assessment plan. The Coast Guard also plans to update the  program\u2019s cost estimate within 8 months of the contract award and  update the program schedule within 3 months of the contract award.\n\n\tHow the Polar Icebreaker Program Will Be Funded Moving Forward is Unclear\n\nOf the $9.827 billion estimated for the lifecycle costs of the polar  icebreaker program, about $3 billion is for acquisition costs. From 2013  through 2018, the polar icebreaker program has received $360 million in  funding\u2014$60 million in Coast Guard appropriations and $300 million in  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 polar icebreaker program from another  program (see figure 5).\nAccording to Coast Guard and Navy officials, the Navy plans to use the  $300 million in Navy appropriations in fiscal year 2019 to fund the  advanced planning, design, engineering, and long lead time materials for  the first polar icebreaker. As part of the polar icebreaker program\u2019s  acquisition strategy and reflected in the March 2018 request for  proposals, the Navy plans to establish options for the subsequent detail  design and construction of each of the three ships. The request for  proposals specified that the options will be priced as fixed-price incentive  type (see table 1).\nThe Navy did not request any funding in fiscal year 2019 for the polar  icebreaker program, 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. As the program prepares to award a contract in fiscal year  2019 worth billions of dollars if all the options are exercised, it is unclear  to what extent the program will be funded using Coast Guard or Navy  appropriations or how much total funding will be provided.\nIn conclusion, as the Coast Guard embarks on the acquisition of its new  polar icebreakers to address capability gaps in the Arctic and Antarctic  regions, it faces a number of key acquisition and funding risks. DHS, the  Coast Guard, and the Navy must gain key acquisition knowledge before  committing significant resources to the program while Congress faces key  funding and tradeoff considerations. To put the polar icebreaker program  in a position to succeed, Congress and the agencies must remain  committed to establishing and executing a sound business case for the  program.\nChairman Mast, Ranking Member Garamendi, and Members of the  Subcommittee, this concludes my prepared statement. I would be  pleased to respond to any questions.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf 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; Kurt Gurka; Claire Li; and Roxanna  Sun.\nThis 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.","output":null}
{"id":"crs_R46338","pid":"crs_R46338_0","input":"T he constitutional system of checks and balances and the separation of powers among the legislative, executive, and judicial branches is a cornerstone of the American system of government. By separating and checking powers in this way, the Framers hoped to prevent any person or group from seizing control over the nation's government. For example, the Framers checked congressional legislative power by providing the President the power to veto legislation and, in turn, checked the President's veto power by providing Congress a means to override that veto. Over time, it has become clear that the presidential veto power, even when not formally exercised, provides the President with an important tool to engage in the legislative process.\nMost Presidents have exercised their veto power in an effort to block legislation. Of 45 Presidents, 37 have exercised their veto power. As of the end of 2019, Presidents have issued 2,580 vetoes, and Congress has overridden 111. President George W. Bush vetoed 12 bills during his presidency. Congress attempted to override six of them and succeeded four times. President Barack Obama also vetoed 12 bills during his presidency. Congress attempted to override six of them and succeeded once. \nPresidents have also attempted to influence the shape of legislation through the use of veto threats. Since the 1980s, formal, written Statements of Administration Policy (SAPs, pronounced \"saps\") have frequently been used to express the President's support for or opposition to particular pieces of legislation. SAPs sometimes threaten to use the veto power if the legislation reviewed reaches the President's desk in its current form. Among the George W. Bush Administration (2001-2009) and the Obama Administration (2009-2017) SAPs examined later in this report, for example, 24% and 48%, respectively, contained a veto threat. \nThis report begins with a brief discussion of the veto power and Congress's role in the veto process. It then examines the ways Presidents communicate their intention to veto, oppose, or support a bill. The report then provides and discusses summary data on veto threats and vetoes during the Bush and Obama Administrations.\n\n\tThe President's Veto Power\n\nAs specified by the U.S. Constitution (Article I, Section 7), the President has 10 days, Sundays excepted, to act once he has been presented with legislation that has passed both houses of Congress and either reject or accept the bill into law. Within those 10 days, Administration officials consider various points of view from affected agencies (as is the case throughout the legislative process) and recommend a course of action to the President regarding whether or not to veto the presented bill.\nThe President has three general courses of action during the 10-day presentment period: The President may sign the legislation into law, take no action and allow the bill to become law without signature after the 10 days, or reject the legislation by exercising the office's veto authority. \nThe President may reject legislation in two ways. The President may veto the bill and \"return it, with his Objections to that House in which it shall have originated.\" This action is called a \"regular\" or \"return\" veto (hereinafter return veto). Congress typically receives the objections to the bill in a written veto message. \nIf Congress has adjourned during the 10-day period, the President might also reject the legislation through a \"pocket veto.\" This occurs when the President retains, but does not sign, presented legislation during the 10-day period, with the understanding that the President cannot return the bill to a Congress that has adjourned. Under these circumstances, the bill will not become law. A pocket veto is typically marked by a type of written veto message known as a \"Memorandum of Disapproval.\" As discussed in greater detail below, this practice has sometimes been controversial, because arguably it prevents Congress from attempting to override the President's veto.\n\n\tCongress's Response\n\nA President's return veto may be overridden, or invalidated, by a process provided for in Article 1, Section 7, of the U.S. Constitution. To override a return veto, Congress may choose to \"proceed to reconsider\" the bill. Passage by two-thirds of Members in each chamber is required to override a veto before the end of the Congress in which the veto is received. Neither chamber is under any constitutional, legal, or procedural obligation to conduct an override vote. It is not unusual for either chamber of Congress to make no effort to override the veto if congressional leaders do not believe they have sufficient votes to do so.\nIf a two-thirds vote is successful in both chambers, the President's return veto is overridden, and the bill becomes law. If a two-thirds vote is unsuccessful in one or both chambers, the veto is sustained, and the bill does not become law. \nIn contrast, Congress cannot override the President's pocket veto. By definition, a pocket veto may occur only when a congressional adjournment prevents the return of the vetoed bill. If a bill is pocket vetoed while Congress is adjourned, the only way for Congress to pass a version of the policy contained in the vetoed bill is to reintroduce the legislation as a new bill, pass it through both chambers, and present it to the President again for signature. Recent Presidents and Congresses have disagreed about what constitutes an adjournment that prevents the return of a bill such that a pocket veto may be used.\nFor purposes of the sections below concerning the use of veto threats, the unit of analysis is a veto. The analysis does not distinguish between regular and pocket vetoes.\n\n\tVeto Threats in the Legislative Process\n\nBecause Congress faces a two-thirds majority threshold to override a President's veto, veto threats may deter Congress from passing legislation that the President opposes. The veto override threshold may also prompt Congress to change a bill in response to a veto threat. The Framers of the U.S. Constitution viewed the veto power as a way of reminding Congress that the President also plays an important legislative role and that threatening to use the veto power can influence legislators into creating more amenable bills. Political scientist Richard A. Watson writes that \"the veto is available to a President as a general weapon in his conflicts with Congress: Franklin Roosevelt sometimes asked his aides for 'something I can veto' as a lesson and reminder to congressmen that they had to deal with a President.\"\nVeto threats are, therefore, an important component in understanding the use of the President's veto power. In recent presidencies, these threats have generally been expressed either through SAPs or verbally. President Trump has also used social media to communicate his intention to veto, oppose, or support a bill. \n\n\t\tSignaling Policy Intentions Before a Veto\n\nPresidents may signal their intention to support, oppose, or veto a bill early in the legislative process using both verbal and written means. For example, Presidents can mention in a speech that they intend to veto legislation, or they can authorize others (such as a press secretary) to verbally indicate the Administration's position on specific legislation. Presidents can also issue, through the Office of Management and Budget (OMB), formal, written SAPs to communicate their intention to veto, oppose, or support a bill. \n\n\t\t\tVerbal Veto Threats\n\nVerbal veto threats may include commentary related to the President's strategy for working with Congress along with a threat to veto legislation if the President's policy agenda is not heeded. For example, at a press conference President George W. Bush explained, \"I want the Members of Congress to hear that once we set a budget we're going to stick by it. And if not, I'm going to use the veto pen of the President of the United States to keep fiscal sanity in Washington, D.C.\" In another instance, President Obama said that the House \"is trying to pass the most extreme and unworkable versions of a bill that they already know is going nowhere, that can't pass the Senate and that if it were to pass the Senate I would veto. They know it.\" In these remarks, both President Bush and President Obama used their words to attempt to deter Congress from passing bills that did not match the President's policy agenda and unambiguously remind the public of their veto power.\n\n\t\t\tWritten Veto Threats\n\nFormal, written SAPs are frequently used to express the President's support for or opposition to particular pieces of legislation. The decision to issue a SAP is a means for the President to insert the Administration's views into the legislative debate. While SAPs provide Presidents an opportunity to assert varying levels of support for or against a bill, perhaps the most notable statement in a SAP is whether the Administration intends to veto the bill. Members of Congress may pay particular attention to a SAP when a veto threat is being made. At least one congressional leader has characterized SAPs as forerunner indicators of a veto.\nSAPs are often the first public document outlining the Administration's views on pending legislation and allow for the Administration to assert varying levels of support for or opposition to a bill. Because written threats are typically required to be scrutinized by the Administration through the central legislative clearance process in advance of their release, written SAP veto threats are often considered more formal than verbal veto threats.\nWhen a SAP indicates that the Administration may veto a bill, it appears in one of two ways:\n1. A statement indicating that the President intends to veto the bill (hereinafter a presidential veto threat) or 2. A statement that agencies or senior advisors would recommend that the President veto the bill (hereinafter a senior advisors veto threat). \nThese two types of SAPs indicate degrees of veto threat certainty. Generally speaking, a presidential veto threat signals the President's strong opposition to the bill. A senior advisors veto threat, on the other hand, may signal that the President may be more likely to enter into negotiations in order to reach a compromise with Congress on the bill. \nBy publicly issuing a veto threat, the President may leverage public pressure upon Congress to support the President's agenda. Furthermore, many SAPs propose a compromise to Congress wherein the President would not exercise a veto. In addition, a President or an Administration's senior advisors may not always issue a veto threat prior to a decision to veto passed legislation. As discussed below, both Presidents Bush and Obama vetoed legislation for which they never issued a written veto threat.\n\n\tVeto Threats Within Different SAP Types\n\nDuring both the Obama and Bush Administrations, roughly three-quarters of SAPs issued were on non-appropriations bills, and roughly one-quarter concerned appropriations bills. Each SAP signaled the Administration's intent to veto, oppose, or support a bill. There are fundamental differences between non-appropriations bill SAPs and appropriations bill SAPs. \nNon-appropriations bill SAPs typically involve specific policy objections, such as how a program operates or what constituency the program is designed to serve. Appropriations bill SAPs, in contrast, often involve more general budgetary policy objections, such as the perceived need to balance the budget or to reallocate resources for other purposes. Therefore, the President may generally support a particular provision in an appropriations bill on programmatic policy grounds but oppose it for budgetary reasons. Or the President may oppose a particular provision in an appropriations bill for both programmatic and budgetary reasons.\nThis report focuses on the impact of the President's veto threat in non-appropriations bill SAPs given their more targeted nature.\n\n\tVeto Threats During the George W. Bush and Obama Administrations\n\nData in this report were compiled from SAPs located on the archived White House websites of the Bush and Obama Administrations. Using the classification of SAPs on each website, analysis was conducted with only non-appropriations SAPs for reasons described above. The analysis examined each SAP and individually assessed whether the SAP contained a veto threat, the type of threat (presidential or senior advisor), and whether the veto threat concerned a part of the bill or the whole bill. The analysis considers each SAP to be an individual veto threat. In instances where one bill received veto threats in multiple SAPs, veto threats were counted individually and not combined. To assess the final outcome of bills, the analysis used information on bill statuses located at Congress.gov and does not track whether bills that received a SAP were later combined into other legislative vehicles. The inherent limitations in this methodology make it difficult to determine direct effects of any veto threat on the final outcome of a bill. However, in the aggregate, general trends may be observed.\nThe proportion of non-appropriation bill SAPs with veto threats steadily increased over the course of each of the two presidencies reviewed. SAPs containing veto threats as a proportion of all SAPs was at its highest at the conclusion of both President Bush's and President Obama's second terms. Figure 1 illustrates this trend by showing SAP veto threats as a percentage of issued SAPs. \n\n\t\tGeorge W. Bush Administration Veto Threats\n\nWhile the Bush Administration remained relatively consistent in the number of veto threats issued in SAPs during its first six years, the number of threats increased during the final two years of the Administration. The Bush Administration issued a total of 491 SAPs on non-appropriations bills. Just under one-quarter (24%) of the non-appropriations bill SAPs contained a veto threat: 24 presidential veto threats and 94 senior advisors veto threats. Of bills that received a presidential veto threat, one was signed by the President, seven were vetoed, and the remaining 16 did not make it to the President's desk. Of bills that received a senior advisors veto threat, 16 were signed, one was vetoed, and the remaining 77 were not passed by both chambers. Seven of the 12 Bush Administration vetoes were preceded by a SAP containing a veto threat. \nWhile the number of veto threats in SAPs slowly increased during the first three Congresses of the Bush Administration (two in the 107 th Congress, three in the 108 th Congress, and seven in the 109 th Congress), the number of veto threats grew sharply in the 110 th Congress\u00e2\u0080\u0094to 107 veto threats\u00e2\u0080\u0094coinciding with Democrats gaining control of both chambers of Congress during the Republican President's final two years in office. This might suggest (and is supported by Obama Administration data) that the partisan constitution of Congress, as well as whether the Administration is in its first or second term, may impact the number of veto threats issued. Below, Figure 2 illustrates this change in the number of veto threats over time across the four Congresses associated with President Bush's two terms in office.\nNevertheless, presidential veto threats in the Bush Administration remained a fraction of overall veto threats and often resulted in an actual veto. The rarity with which the Bush Administration issued presidential veto threats suggests that the Administration viewed them as a message to be used sparingly. \nAlthough the relationship between Congress and a President may change every two years with each new Congress, the relationship between an Administration and its President may also change by presidential term. Compared to a President's first term, in a second term Administration, executive branch officials may become more adept in coordinating the veto power. Additionally, a second-term President cannot be re-elected, which may allow the Administration to take a stronger position on unfavorable legislation. Alternatively, it could be that the President lacks the political influence necessary to advance his legislative agenda and instead relies on veto power to block legislative vehicles more often as his presidency concludes. Figure 3 presents veto threat percentages by presidential term for the Bush Administration, showing an increase in the President's second term. \nDuring President Bush's first term (2001-2005), 98% of SAPs did not contain a veto threat, 1% contained a senior advisors veto threat, and 1% contained a presidential veto threat. During President Bush's second term (2005-2009), 60% did not contain a veto threat, 32% contained a senior advisors veto threat, and 8% contained a presidential veto threat.\n\n\t\tObama Administration Veto Threats\n\nIn comparison to the Bush Administration, the Obama Administration steadily increased its use of veto threats issued in SAPs in every subsequent Congress. The Obama Administration issued 472 SAPs on non-appropriations bills. Just under half (48%) of these contained a veto threat: 43 presidential veto threats and 186 senior advisors veto threats. Of bills that received a presidential veto threat, four were ultimately signed by the President, five were vetoed, and 34 did not make it to the President's desk. Of bills that received a senior advisors veto threat, 17 were signed, two were vetoed, and 167 were not passed by the two chambers. Six of the 12 Obama Administration vetoes were preceded by a SAP containing a veto threat. \nPresident Obama (a Democrat) issued more veto threats in his SAPs with each passing Congress. (Democrats controlled both chambers during the 111 th Congress and the Senate during the 112 th Congress, and Republicans controlled the House during the 113 th Congress and both chambers during the 114 th Congress. ) Below, Figure 4 illustrates this change in the number of veto threats over time by Congress.\nAlthough the number of veto threats increased over the course of the Obama presidency (eight in the 111 th Congress, 54 in the 112 th Congress, 63 in the 113 th Congress, and 104 in the 114 th Congress), the number of presidential veto threats remained small when compared to the total number of veto threats, varying from a low of 14.3% in the 111 th Congress to a high of 28.3% in the 114 th Congress. The increase over time in total number of veto threats may indicate that President Obama was presented with more legislation he was likely to oppose. However, the increase is mostly composed of senior advisors veto threats. This suggests that the Administration nonetheless treated presidential veto threats, compared to senior advisors veto threats, as a tool to be used more rarely. \nAs with the Bush Administration, President Obama's use of veto threats in the first and second terms differ. Figure 5 presents veto threat percentages by presidential term as opposed to by Congress. \nDuring President Obama's first term (2009-2013), 69% of SAPs did not contain a veto threat, 27% contained a senior advisors veto threat, and 4% contained a presidential veto threat. During President Obama's second term (2013-2017), 39% of SAPs did not contain a veto threat, 49% contained a senior advisors veto threat, and 13% contained a presidential veto threat.\n\n\tCongressional Responses to Veto Threats\n\nCRS analyzed all veto threats contained in SAPs on non-appropriations legislation across these two Administrations and determined whether the veto threat was isolated to a provision of the bill (a partial bill veto threat) or if the veto threat was not particularized (a whole bill veto threat).\nPresident Bush issued partial bill veto threats and whole bill veto threats an equal amount of the time. However, the type of threat he used in each category varied. Of partial bill veto threats, 7% were presidential veto threats and the remaining 93% were senior advisors veto threats. Of whole bill veto threats, 34% were presidential veto threats and the remaining 66% were senior advisors veto threats. \nIn contrast, President Obama issued partial bill veto threats more sparingly (8% versus 92% for whole bill veto threats). Similar to President Bush, however, of partial bill veto threats, 6% were presidential veto threats and the remaining 94% were senior advisors veto threats. Of whole bill veto threats, 20% were presidential veto threats and the remaining 80% were senior advisors veto threats.\nThe difference in frequency of partial and whole bill veto threats across the Administrations may suggest that the two Presidents viewed the use of veto threats differently: One President may have used partial threats to negotiate more with Congress, whereas another President preferred to threaten a veto only when he viewed an entire bill as unfavorable. Likewise, the increased frequency of partial bill senior advisors veto threats suggests that both Presidents preferred to use presidential veto threats in rejecting an entire bill and leaving senior advisors veto threats for negotiations where only part of a bill is unfavorable. \n\n\t\tLegislative Action Following a Veto Threat\n\nA presidential veto threat in a SAP may be more likely than a senior advisors veto threat to deter passage of a bill because of the President's direct association with the threat. However, an analysis of these two Administrations does not necessarily support this argument. Figure 6 shows that bills appeared less likely to pass when the bill received a senior advisors veto threat versus a presidential veto threat. This may be due to a number of factors, including that senior advisors threats are more frequently issued than presidential veto threats (279 senior advisors threats and 67 presidential veto threats were issued across these two presidencies) or that Congress may perceive it to be beneficial to pass presidentially threatened legislation anyway based on certain political calculations and circumstances.\n\n\tVeto Threats and Veto Patterns\n\nDuring the Bush and Obama Administrations, enrolled bills that passed both chambers and were met with a presidential veto threat SAP were vetoed more often than were those that were met with a senior advisors threat. Figure 7 shows the outcomes of bills receiving veto threats that were passed by Congress and sent to the President. Across both the Bush and Obama Administrations, a bill that received a presidential veto threat and was passed was followed by a veto 70.6% of the time, whereas a bill that received a senior advisors veto threat was later vetoed 8.3% of the time.\nWhen a President vetoes a bill, it marks the end of the President's ability to procedurally affect whether or not a bill becomes law. Whether or not that specific bill becomes law is no longer in the President's hands. Congress may or may not elect to attempt an override. \n\n\t\tGeorge W. Bush Administration Vetoes and Ensuing Congressional Action\n\nPresident Bush exercised the veto power 12 times. Four of these vetoes were overridden. Six vetoed bills were forewarned with a written veto threat. (Four received a presidential threat, and two received senior advisors threats.) Three additional bills received statements noting the Administration's opposition to the bill but did not include a veto threat. None of the bills that Congress later overrode were preceded by a presidential veto threat. \nThree-quarters of President Bush's vetoes (9 of 12) were preceded by a written statement of opposition to the bill. President Bush also issued multiple written veto threats on four bills that would later receive a veto: Three bills received two threats each, and one bill received two statements of opposition. \n\n\t\tObama Administration Vetoes and Ensuing Congressional Action\n\nPresident Obama vetoed 12 bills, and Congress overrode his veto once. As was true for President Bush, six of President Obama's vetoes were preceded by a written veto threat (four presidential and two senior advisors threats). Unlike the patterns observed for the Bush presidency, however, all of President Obama's veto threats were whole bill veto threats.\nWhereas President Bush also communicated in SAPs his opposition to three bills short of threatening a veto, President Obama either did not issue a SAP at all or issued one that contained a veto threat. One of President Obama's vetoed bills received two veto threats. President Obama's approach of issuing either no statement at all on a bill or a statement containing a veto threat marks a different approach from the one used by President Bush.","output":null}
{"id":"crs_R46294","pid":"crs_R46294_0","input":"\tIntroduction\n\nPoverty is an ongoing topic of interest for Congress, in various capacities: as a factor to be considered when allocating funding for certain programs, as an eligibility criterion for some low-income assistance programs, and to gauge the well-being of individuals, families, or the economy as a whole. The poverty rate fell to 11.8% in 2018 from 12.3% in 2017. In both years, the poverty rate was lower than the pre-recessionary level of 12.5% in 2007. However, since the end of the Great Recession in 2009, the poverty rate remained elevated for approximately the first four years after the recession's end, and despite reductions in the poverty rate in recent years, it remains higher than its record-low of 11.1% in 1973. Poverty's persistence alongside indicators of economic strength has led policymakers to continually examine the drivers of poverty\u00e2\u0080\u0094both economic and social\u00e2\u0080\u0094and the effectiveness of various policy responses. As the conversations about poverty and public policy continue, it may be useful to consider the question: Who are the people who are poor in the United States?\nThis report provides a snapshot of who was poor in 2018 by selected demographic, economic, and social characteristics. The data presented here show that people in poverty are not a monolithic group, but rather a diverse collection of families and individuals at different stages of life, living in different circumstances. Special attention is paid in this report to the role of work in the lives of people who are poor. Income from work, or the lack thereof, is central to the economic fortunes not only of those considered \"working-age,\" but also of children, who are generally dependent on working-age adults, and persons who are aged (age 65 and older), who generally have prior experience in the workforce that shapes their economic well-being after they retire. Attention is also paid to living arrangements. Because poverty is measured at the family level, considerations such as whether someone lives alone, or whom someone lives and potentially shares resources with, influence economic well-being. Other factors that affect family well-being, and that influence individuals' attachment to and success in the labor market, are important for considering individuals' experiences of poverty but are beyond the scope of this report.\nThis snapshot looks at the composition of people in poverty\u00e2\u0080\u0094what groups comprise what share of the poverty population\u00e2\u0080\u0094rather than at poverty rates among different groups. This provides a different perspective in viewing poverty. A large population group such as non-Hispanic whites might have relatively low poverty rates, but because of the group's size in the overall population it represents a relatively large share of the poverty population. A small population, such as American Indians and Alaska Natives, might have relatively high poverty rates, but because of the group's size it represents a relatively small share of the poverty population. Both perspectives on poverty are valid and relevant to public policy. Readers interested in an examination of poverty rates for different demographic groups\u00e2\u0080\u0094and trends in poverty over time\u00e2\u0080\u0094should see CRS Report R46000, Poverty in the United States in 2018: In Brief , by Joseph Dalaker. \n\n\t\tData Used in this Report\n\nPoverty, in general, is a lack of resources to meet basic needs. This report uses the official measure of poverty used by the U.S. Census Bureau to identify individuals as \"poor.\" However, it is important to note that the Census poverty measure is actually family -based. Whether a person is considered poor depends on his or her money income and the income of any other family members\u00e2\u0080\u0094those related to a family head by birth, marriage, or adoption\u00e2\u0080\u0094with whom the person lives and presumably shares resources. If an individual is living alone or with people who are not relatives, that individual is considered a family of one and only his or her income is counted in determining his or her poverty status. That money income is then compared with a dollar threshold, which is based on that individual's family composition. For example, the poverty threshold for a working-age single person (who does not live in a family) in 2018 was $13,064. A single person with income below that amount is considered poor. The poverty threshold for a family of two adults and two children was $25,465. If the combined income of all family members was below that amount, all people in that family would be considered poor.\nThe current official poverty measure has existed for about 50 years and is widely used, but it does have limitations. For example, the official measure looks only at pre-tax money income and does not examine the impact of government taxes and non-cash benefits on family well-being. The official measure also generally does not take the value of assets into account, though a recent change in measurement now considers distributions from retirement savings as income. The official measure is also the same across the country, and does not take into consideration differences in living costs in different geographical areas. Additionally, the measure's current definition of family does not take into account modern resource-sharing arrangements, such as those of cohabiting couples. The Census Bureau now publishes a supplemental poverty measure (SPM) for research purposes that does take into account taxes and transfers, make adjustments for housing costs by geographical area, and use an expanded definition of family.\n\n\tHow Many People Were Poor in 2018?\n\nIn 2018, an estimated 38.1 million people had pre-tax money income below the poverty threshold. As shown in Figure 1 , people who were poor accounted for 11.8% of the total noninstitutionalized population. \nThe number and percentage of people in poverty reflect those whose family income fell short of the poverty threshold by any dollar amount. Of course, some people are poorer than others. One area of policy focus has been on the very poor: those considered to be in \"deep poverty.\" Deep poverty is usually defined as having income below 50% of the poverty threshold. In 2018, an estimated 17.3 million persons, close to half of all people in poverty (45.3%), were counted as living in deep poverty.\n\n\tWho Was Poor in 2018? An Overview\n\nThe population of people living in poverty comprised individuals of all ages and sexes, and across all racial and ethnic groups. \n\n\t\tAge\n\n Figure 2 shows the composition of the population living in poverty and the overall population (for context) by age group in 2018. Three categories are presented: children (those under age 18), working-age adults (those ages 18 to 64), and the aged (those age 65 and older).\nAs shown in the figure, slightly less than one-third (11.9 million) of all people in poverty were children. Children were over-represented among people in poverty relative to the overall population\u00e2\u0080\u009431.1% compared to 22.6%. People who were working age (18-64) made up the largest share of the population who were poor, but they were under-represented among people in poverty relative to the overall population (55.4% compared to 61.1%). Among persons who were poor, 13.5% were age 65 and older, a smaller representation than their share of the overall population (16.3%).\n\n\t\tRace and Ethnicity\n\n Figure 3 shows the composition of people in the poverty population and the total population (for context) by race and ethnicity for 2018. The racial and ethnic groups presented are ranked by the size of their total population (which is the same in both cases). Non-Hispanic whites were the largest racial\/ethnic group overall (60.2% of the total population), and represented the largest racial\/ethnic group within the poverty population (41.2%). Hispanics (of any race) were the second largest group (18.5% of the total population) and represented 27.6% of all those who were poor. Non-Hispanic African-Americans were the third largest racial\/ethnic group in both the total and poverty populations, representing 12.3% and 21.9%, respectively.\nNote that most minority groups were over-represented in the poverty population relative to their share of the overall population. The over-represented groups were Hispanics, non-Hispanic African-Americans, and non-Hispanic American Indians and Alaska Natives. Under-represented racial\/ethnic groups were non-Hispanic whites and Asians.\nThe racial and ethnic composition of people in poverty by age group is shaped by the overall demographic trends affecting each age group. As illustrated in Figure 4 , children (under age 18), both poor and overall, are more racially and ethnically diverse than adults, especially the aged (age 65+). However, minorities were over-represented in the poverty population for all age groups in 2018. For instance, Hispanic children (of any race) made up the largest share of poor children (37.4%) whereas non-Hispanic white children made up the largest share (50.0%) of children overall.\n\n\t\tSex\n\nWomen slightly outnumber men in the overall population, accounting for 51.0% of the total population in 2018. However, as shown in Figure 5 , women represented an even larger share (56.0%) of the population in poverty. This over-representation may be due, in part, to the fact that women are more likely than men to head single-parent households, a family type that is more likely to be poor. Additionally, men's earnings are higher than women's on average, even accounting for differences in full-time year-round employment status.\n\n\tPoverty Among Children, Working-Age Adults, and Aged Adults\n\nPoverty raises different public policy considerations for children, working-age adults, and aged adults. Children are not expected to support themselves economically\u00e2\u0080\u0094they are dependents of their parents or other adult caretakers who are assumed to fulfill that responsibility. Policies affecting the family income and poverty status of children generally apply to their parents or other adult caretakers. Working-age adults\u00e2\u0080\u0094aside from those who are severely disabled\u00e2\u0080\u0094are expected to work and to support themselves and their children, if they have any. Aged adults may retire from work and draw income from public or private benefits, which are based primarily on their past work. \nThe remainder of this report separately explores poverty among children, working-age adults, and aged adults. Though relevant policy considerations may differ among the three groups, the central role played by work as the primary means of economic support for individuals and families is highlighted. That work could be one's own work, the work of the parents or other family members, or past work providing retirement income. Similarly, because poverty is a family-based measure and the ability to share resources is an important consideration in economic well-being, living arrangements are also explored. \n\n\t\tChildren\n\nAs noted earlier, children made up slightly less than one-third of all people in poverty in America in 2018, even though they made up less than a quarter of the total population. Thus, children in America are disproportionately poor. Of the three age groups examined in this report, children had the highest poverty rate in 2018, 16.2%.\nChildren rely on their parents or other adult caretakers for their support. That support, even for children who are poor, is likely to come from earnings from the work of their parents or other adult caretakers.\n Figure 6 shows the composition of children who were poor and children in the total population by number of adult workers in the family for 2018. Note that the number of adult workers can exceed two, as it would include all adults in the family (such as siblings older than 18, grandparents, or other relatives over the age of 18). The figure shows that among children in the total population, 93.0% lived in families with at least one adult worker and roughly half (51.4%) lived in families with two or more adult workers.\nAmong children who were poor, just over two-thirds lived in families with one or more workers. A majority of children in poor families (57.1%) lived in families with one worker, compared with 11.0% who lived in families with two or more workers. The remaining 31.9% lived in families with no workers.\nThe number of potential adult workers in a child's family is affected by the type of family a child lives in. A single parent family might have only one potential adult worker, while a married-couple family has at least two potential adult workers. \n Figure 7 shows the distribution of children who were poor and children in the total population by family type in 2018. Children living in female-headed families accounted for a majority (57.5%) of all children who were poor, a disproportionate share relative to children in the total population. However, children in married-couple families still accounted for nearly one-third (32.2%) of all children who were poor. \nDespite a relatively low poverty rate for children in married-couple families in 2018, the large size of this population overall (children in married-couple families accounted for over two-thirds of all children) meant that a substantial number of children who were poor lived in this family type. Married-couple families were the only family type that was significantly under - represented among the population of children in poverty relative to the overall population. \nChildren who are poor are also more likely to live in larger families. Larger families require more income to meet needs, and thus the poverty thresholds for larger families are higher than for small families. However, since most children live in families with earnings, and earnings are not determined by family size\u00e2\u0080\u0094they are determined by what the worker can command in the labor market\u00e2\u0080\u0094larger families are more likely to be poor.\n Figure 8 shows the composition of children who were poor and children in the overall population by number of children in the family in 2018. In that year, 24.7% of all children who were poor were in families with four or more children, which is disproportionately higher than the 14.2% of children in the overall population living in families of that size. In contrast, 46.0% of children who were poor were in families with only one or two children.\n\n\t\tWorking-Age Adults\n\nThe majority of people in poverty in America are working-age adults (18-64 years old). This age group represented 55.4% (21.1 million individuals) of all people in poverty in 2018. Overall, this age group had a poverty rate of 10.7%, a lower rate than that of the overall population.\nBecause poverty is a state of low income, and income generally comes from work, it is useful to explore the work status of working-age adults who are poor. In the overall population of working-age adults, the majority (77.3%) worked in 2018. However, among working-age adults who were poor, the majority (63.2%) did not work.\nAs shown in Figure 9 , 36.8% of working-age adults who were poor were working in some capacity, either full- or part-time, full- or part-year. However, a relatively small share (12.0%) of working-age adults who were poor worked full-time all year. \nWhen working-age adults, both the poor and those in the overall population, were asked why they were not working, a wide range of reasons were given. Of non-working adults who were poor, one-third reported being ill or disabled, one-fourth reported taking care of family members, 18.8% said they were going to school, 11.4% said they were retired, and 6.0% said they could not find a job. For those not working in the overall population, a greater proportion (16.2%) reported being retired and a smaller proportion (27.1%) reported being ill or disabled.\nA large body of research has shown that success in the workforce is related to educational attainment. Credentials indicating higher levels of education tend to be reflected in higher earnings and steadier work. Figure 10 shows both working-age adults who were poor and all working-age adults by educational credential. The largest group (54.7%) of poor working-age adults in 2018 were those who obtained a high school diploma but no post-secondary educational credential. (High school graduates without a post-secondary credential were also the largest group (45.8%) within the total population of working-age adults.) Those lacking a high school diploma accounted for another 24.2% of all poor working-age adults, more than twice the share represented in the overall population (10.2%). The remaining 21.1% of 18 to 64 year olds below poverty had some postsecondary credential; the corresponding figure for all 18 to 64 year olds was 44.0%. \nIt should be noted that the working-age adult group includes young adults, whose education might not be finished.\nWorking-age adults represented a diverse group in terms of their family and living arrangements. Figure 11 shows both poor and all working-age adults by their living arrangements. A majority of both groups lived in families, although family living arrangements were more prevalent in the overall population (77.8%) than among the poor (56.4%). (As noted previously, \"family,\" as used by the Census Bureau, includes people related by birth, marriage, or adoption.)\nWorking-age adults who did not live in families were disproportionately poor in 2018; 43.6% of all working-age adults in poverty lived outside of a family. Included in this group were those living alone (19.0%) and those living with cohabiting partners (13.0%) or other unrelated adults\/roommates (11.7%). However, determination of the poverty status of people living outside of families but with others is not straightforward. The poverty status of individuals with cohabiting partners or who are living with other adults is based on each individual's income; no \"pooling\" of income is assumed in the official poverty measure, including among cohabiting partners who may be sharing resources.\n\n\t\tAged Persons\n\nOf the three age groups discussed in this report, aged adults are the least likely to be living below the poverty line. In 2018, they accounted for 16.3% of the total population, compared with 13.5% of the population in poverty. The poverty rate among aged adults was 9.7% in 2018.\nAged adults may retire from the workforce with the support of both public and private sector policies, and in 2018, 76.4% of all adults aged 65 and older did not work. However, income derived from work\u00e2\u0080\u0094past work, the earnings of other family members, and the earnings of the minority of aged adults who continue to work\u00e2\u0080\u0094plays a key role in determining the economic well-being of aged adults. \n Figure 12 explores various forms of work-related income received directly by aged persons or their families, including the following:\nSocial Security income is earned through past work, with the initial benefit determined based on past earnings, with the benefit replacing a portion of those earnings. In 2018, Social Security was received by the families of 63.8% of all aged persons who are poor, compared to 85.1% of aged persons in the total population. Aged persons also frequently receive income from pensions and other benefits earned from jobs held during their working careers. These include private pensions or government pensions paid to former public sector employees. Far fewer aged adults in poverty receive these benefits compared to the overall aged population. In 2018, retirement, disability, or survivor pensions were received by the families of 51.6% of all aged persons, compared with 10.4% of the families of aged persons who were poor. Earnings from current work\u00e2\u0080\u0094either by the aged adult member or other family members\u00e2\u0080\u0094are also often received by families with aged persons. In 2018, earnings were received by the families of 41.4% of aged persons. In comparison, 10.5% of families of aged persons who were poor received earnings from work. \nWhen considering all of these various forms of work-derived income, most aged adults (97.1%) in the total population lived in families with income derived from work: either past work where Social Security or pension income was earned, or the current work of the aged adult or a family member. This share was smaller among aged persons who were poor, but still, almost three in four (74.2%) lived in families with income derived from work.\n Figure 13 shows aged adults living in poverty by living arrangement, which is, as previously mentioned, an important consideration because of the possibility of resource-sharing. In 2018, roughly half (49.9%) of aged adults who were poor lived alone, which is a significantly higher rate than in the overall population of aged adults (28.0%). Aged adults in poverty were much less likely to be living in families than the overall aged population (43.1% compared to 68.4%).\n\n\tConclusion\n\nThis report presents basic information about the 38.1 million people in America who had income below the poverty line in 2018. Although it is presumed that they are all subject to income constraints, these data illustrate that they are not a homogenous group. For example, they are children, working-age adults, and aged adults; full-time full-year workers, caretakers for family members, or outside the workforce for other or unknown reasons; and living alone or in families. \nAs this report shows, certain groups are over-represented among those living in poverty relative to the total population. These include, among others, women, minorities, children, and people living outside of families or alone. The report also shows the central role of income from work in determining whether a group is over-represented among those living in poverty. For children, this income is based on the work of their parents or other family members. For working-age adults, it is their own work that generally determines their poverty status. For aged adults, who are often retired from the workforce, it is primarily their past work or the work of those they live with that determines their status. However, sometimes earnings from work are not enough to prevent poverty. Two-thirds of children living in poverty in 2018 were in families with at least one adult earning income during the year. In 2018, more than 7 out of 10 poor aged persons had some form of work-based income.\nThe complexity of circumstances that result in individuals experiencing poverty\u00e2\u0080\u0094both individual and systemic\u00e2\u0080\u0094are beyond the scope of this report. However, those circumstances warrant further exploration when considering federal policy interventions designed to reduce the incidence, or ameliorate the effects of, poverty.\n\n\t\tAppendix. Data Tables","output":null}
{"id":"gao_GAO-19-460T","pid":"gao_GAO-19-460T_0","input":"\tDOE\u2019s Estimated Environmental Liability Was $494 Billion in Fiscal Year 2018 and May Continue to Grow\n\nIn its fiscal year 2018 financial statement, DOE reported an estimated  environmental liability of $494 billion. The majority of this liability was for  cleanup work overseen by EM. We reported in January 2019 that in  recent years, EM\u2019s environmental liability has grown annually at a level  that has outpaced the department\u2019s annual spending on cleanup  activities, and its liability may continue to grow.\n\n\t\tDOE Estimated Its Environmental Liability Was $494 Billion in Fiscal Year 2018\n\nIn its fiscal year 2018 financial statement, DOE reported its estimated  environmental liability at $494 billion. In the financial statement, EM  accounted for $377 billion (over 75 percent) of DOE\u2019s total liability. In  developing its environmental liability estimate, EM estimates the costs of  storing, treating, or disposing of a variety of waste types. Storing and  treating radioactive tank waste account for the largest portion of EM\u2019s  costs. For example, in January 2019 we reported that, in fiscal year 2017  (the most recent year for which these data were available at the time of  our review), EM\u2019s responsibilities to store and treat radioactive waste  stored in underground tanks accounted for nearly half of EM\u2019s total  environmental liability, and its responsibilities for addressing  contaminated facilities and remediating soil and groundwater  contamination accounted for about one-quarter. Figure 2 shows the  percentage and dollar amount of EM\u2019s environmental liability by cleanup  activity for fiscal year 2017.\nIn January 2019, we also found that, of the 16 sites across the United  States at which EM has cleanup responsibilities, two sites accounted for  more than 70 percent of EM\u2019s environmental liability in fiscal year 2017:  the Hanford site and the Savannah River site (see fig. 3). These sites  also include the majority of EM\u2019s radioactive tank waste and the majority  of radioactive contamination, which is particularly costly and complicated  to treat. The Hanford site has 177 tanks containing 55 million gallons of  waste, and the Savannah River site has 43 tanks containing 36 million  gallons of waste.\n\n\t\tEM\u2019s Environmental Liability May Continue to Grow\n\nWe reported in January 2019 that in recent years, EM\u2019s environmental  liability has grown annually at a level that has outpaced the department\u2019s  annual spending on cleanup activities. This growth has occurred at the  same time as the number of contaminated sites has decreased. In fiscal  years 2011 through 2018, EM spent over $48 billion, primarily to address  radioactive tank waste as well as treat and dispose of other nuclear and  hazardous materials. Nonetheless, since 2011, EM\u2019s environmental  liability grew by $214 billion, from $163 billion to $377 billion, according to  our analysis of DOE financial data and documents (see fig. 4).\nEM\u2019s environmental liability may continue to grow because its currently  estimated environmental liability does not include the costs of all cleanup  activities for which the agency will likely be responsible in the future and  because the cost of addressing some of EM\u2019s largest projects is still  underestimated. First, not all of the cleanup activities EM must undertake  are captured in the current liability because, according to federal  accounting standards, only work that is probable and reasonably  estimable is required to be reported in an agency\u2019s liability. For  example, EM 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 EM\u2019s 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, but the costs for  the cleanup of this waste are excluded from EM\u2019s annually reported  environmental liability. Second, the current cost associated with some of  EM\u2019s cleanup efforts may be underestimated. For example, as of April  2018, EM and its contractor had still not negotiated a cost for completing  the WTP\u2014DOE\u2019s largest and most complex construction project.\nFurther, although EM typically spends about $6 billion per year on  cleanup activities, a large amount of its cleanup budget does not support  actual cleanup activities. Instead, this funding goes toward recurring  activities necessary to maintain the sites rather than toward reducing the  environmental liability. EM refers to these activities as \u201cminimum safety\u201d  work. According to EM officials, examples of such work include physical  security, health and radiation protection, or critical facility and  infrastructure maintenance for safe conditions. These officials said that  minimum safety work constitutes 30 to 60 percent of individual sites\u2019  budgets, for a total of at least $2.7 billion of EM\u2019s fiscal year 2018 budget,  as we reported in February 2019. The Assistant Secretary for EM noted  in September 2018 that much of DOE\u2019s environmental liability is associated with managing minimum safety work and that significant  potential cost savings could result from reducing minimum safety work.  Accordingly, she stated that EM planned an initiative in fiscal year 2019 to  examine how EM can reduce this work.\nEM has undertaken several ad hoc studies and initiatives to address the  growing costs in its cleanup program. However, EM has not conducted a  formal root cause analysis to identify the causes for the growth in its  environmental liabilities. Specifically, EM headquarters officials we  interviewed said they were aware of the increases to the environmental  liability from year to year, as well as the areas in which the liability  changed; however, they said they had not done a detailed analysis of the  root causes of the growth. A leading practice for program management is  monitoring and controlling the program, which includes conducting root  cause analyses and developing corrective action plans. However, in  February 2019, we found that EM\u2019s cleanup policy does not follow this  leading practice because it does not include any such requirements. We  recommended that EM review and revise its policy to include program  management leading practices in its requirements, including for  monitoring and controlling the program. DOE agreed with our  recommendation and stated that it plans to revise its policy.\n\n\tEM Has Not Resolved Management Challenges in Its Cleanup Program\n\nEM has not resolved long standing management challenges that affect its  cleanup program and contracts. In March 2019, we issued our 2019 High- Risk Series, which included updates related to DOE\u2019s environmental  liability and its contract management. While officials at EM have taken  some steps toward management improvements aimed at reducing its  environmental liabilities, we found that EM has not demonstrated  progress toward resolving these challenges. We have identified several  unresolved issues including the following:\nEM does not have a program-wide cleanup strategy. We reported in  January 2019 that EM relies primarily on individual sites to locally  negotiate cleanup activities and establish priorities. Our analysis of  DOE documents identified instances of decisions involving billions of  dollars where such an approach did not always balance overall risks  and costs. For example, we reiterated what we found in May 2017  that two EM sites had plans to treat similar radioactive tank waste  differently, and the estimated costs for treating the waste at one site\u2014 Hanford\u2014may be tens of billions more than those at the other site\u2014 Savannah River. In addition, EM sites generally do not consider  other sites\u2019 risks and priorities when making cleanup decisions. We  reported in January 2019 that this approach is not consistent with  recommendations we and others have made over the last 2 decades  that EM develop national priorities to balance risks and costs across  and within its sites. Moreover, EM has not developed a program- wide strategy that sets such priorities and describes how EM will  address its greatest risks. Instead, according to agency officials, it  continues to prioritize and fund cleanup activities by individual site.  We recommended in January 2019 that EM develop a program-wide  strategy that outlines how EM will direct available resources to  address human health and environmental risks across and within  sites. DOE agreed with our recommendation and has since said it is  working toward this goal.\nEM manages most of its cleanup work as operations activities, under  less stringent requirements than capital asset projects. In February  2019, we reported that EM manages its cleanup work under different  requirements, depending on whether it classifies the work as a capital  asset project or an operations activity. EM currently manages most  of its work as operations activities. In its fiscal year 2019 budget,  operations activities accounted for 77 percent of EM\u2019s budget (about  $5.5 billion), and capital asset projects accounted for 18 percent  (about $1.3 billion). Operations activities have less stringent  requirements. For example, unlike capital asset projects, operations  activities are not required to go through a thorough upfront planning  process to determine the scope of work to be completed. In addition,  under EM cleanup requirements, operations activities are not subject  to independent oversight by entities outside EM. As a result, DOE  management 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. Since 2015,  experts in DOE\u2019s Office of Project Management have raised concerns  that some operations activities, such as cleanup of radioactive tank  waste, should be classified as capital asset projects. In February  2019, we recommended that EM work with DOE\u2019s Office of Project  Management\u2014which is responsible for providing DOE-wide  leadership and assistance pertaining to project management\u2014to  establish requirements for classifying cleanup work as capital asset  projects or operations activities and then 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. DOE generally agreed with our recommendations and  committed to review and revise its requirements as appropriate.\nEM\u2019s cleanup policy does not follow program and project  management leading practices. In February 2019, we also found that  EM\u2019s 2017 cleanup policy, which outlines procedures that govern the  EM program and its operations activities, does not follow most  selected leading practices for program and project management.  Specifically, we found that 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. For  example, the policy does not require the program management  leading practice of monitoring and controlling the program, including  conducting root cause analyses and developing corrective action  plans. Further, EM\u2019s 2017 cleanup policy follows only 3 of 12 selected  project management leading practices related to these areas. For  example, EM\u2019s 2017 cleanup policy does not require any independent  reviews of its operations activities by anybody outside of EM. We  recommended that DOE review and revise EM\u2019s cleanup policy to  include program and project management leading practices related to  scope, cost, schedule performance, and independent reviews. DOE  agreed with our recommendations.\nIn addition, broader DOE management challenges affect EM and have  implications for EM\u2019s ability to effectively manage its cleanup work and  begin reducing its environmental liability. EM, like DOE, executes its  program activities primarily through the use of contracts. We have  reported that about 90 percent of DOE\u2019s budget is spent on contractors  that manage the laboratories and carry out DOE\u2019s programs. DOE\u2019s  contract management, however, is one of the areas we have identified as  posing a high risk of fraud, waste, abuse, and mismanagement because  of DOE\u2019s record of inadequate management and oversight of contractors.  As a result, DOE\u2019s contract and project management has been on our  High Risk List since 1990. Most recently, we found in March 2019 that  DOE did not always ensure that contractors audited subcontractors\u2019  incurred costs as required in their contracts. We 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.  We recommended that DOE develop procedures that require local offices  to monitor contractors to ensure timely completion of required subcontract  audits. DOE partially concurred with this recommendation and stated that  it plans to review existing requirements and guidance and to consider the  extent to which it requires monitoring of contractors\u2019 progress in  completing required subcontract audits. As we noted in the March 2019  report, 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  continue to 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.\n\n\tEM Has Not Reported Required Information about the Status of Its Cleanup\n\nAccurate and reliable information on the status and progress in a program  is essential for effective management and to ensure key stakeholders are  provided the information they need to fulfill their oversight, advisory, and  other essential roles. However, EM\u2019s performance measures for  operations activities do not provide a clear picture of overall performance,  and EM has not followed best practices in implementing its performance  reporting systems. In addition, EM has historically not provided all of the  statutorily required information about the status of its cleanup effort, and  the information EM has reported has been incomplete or inaccurate.  Finally, in its recent budget materials, EM did not include the funding it  says it needs to meet its schedule cleanup milestones.\n\n\t\tEM\u2019s Cleanup Performance Measures Do Not Provide a Clear Picture of Overall Performance\n\nIn February 2019, we found that EM\u2019s performance measures for  operations activities\u2014which constitute most of its cleanup activities\u2014do  not provide a clear picture of overall performance. According to EM  documentation and officials, EM uses three tools to measure the overall  performance of operations activities: earned value management (EVM),  performance metrics, and cleanup milestones. We found problems  with EM\u2019s use of each of these tools. Figure 5 summarizes our findings on  these three performance measures and how they affect EM\u2019s ability to  effectively manage the cleanup effort.\nFirst, we found in February 2019 that EM does not always ensure that its  EVM data are comprehensive or reliable. EVM measures the value of  work accomplished in a given period and compares it with the planned  value of work scheduled for the period and with the actual cost of the  work accomplished. EM relies primarily on EVM data to measure the  overall performance of its operations activities. EM relies on contractors\u2019  EVM systems to measure the performance of its contractors\u2019 operations  activities. 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. We also found that EM paid its contractors to  maintain these systems and provide EVM reports to EM. However, we  found that EM has not followed 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. For example, 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. We found  that EM officials were not performing thorough surveillance reviews to  ensure that EVM systems were in alignment with EVM guidelines and that  the data being reported by the EVM systems were reliable. In addition,  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. Even though EM requires most of its contractors for operations  activities to maintain EVM systems and pays them for doing so, EM\u2019s  2017 cleanup policy generally does not require that EVM systems be  maintained and used in a way that follow EVM best practices. The use of  EVM as a management tool is considered an industry standard and a  best practice for conducting cost and schedule performance analysis for  projects. EVM data can alert project managers to potential problems  sooner than expenditures alone can. Because EM does not follow best  practices in administering its EVM systems, EM leadership may not have  access to reliable performance data to make informed decisions in  managing billions of dollars\u2019 worth of cleanup work every year and to  provide to Congress and other stakeholders. We recommended that EM  update its cleanup policy to require that EVM systems be maintained and  used in a way that follows EVM best practices. DOE agreed with this  recommendation, and said it would implement it.\nSecond, we found that EM\u2019s performance metrics do not link performance  to cost. EM collects performance metrics from the sites monthly to  measure progress toward completing the scope of work for the contract  and against a goal set at the beginning of each year. We found in  February 2019 that EM\u2019s performance metrics do not link that work to the  cost of completing it. For example, EM reported that it eliminated 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 disposed 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, such as whether those costs were above or below what had  been planned. Because EM\u2019s metrics do not link performance to cost, the  performance information EM has provided to Congress does not indicate  whether EM received good value from the contractor since it does not  show how much that work cost to accomplish. We recommended that EM  integrate EVM data into EM\u2019s performance metrics for operations  activities. DOE agreed with this recommendation and said it would  implement it.\nFinally, we found in February 2019 that sites regularly renegotiate  cleanup milestones they are at risk of missing, and EM does not track  data on the history of postponed milestones or the reasons why  milestones were postponed. As a result, milestones have limited value  as a means of tracking cleanup progress since EM does not track the  original (or any previously revised) milestone dates, which could provide  some data to measure the progress of cleanup activities. We  recommended that EM track and report original milestones dates as well  as changes to its cleanup milestones. DOE agreed with our  recommendation and said it is already tracking this information at the site  level. In response, we reiterated the importance of tracking these  changes and reporting that information at the headquarters level to help  inform Congress.\n\n\t\tEM Has Inconsistently Reported on Cleanup Status and Its Information May Be Misleading\n\nWe reported in January 2019 that EM has not submitted congressionally  mandated reports on its cleanup program and the information EM has  reported has been incomplete or inaccurate. These reports are intended  to provide Congress with information on the progress, challenges, and  expected future costs of the EM cleanup program. Under the fiscal year  2011 National Defense Authorization Act, EM must annually develop and  report to Congress a Future-Years Defense Environmental Management  Plan that reflects estimated expenditures and proposed appropriations  included in the DOE budget for defense environmental cleanup  activities. It must do so at or about the same time that it submits its  budget request. The plan is to cover the fiscal year for which the budget is  submitted and at least the 4 succeeding fiscal years. The plan is required  to describe the cleanup activities to be carried out during the period  specified by the plan, estimated expenditures and proposed  appropriations necessary to support them, and each milestone in an  enforceable agreement governing the cleanup activity. For each  milestone, EM is to identify whether the milestone will be met and, if not,  explain why not and provide the date by which EM expects to meet it.\nEM submitted the required plan in fiscal year 2012 but did not submit  plans from fiscal year 2013 through fiscal year 2016, as we found in  January 2019, or in fiscal year 2018. EM\u2019s most recent Future-Years  Defense Environmental Management Plan, which DOE submitted to  Congress in August 2017, included little of the information required by the  fiscal year 2011 National Defense Authorization Act . Table 1 shows our  assessment of the information EM provided in its 2017 Future-Years  Defense Environmental Management Plan against the reporting  requirements.\nWe also found in February 2019 that 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 only four out of 218  milestones were at risk of missing their planned completion date, while  the rest were on schedule. When comparing these milestones to the 2017  plan, we found that at least 14 of them had been postponed. Similarly, the  2017 plan listed only one milestone out of 154 as forecast 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 were recently revised or actually represented their original due  dates because the report does not include this information.\nBecause DOE is not consistently and comprehensively submitting  complete information about the status of its cleanup, Congress and other  stakeholders may not have access to reliable information to make  informed decisions about billions of dollars of cleanup work. We  recommended that DOE submit in EM\u2019s annually required Future-Years  Defense Environmental Management Plan all mandated requirements, as  well as information on annual growth in environmental liability estimates  by site, the key factors causing that growth, and an explanation of  significant differences between environmental liability estimates and life  cycle cost estimates. DOE agreed with our recommendation and has  since said it is working toward this goal.\n\n\t\tEM\u2019s Recent Budget Materials Have Not Reflected the Funding EM Anticipates Is Needed to Meet Its Future Cleanup Responsibilities\n\nIn addition to the Future-Years Defense Environmental Management  Plan, DOE is to submit a budget request each fiscal year to Congress  along with an explanation of what EM cleanup activities the funding will  accomplish. However, in January 2019 we found that the information EM  provided to Congress in its fiscal years 2016, 2017, and 2018 budget  requests did not reflect the funding some senior DOE officials said EM  needs to meet its scheduled cleanup milestones. We reported that in a  2015 presentation on cleanup priorities, EM\u2019s Deputy Assistant Secretary  noted that EM\u2019s anticipated long-term funding needs for the full costs of  cleanup far exceeded the office\u2019s annual budget requests and noted that  in fiscal years 2016, 2017, and 2018, EM anticipated that it needed nearly  $8 billion annually to meet scheduled milestones called for in compliance  agreements. However, DOE\u2019s budget requests for those fiscal years were  $5.8 billion, $6.1 billion, and $6.5 billion, respectively\u2014a shortfall of at  least $1.5 billion per year. The Deputy Assistant Secretary also noted  that if EM continued to receive about $6 billion per year in the coming 2  decades, it would face a funding shortfall of about $28 billion. He also  said that the time frame for EM\u2019s cleanup mission would likely be  extended for years, thereby increasing cleanup costs and raising the  environmental liability. Similarly, we reported that in a 2017 site cleanup  meeting, EM\u2019s Associate Principle Deputy Assistant Secretary for Field  Operations said that in order for EM to meet all of the cleanup  requirements reflected in agreements with federal and state regulators,  EM would need a much larger budget than was requested in fiscal year  2018. For example, this official said that EM\u2019s Hanford site, which received about $2.5 billion in fiscal year 2018, needed more than $4  billion per year to meet scheduled milestones to construct and operate  the WTP\u2014one of many cleanup activities at the site\u2014for the duration of  its planned mission. The official added that EM\u2019s annual budget will not  cover all needs, particularly because infrastructure maintenance, repair,  and replacement needs are growing and extending the completion of  cleanup further into the future. We recommended that DOE disclose the  funding EM needs to meet all of its scheduled milestones. DOE agreed  with this recommendation and said it plans to request the funding needed  to meet its cleanup agreements.\nChair DeGette, Ranking Member Guthrie, and Members of the  Subcommittee, this concludes my prepared remarks. I would be happy to  respond to any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact David C. Trimble, Director, Natural Resources and Environment,  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 testimony. GAO staff who made key contributions to this testimony  are Amanda Kolling (Assistant Director), Chad Clady, Kelly Friedman,  Cristian Ion, Jeff Larson, Cynthia Norris, Dan Royer, and Kiki  Theodoropoulos.\n\nRelated GAO Products\n\nDepartment of Energy Contracting: Actions Needed to Strengthen  Subcontract Oversight. GAO-19-107. Washington, D.C.: March 12, 2019.\nHigh-Risk Series: Substantial Efforts Needed to Achieve Greater  Progress on High-Risk Areas. GAO-19-157SP. Washington, D.C.: March  6, 2019.\nNuclear Waste Cleanup: DOE Could Improve Program and Project  Management by Better Classifying Work and Following Leading  Practices. GAO-19-223. Washington, D.C.: February 19, 2019.\nNuclear Waste: DOE Should Take Actions to Improve Oversight of  Cleanup Milestones. GAO-19-207. Washington, D.C.: February 14, 2019.\nDepartment of Energy: Program-Wide Strategy and Better Reporting  Needed to Address Growing Environmental Cleanup Liability.  GAO-19-28. Washington, D.C.: January 29, 2019.\nThis 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.","output":null}
{"id":"crs_RS20871","pid":"crs_RS20871_0","input":"\tOverview and Objectives\n\nSanctions have been a significant component of U.S. Iran policy since Iran's 1979 Islamic Revolution that toppled the Shah of Iran, a U.S. ally. In the 1980s and 1990s, U.S. sanctions were intended to try to compel Iran to cease supporting acts of terrorism and to limit Iran's strategic power in the Middle East more generally. After the mid-2000s, U.S. and international sanctions focused largely on ensuring that Iran's nuclear program is for purely civilian uses. During 2010-2015, the international community cooperated closely with a U.S.-led and U.N.-authorized sanctions regime in pursuit of the goal of persuading Iran to agree to limits to its nuclear program. Still, sanctions against Iran have multiple objectives and address multiple perceived threats from Iran simultaneously. \nThis report analyzes U.S. and international sanctions against Iran. CRS has no way to independently corroborate whether any individual or other entity might be in violation of U.S. or international sanctions against Iran. The report tracks \"implementation\" of the various U.S. laws and executive orders as designations and imposition of sanctions. Some sanctions require the blocking of U.S.-based property of sanctioned entities. CRS has not obtained information from the executive branch indicating that such property has been blocked, and it is possible that sanctioned entities do not have any U.S. assets that could be blocked. \nThe sections below are grouped by function, in the chronological order in which these themes have emerged.\n\n\tBlocked Iranian Property and Assets\n\n\t\tPost-JCPOA Status: Iranian Assets Still Frozen, but Some Issues Resolved\n\nU.S. sanctions on Iran were first imposed during the U.S.-Iran hostage crisis of 1979-1981, in the form of executive orders issued by President Jimmy Carter blocking nearly all Iranian assets held in the United States. These included E.O. 12170 of November 14, 1979, blocking all Iranian government property in the United States, and E.O 12205 (April 7, 1980) and E.O. 12211 (April 17, 1980) banning virtually all U.S. trade with Iran. The latter two Orders were issued just prior to the failed April 24-25, 1980, U.S. effort to rescue the U.S. Embassy hostages held by Iran. President Jimmy Carter also broke diplomatic relations with Iran on April 7, 1980. The trade-related Orders (12205 and 12211) were revoked by Executive Order 12282 of January 19, 1981, following the \"Algiers Accords\" that resolved the U.S.-Iran hostage crisis. Iranian assets still frozen are analyzed below.\n\n\t\tU.S.-Iran Claims Tribunal\n\nThe Accords established a \"U.S.-Iran Claims Tribunal\" at the Hague that continues to arbitrate cases resulting from the 1980 break in relations and freezing of some of Iran's assets. All of the 4,700 private U.S. claims against Iran were resolved in the first 20 years of the Tribunal, resulting in $2.5 billion in awards to U.S. nationals and firms. \nThe major government-to-government cases involved Iranian claims for compensation for hundreds of foreign military sales (FMS) cases that were halted in concert with the rift in U.S.-Iran relations when the Shah's government fell in 1979. In 1991, the George H. W. Bush Administration paid $278 million from the Treasury Department Judgment Fund to settle FMS cases involving weapons Iran had received but which were in the United States undergoing repair and impounded when the Shah fell. \nOn January 17, 2016, (the day after the JCPOA took effect), the United States announced it had settled with Iran for FMS cases involving weaponry the Shah was paying for but that was not completed and delivered to Iran when the Shah fell. The Shah's government had deposited its payments into a DOD-managed \"Iran FMS Trust Fund,\" and, after 1990, the Fund had a balance of about $400 million. In 1990, $200 million was paid from the Fund to Iran to settle some FMS cases. Under the 2016 settlement, the United States sent Iran the $400 million balance in the Fund, plus $1.3 billion in accrued interest, paid from the Department of the Treasury's \"Judgment Fund.\" In order not to violate U.S. regulations barring direct U.S. dollar transfers to Iranian banks, the funds were remitted to Iran in late January and early February 2016 in foreign hard currency from the central banks of the Netherlands and of Switzerland. Some remaining claims involving the FMS program with Iran remain under arbitration at the Tribunal. \n\n\t\tOther Iranian Assets Frozen\n\nIranian assets in the United States are blocked under several provisions, including Executive Order 13599 of February 2010. The United States did not unblock any of these assets as a consequence of the JCPOA. \nAbout $1.9 billion in blocked Iranian assets are bonds belonging to Iran's Central Bank, frozen in a Citibank account in New York belonging to Clearstream, a Luxembourg-based securities firm, in 2008. The funds were blocked on the grounds that Clearstream had improperly allowed those funds to access the U.S. financial system. Another $1.67 billion in principal and interest payments on that account were moved to Luxembourg and are not blocked. About $50 million of Iran's assets frozen in the United States consists of Iranian diplomatic property and accounts, including the former Iranian embassy in Washington, DC, and 10 other properties in several states, and related accounts. Among other frozen Iranian assets are real estate holdings of the Assa Company, a UK-chartered entity, which allegedly was maintaining the interests of Iran's Bank Melli in a 36-story office building in New York City and several other properties around the United States (in Texas, California, Virginia, Maryland, and other parts of New York City). An Iranian foundation, the Alavi Foundation, allegedly is an investor in the properties. The U.S. Attorney for the Southern District of New York blocked these properties in 2009. The Department of the Treasury report avoids valuing real estate holdings, but public sources assess these blocked real estate assets at nearly $1 billion. In June 2017, litigation won the U.S. government control over the New York City office building. \n\n\t\tUse of Iranian Assets to Compensate U.S. Victims of Iranian Terrorism\n\nThere are a total of about $46 billion in court awards that have been made to victims of Iranian terrorism. These include the families of the 241 U.S. soldiers killed in the October 23, 1983, bombing of the U.S. Marine barracks in Beirut. U.S. funds equivalent to the $400 million balance in the DOD account (see above) have been used to pay a small portion of these judgments. The Algiers Accords apparently precluded compensation for the 52 U.S. diplomats held hostage by Iran from November 1979 until January 1981. The FY2016 Consolidated Appropriation (Section 404 of P.L. 114-113 ) set up a mechanism for paying damages to the U.S. embassy hostages and other victims of state-sponsored terrorism using settlement payments paid by various banks for concealing Iran-related transactions, and proceeds from other Iranian frozen assets. \nIn April 2016, the U.S. Supreme Court determined the Central Bank assets, discussed above, could be used to pay the terrorism judgments, and the proceeds from the sale of the frozen real estate assets mentioned above will likely be distributed to victims of Iranian terrorism as well. On the other hand, in March 2018, the U.S. Supreme Court ruled that U.S. victims of an Iran-sponsored terrorist attack could not seize a collection of Persian antiquities on loan to a University of Chicago museum to satisfy a court judgment against Iran. \nOther past financial disputes include the mistaken U.S. shoot-down on July 3, 1988, of an Iranian Airbus passenger jet (Iran Air flight 655), for which the United States paid Iran $61.8 million in compensation ($300,000 per wage-earning victim, $150,000 per non-wage earner) for the 248 Iranians killed. The United States did not compensate Iran for the airplane itself, although officials involved in the negotiations told CRS in November 2012 that the United States later arranged to provide a substitute used aircraft to Iran. \nFor more detail on how Iranian and other assets are used to compensate victims of Iranian terrorism, see CRS Report RL31258, Suits Against Terrorist States by\u00a0Victims\u00a0of\u00a0Terrorism , by Jennifer K. Elsea and CRS Legal Sidebar LSB10104, It Belongs in a Museum: Sovereign Immunity Shields Iranian Antiquities Even When It Does Not Protect Iran , by Stephen P. Mulligan.\n\n\t\tExecutive Order 13599 Impounding Iran-Owned Assets\n\n\t\t\tPost-JCPOA Status: Still in Effect\n\nExecutive Order 13599, issued February 5, 2012, directs the blocking of U.S.-based assets of entities determined to be \"owned or controlled by the Iranian government.\" The order was issued to implement Section 1245 of the FY2012 National Defense Authorization Act ( P.L. 112-81 ) that imposed secondary U.S. sanctions on Iran's Central Bank. The Order requires that any U.S.-based assets of the Central Bank of Iran, or of any Iranian government-controlled entity, be blocked by U.S. banks. The order goes beyond the regulations issued pursuant to the 1995 imposition of the U.S. trade ban with Iran, in which U.S. banks are required to refuse such transactions but to return funds to Iran. Even before the issuance of the Order, and in order to implement the ban on U.S. trade with Iran (see below) successive Administrations had designated many entities as \"owned or controlled by the Government of Iran.\"\nNumerous designations have been made under Executive Order 13599, including the June 4, 2013, naming of 38 entities (mostly oil, petrochemical, and investment companies) that are components of an Iranian entity called the \"Execution of Imam Khomeini's Order\" (EIKO). EIKO was characterized by the Department of the Treasury as an Iranian leadership entity that controls \"massive off-the-books investments.\" \nImplementation of the U.S. JCPOA Withdrawa l. To implement the JCPOA, many 13599-designated entities specified in the JCPOA (Attachment 3) were \"delisted\" from U.S. secondary sanctions (no longer considered \"Specially Designated Nationals,\" SDNs), and referred to as \"designees blocked solely pursuant to E.O 13599.\" That characterization permitted foreign entities to conduct transactions with the listed entities without U.S. sanctions penalty but continued to bar U.S. persons (or foreign entities owned or controlled by a U.S. person) from conducting transactions with these entities. Treasury Department announced on May 8, 2018, in concert with the U.S. withdrawal from the JCPOA, that almost all of the 13599-designated entities that were delisted as SDNs will be relisted as SDNs on November 5, 2018. That day, the Treasury Department updated the list of SDNs to reflect the redesignations.\nCivilian Nuclear Entity Exception . One notable exception to the relisting policy implemented in 2018 is the Atomic Energy Organization of Iran (AEOI). The entity, along with 23 of its subsidiaries, were redesignated under E.O. 13599 but not as entities subject to secondary sanctions under E.O. 13382. This U.S. listing decision was made in order to facilitate continued IAEA and EU and other country engagement with Iran's civilian nuclear program under the JCPOA. The May 2019 ending of some waivers for nuclear technical assistance to Iran modifies this stance somewhat (see subhead on waivers and exceptions under the JCPOA, below). \n\n\tSanctions for Iran's Support for Armed Factions and Terrorist Groups\n\nMost of the hostage crisis-related sanctions were lifted upon resolution of the crisis in 1981. The United States began imposing sanctions against Iran again in the mid-1980s for its support for regional groups committing acts of terrorism. The Secretary of State designated Iran a \"state sponsor of terrorism\" on January 23, 1984, following the October 23, 1983, bombing of the U.S. Marine barracks in Lebanon by elements that established Lebanese Hezbollah. This designation triggers substantial sanctions on any nation so designated. \nNone of the laws or Executive Orders in this section were waived or revoked to implement the JCPOA. No entities discussed in this section were \"delisted\" from sanctions under t he JCPOA. \n\n\t\tSanctions Triggered by Terrorism List Designation\n\nThe U.S. naming of Iran as a \"state sponsor of terrorism\"\u2014commonly referred to as Iran's inclusion on the U.S. \"terrorism list\"\u2014triggers several sanctions. The designation is made under the authority of Section 6(j) of the Export Administration Act of 1979 ( P.L. 96-72 , as amended), sanctioning countries determined to have provided repeated support for acts of international terrorism. The sanctions triggered by Iran's state sponsor of terrorism designation are as follows: \nRestrictions on sales of U.S. dual use items . The restriction\u2014a presumption of denial of any license applications to sell dual use items to Iran\u2014is required by the Export Administration Act, as continued by executive orders under the authority of the International Emergency Economic Powers Act, IEEPA. The restrictions are enforced through Export Administration Regulations (EARs) administered by the Bureau of Industry and Security (BIS) of the Commerce Department. Ban on direct U.S. financial assistance and arms sales to Iran . Section 620A of the Foreign Assistance Act, FAA (P.L. 87-95) and Section 40 of the Arms Export Control Act ( P.L. 95-92 , as amended), respectively, bar any U.S. foreign assistance to terrorism list countries. Included in the definition of foreign assistance are U.S. government loans, credits, credit insurance, and Ex-Im Bank loan guarantees. Successive foreign aid appropriations laws since the late 1980s have banned direct assistance to Iran, and with no waiver provisions. The FY2012 foreign operations appropriation (Section 7041(c)(2) of P.L. 112-74) banned the Ex-Im Bank from using funds appropriated in that Act to finance any entity sanctioned under the Iran Sanctions Act. The foreign aid provisions of the FY2019 Consolidated Appropriation (Section 7041) made that provision effective for FY2019. Requirement to oppose multilateral lending . U.S. officials are required to vote against multilateral lending to any terrorism list country by Section 1621 of the International Financial Institutions Act ( P.L. 95-118 , as amended [added by Section 327 of the Anti-Terrorism and Effective Death Penalty Act of 1996 ( P.L. 104-132 )]). Waiver authority is provided. Withholding of U.S. foreign assistance to countries that assist or sell arms to t errorism l ist c ountries . Under Sections 620G and 620H of the Foreign Assistance Act, as added by the Anti-Terrorism and Effective Death Penalty Act (Sections 325 and 326 of P.L. 104-132 ), the President is required to withhold foreign aid from any country that aids or sells arms to a terrorism list country. Waiver authority is provided. Section 321 of that act makes it a crime for a U.S. person to conduct financial transactions with terrorism list governments. Withholding of U.S. Aid to Organizations T hat Assist Iran . Section 307 of the FAA (added in 1985) names Iran as unable to benefit from U.S. contributions to international organizations, and require proportionate cuts if these institutions work in Iran. For example, if an international organization spends 3% of its budget for programs in Iran, then the United States is required to withhold 3% of its contribution to that international organization. No waiver is provided for.\n\n\t\t\tException for U.S. Humanitarian Aid\n\nThe terrorism list designation, and other U.S. sanctions laws barring assistance to Iran, do not bar U.S. disaster aid. The United States donated $125,000, through relief agencies, to help victims of two earthquakes in Iran (February and May 1997); $350,000 worth of aid to the victims of a June 22, 2002, earthquake; and $5.7 million in assistance for victims of the December 2003 earthquake in Bam, Iran, which killed 40,000. The U.S. military flew 68,000 kilograms of supplies to Bam.\n\n\t\tSanctions on States \"Not Cooperating\" Against Terrorism\n\nSection 330 of the Anti-Terrorism and Effective Death Penalty Act ( P.L. 104-132 ) added a Section 40A to the Arms Export Control Act that prohibits the sale or licensing of U.S. defense articles and services to any country designated (by each May 15) as \"not cooperating fully with U.S. anti-terrorism efforts.\" The President can waive the provision upon determination that a defense sale to a designated country is \"important to the national interests\" of the United States. \nEvery May since the enactment of this law, Iran has been designated as a country that is \"not fully cooperating\" with U.S. antiterrorism efforts. However, the effect of the designation is largely mooted by the many other authorities that prohibit U.S. defense sales to Iran. \n\n\t\tExecutive Order 13224 Sanctioning Terrorism-Supporting Entities\n\nExecutive Order 13324 (September 23, 2001) mandates the freezing of the U.S.-based assets of and a ban on U.S. transactions with entities determined by the Administration to be supporting international terrorism. This order was issued two weeks after the September 11, 2001, attacks on the United States, under the authority of the IEEPA, the National Emergencies Act, the U.N. Participation Act of 1945, and Section 301 of the U.S. Code, initially targeting Al Qaeda. \n\n\t\t\tUse of the Order to Target Iranian Arms Exports\n\nE.O. 13224 is not specific to Iran and does not explicitly target Iranian arms exports to movements, governments, or groups in the Middle East region. However, successive Administrations have used the Order\u2014and the orders discussed immediately below\u2014to sanction such Iranian activity by designating persons or entities that are involved in the delivery or receipt of such weapons shipments. Some persons and entities that have been sanctioned for such activity have been cited for supporting groups such as the Afghan Taliban organization and the Houthi rebels in Yemen, which are not named as terrorist groups by the United States. \n\n\t\t\tApplication of CAATSA to the Revolutionary Guard\n\nSection 105 of the Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44 , signed on August 2, 2017), mandates the imposition of E.O. 13324 penalties on the Islamic Revolutionary Guard Corps (IRGC) and its officials, agents, and affiliates by October 30, 2017 (90 days after enactment). The IRGC was named as a terrorism-supporting entity under E.O 13224 within that deadline. The Treasury Department made the designation of the IRGC as a terrorism-supporting entity under that E.O. on October 13, 2017.\n\n\t\t\tImplementation\n\nNo entities designated under E.O. 13224 were delisted to implement the JCPOA. Additional Iran-related entities have been designated under the Order since JCPOA implementation, as shown in the tables at the end of this report.\n\n\t\tForeign Terrorist Organization Designations\n\nSanctions similar to those of E.O. 13224 are imposed on Iranian and Iran-linked entities through the State Department authority under Section 219 of the Immigration and Nationality Act (8.U.S.C. 1189) to designate an entity as a Foreign Terrorist Organization (FTO). In addition to the sanctions of E.O. 13224, any U.S. person (or person under U.S. jurisdiction) who \"knowingly provides material support or resources to an FTO, or attempts or conspires to do so\" is subject to fine or up to 20 years in prison. A bank that commits such a violation is subject to fines. \nImplementation: The following organizations have been designated as FTOs for acts of terrorism on behalf of Iran or are organizations assessed as funded and supported by Iran:\nIslamic Revolutionary Guard Corps (IRGC). Designated April 8, 2019. See CRS Insight IN11093, Iran's Revolutionary Guard Named a Terrorist Organization , by Kenneth Katzman. On April 22, 2019, the State Department issued guidelines for implementing the IRGC FTO designation, indicating that it would not penalize routine diplomatic or humanitarian-related dealings with the IRGC by U.S. partner countries or nongovernmental entities. Lebanese HezbollahKata'ib Hezbollah . Iran-backed Iraqi Shi'a militia. Hamas . Sunni, Islamist Palestinian organization that essentially controls the Gaza Strip. Palestine Islamic Jihad . Small Sunni Islamist Palestinian militant group Al Aqsa Martyr's Brigade . Secular Palestinian militant group. Popular Front for the Liberation of Palestine-General Command (PFLP-GC). Leftwing secular Palestinian group based mainly in Syria. Al Ashtar Brigades . Bahrain militant opposition group \n\n\t\tOther Sanctions on Iran's \"Malign\" Regional Activities\n\nSome sanctions have been imposed to try to curtail Iran's destabilizing influence in the region. \n\n\t\t\tExecutive Order 13438 on Threats to Iraq's Stability\n\nIssued on July 7, 2007, the order blocks U.S.-based property of persons who are determined by the Administration to \"have committed, or pose a significant risk of committing\" acts of violence that threaten the peace and stability of Iraq, or undermine efforts to promote economic reconstruction or political reform in Iraq. The Order extends to persons designated as materially assisting such designees. The Order was clearly directed at Iran for its provision of arms or funds to Shiite militias there. Persons sanctioned under the Order include IRGC-Qods Force officers, Iraqi Shiite militia-linked figures, and other entities. Some of these sanctioned entities worked to defeat the Islamic State in Iraq and are in prominent roles in Iraq's parliament and political structure. \n\n\t\t\tExecutive Order 13572 on Repression of the Syrian People.\n\nIssued on April 29, 2011, the order blocks the U.S.-based property of persons determined to be responsible for human rights abuses and repression of the Syrian people. The IRGC-Qods Force (IRGC-QF), IRGC-QF commanders, and others are sanctioned under this order. \n\n\t\t\tThe Hizballah International Financing Prevention Act (P.L. 114-102) and Hizballah International Financing Prevention Amendments Act of 2018 (S. 1595, P.L. 115-272).\n\nThe latter Act was signed by President Trump on October 23, 2018the 25 th anniversary of the Marine barracks bombing in Beirut. The original law, modeled on the 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act (\"CISADA,\" see below), excludes from the U.S. financial system any bank that conducts transactions with Hezbollah or its affiliates or partners. The more recent law expands the authority of the original law by authorizing the blocking of U.S.-based property of and U.S. transactions with any \"agency or instrumentality of a foreign state\" that conducts joint operations with or provides financing or arms to Lebanese Hezbollah. These latter provisions clearly refer to Iran, but are largely redundant with other sanctions on Iran. \n\n\tBan on U.S. Trade and Investment with Iran\n\n\t\tStatus: Trade ban eased for JCPOA, but back in full effect on August 6, 2018\n\nIn 1995, the Clinton Administration expanded U.S. sanctions against Iran by issuing Executive Order 12959 (May 6, 1995) banning U.S. trade with and investment in Iran. The order was issued under the authority primarily of the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701 et seq.), which gives the President wide powers to regulate commerce with a foreign country when a \"state of emergency\" is declared in relations with that country. E.O. 12959 superseded Executive Order 12957 (March 15, 1995) barring U.S. investment in Iran's energy sector, which accompanied President Clinton's declaration of a \"state of emergency\" with respect to Iran. Subsequently, E.O 13059 (August 19, 1997) added a prohibition on U.S. companies' knowingly exporting goods to a third country for incorporation into products destined for Iran. Each March since 1995, the U.S. Administration has renewed the \"state of emergency\" with respect to Iran. IEEPA gives the President the authority to alter regulations to license transactions with Iran\u2014regulations enumerated in Section 560 of the Code of Federal Regulations (Iranian Transactions Regulations, ITRs). \nSection 103 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195 ) codified the trade ban and reinstated the full ban on imports that had earlier been relaxed by April 2000 regulations. That relaxation allowed importation into the United States of Iranian nuts, fruit products (such as pomegranate juice), carpets, and caviar. U.S. imports from Iran after that time were negligible. Section 101 of the Iran Freedom Support Act ( P.L. 109-293 ) separately codified the ban on U.S. investment in Iran, but gives the President the authority to terminate this sanction with presidential notification to Congress of such decision 15 days in advance (or 3 days in advance if there are \"exigent circumstances\").\n\n\t\tJCPOA-Related Easing and Reversal\n\nIn accordance with the JCPOA, the ITRs were relaxed to allow U.S. importation of the Iranian luxury goods discussed above (carpets, caviar, nuts, etc.), but not to permit general U.S.-Iran trade. U.S. regulations were also altered to permit the sale of commercial aircraft to Iranian airlines that are not designated for sanctions. The modifications were made in the Departments of State and of the Treasury guidance issued on Implementation Day and since. In concert with the May 8, 2018, U.S. withdrawal from the JCPOA, the easing of the regulations to allow for importation of Iranian carpets and other luxury goods was reversed on August 6, 2018. \n\n\t\tWhat U.S.-Iran Trade Is Allowed or Prohibited?\n\nThe following provisions apply to the U.S. trade ban on Iran as specified in regulations (Iran Transaction Regulations, ITRs) written pursuant to the executive orders and laws discussed above and enumerated in regulations administered by the Office of Foreign Assets Control (OFAC) of the Department of the Treasury. \nOil Transactions . All U.S. transactions with Iran in energy products are banned. The 1995 trade ban (E.O. 12959) expanded a 1987 ban on imports from Iran that was imposed by Executive Order 12613 of October 29, 1987. The earlier import ban, authorized by Section 505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9), barred the importation of Iranian oil into the United States but did not ban the trading of Iranian oil overseas. The 1995 ban prohibits that activity explicitly, but provides for U.S. companies to apply for licenses to conduct \"swaps\" of Caspian Sea oil with Iran. These swaps have been prohibited in practice; a Mobil Corporation application to do so was denied in April 1999, and no applications have been submitted since. The ITRs do not ban the importation, from foreign refiners, of gasoline or other energy products in which Iranian oil is mixed with oil from other producers . The product of a refinery in any country is considered to be a product of the country where that refinery is located, even if some Iran-origin crude oil is present. Transshipment and Brokering . The ITRs prohibit U.S. transshipment of prohibited goods across Iran, and ban any activities by U.S. persons to broker commercial transactions involving Iran. Iranian Luxury Goods . Pursuant to the JCPOA, Iranian luxury goods, such as carpets and caviar, could be imported into the United States after January 2016. This prohibition went back into effect on August 6, 2018 (90-day wind-down). Shipping Insurance . Obtaining shipping insurance is crucial to Iran's expansion of its oil and other exports. A pool of 13 major insurance organizations, called the International Group of P & I Clubs, dominates the shipping insurance industry and is based in New York. The U.S. presence of this pool renders it subject to the U.S. trade ban, which complicated Iran's ability to obtain reinsurance for Iran's shipping after Implementation Day. On January 16, 2017, the Obama Administration issued waivers of Sections 212 and 213 of the ITRSHRA to allow numerous such insurers to give Iranian ships insurance. However, this waiver ended on August 6, 2018 (90-day wind-down). Civilian Airline Sales . The ITRs have always permitted the licensing of goods related to the safe operation of civilian aircraft for sale to Iran (\u00a7560.528 of Title 31, C.F.R.), and spare parts sales have been licensed periodically. However, from June 2011 until Implementation Day, Iran's largest state-owned airline, Iran Air, was sanctioned under Executive Order 13382 (see below), rendering licensing of parts or repairs for that airline impermissible. Several other Iranian airlines were sanctioned under that Order and Executive Order 13224. In accordance with the JCPOA, the United States relaxed restrictions on to allow for the sale to Iran of finished commercial aircraft, including to Iran Air, which was \"delisted\" from sanctions. A March 2016 general license allowed for U.S. aircraft and parts suppliers to negotiate sales with Iranian airlines that are not sanctioned, and Boeing and Airbus subsequently concluded major sales to Iran Air. In keeping with the May 8, 2018, U.S. withdrawal from the JCPOA, preexisting licensing restrictions went back into effect on August 6, 2018, and the Boeing and Airbus licenses to sell aircraft to Iran were revoked. Sales of some aircraft spare parts (\"dual use items\") to Iran also require a waiver of the relevant provision of the Iran-Iraq Arms Non-Proliferation Act, discussed below. Personal Communications , Remittances , and Publishing . The ITRs permit personal communications (phone calls, emails) between the United States and Iran, personal remittances to Iran, and Americans to engage in publishing activities with entities in Iran (and Cuba and Sudan). Information Technology Equipment. CISADA exempts from the U.S. ban on exports to Iran information technology to support personal communications among the Iranian people and goods for supporting democracy in Iran. In May 2013, OFAC issued a general license for the exportation to Iran of goods (such as cell phones) and services, on a fee basis, that enhance the ability of the Iranian people to access communication technology. Food and Medical Exports. Since April 1999, sales to Iran by U.S. firms of food and medical products have been permitted, subject to OFAC stipulations. In October 2012, OFAC permitted the sale to Iran of specified medical products, such as scalpels, prosthetics, canes, burn dressings, and other products, that could be sold to Iran under \"general license\" (no specific license application required). This list of general license items list was expanded in 2013 and 2016 to include more sophisticated medical diagnostic machines and other medical equipment. Licenses for exports of medical products not on the general license list are routinely expedited for sale to Iran, according to OFAC. The regulations have a specific definition of \"food\" that can be licensed for sale to Iran, and that definition excludes alcohol, cigarettes, gum, or fertilizer. The definition addresses information in a 2010 article that OFAC had approved exports to Iran of condiments such as food additives and body-building supplements that have uses other than purely nutritive. Humanitarian and Related Services . Donations by U.S. residents directly to Iranians (such as packages of food, toys, clothes, etc.) are not prohibited, but donations through relief organizations broadly require those organizations' obtaining a specific OFAC license. On September 10, 2013, the Department of the Treasury eliminated licensing requirements for relief organizations to (1) provide to Iran services for health projects, disaster relief, wildlife conservation; (2) to conduct human rights projects there; or (3) undertake activities related to sports matches and events. The amendment also allowed importation from Iran of services related to sporting activities, including sponsorship of players, coaching, referees, and training. In some cases, such as the earthquake in Bam in 2003 and the earthquake in northwestern Iran in August 2012, OFAC has issued blanket temporary general licensing for relief organizations to work in Iran. Payment Methods, Trade Financing , and Financing Guarantees . U.S. importers are allowed to pay Iranian exporters, including with U.S. dollars. However, U.S. funds cannot go directly to Iranian banks, but must instead pass through third-country banks. In accordance with the ITRs' provisions that transactions that are incidental to an approved transaction are allowed, financing for approved transactions are normally approved, presumably in the form of a letter of credit from a non-Iranian bank. Title IX of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 ) bans the use of official credit guarantees (such as the Ex-Im Bank) for food and medical sales to Iran and other countries on the U.S. terrorism list, except Cuba, although allowing for a presidential waiver to permit such credit guarantees. The Ex-Im Bank is prohibited from guaranteeing any loans to Iran because of Iran's continued inclusion on the terrorism list, and the JCPOA did not commit the United States to provide credit guarantees for Iran. \n\n\t\tApplication to Foreign Subsidiaries of U.S. Firms\n\nThe ITRs do not ban subsidiaries of U.S. firms from dealing with Iran, as long as the subsidiary is not \"controlled\" by the parent company. Most foreign subsidiaries are legally considered foreign persons subject to the laws of the country in which the subsidiaries are incorporated. Section 218 of the Iran Threat Reduction and Syrian Human Rights Act (ITRSHRA, P.L. 112-158 ) holds \"controlled\" foreign subsidiaries of U.S. companies to the same standards as U.S. parent firms, defining a controlled subsidiary as (1) one that is more than 50% owned by the U.S. parent; (2) one in which the parent firm holds a majority on the Board of Directors of the subsidiary; or (3) one in which the parent firm directs the operations of the subsidiary. There is no waiver provision. \nJCPOA Regulations and Reversal. To implement the JCPOA, the United States licensed \"controlled\" foreign subsidiaries to conduct transactions with Iran that are permissible under JCPOA (almost all forms of civilian trade). The Obama Administration asserted that the President has authority under IEEPA to license transactions with Iran, the ITRSHRA notwithstanding. This was implemented with the Treasury Department's issuance of \"General License H: Authorizing Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person.\" With the Trump Administration reimposition of sanctions, the licensing policy (\"Statement of Licensing Policy,\" SLP) returned to pre-JCPOA status on November 5, 2018. \n\n\tSanctions on Iran's Energy Sector\n\n\t\tStatus: Energy sanctions waived for JCPOA, back in effect November 5, 2018\n\nIn 1996, Congress and the executive branch began a long process of pressuring Iran's vital energy sector in order to deny Iran the financial resources to support terrorist organizations and other armed factions or to further its nuclear and WMD programs. Iran's oil sector is as old as the petroleum industry itself (early 20 th century), and Iran's onshore oil fields are in need of substantial investment. Iran has 136.3 billion barrels of proven oil reserves, the third largest after Saudi Arabia and Canada. Iran has large natural gas resources (940 trillion cubic feet), exceeded only by Russia. However, Iran's gas export sector is still emerging\u2014most of Iran's gas is injected into its oil fields to boost their production. The energy sector still generates about 20% of Iran's GDP and as much as 30% of government revenue. \n\n\t\tThe Iran Sanctions Act (and Triggers added by other Laws)\n\nThe Iran Sanctions Act (ISA) has been a pivotal component of U.S. sanctions against Iran's energy sector. Since its enactment in 1996, ISA's provisions have been expanded and extended to other Iranian industries. ISA sought to thwart Iran's 1995 opening of the sector to foreign investment in late 1995 through a \"buy-back\" program in which foreign firms gradually recoup their investments as oil and gas is produced. It was first enacted as the Iran and Libya Sanctions Act (ILSA, P.L. 104-172 , signed on August 5, 1996) but was later retitled the Iran Sanctions Act after it terminated with respect to Libya in 2006. ISA was the first major \"extra-territorial sanction\" on Iran\u2014a sanction that authorizes U.S. penalties against third country firms. \n\n\t\t\tKey Sanctions \"Triggers\" Under ISA\n\nISA consists of a number of \"triggers\"\u2014transactions with Iran that would be considered violations of ISA and could cause a firm or entity to be sanctioned under ISA's provisions. The triggers, as added by amendments over time, are detailed below:\n\n\t\t\t\tTrigger 1 (Original Trigger): \"Investment\" To Develop Iran's Oil and Gas Fields\n\nThe core trigger of ISA when first enacted was a requirement that the President sanction companies (entities, persons) that make an \"investment\" of more than $20 million in one year in Iran's energy sector. The definition of \"investment\" in ISA (\u00a714 [9]) includes not only equity and royalty arrangements but any contract that includes \"responsibility for the development of petroleum resources\" of Iran. The definition includes additions to existing investment (added by P.L. 107-24 ) and pipelines to or through Iran and contracts to lead the construction, upgrading, or expansions of energy projects (added by CISADA).\n\n\t\t\t\tTrigger 2: Sales of WMD and Related Technologies, Advanced Conventional Weaponry, and Participation in Uranium Mining Ventures\n\nThis provision of ISA was not waived under the JCPOA. \nThe Iran Freedom Support Act ( P.L. 109-293 , signed September 30, 2006) added Section 5(b)(1) of ISA, subjecting to ISA sanctions firms or persons determined to have sold to Iran (1) \"chemical, biological, or nuclear weapons or related technologies\" or (2) \"destabilizing numbers and types\" of advanced conventional weapons. Sanctions can be applied if the exporter knew (or had cause to know) that the end-user of the item was Iran. The definitions do not specifically include ballistic or cruise missiles, but those weapons could be considered \"related technologies\" or, potentially, a \"destabilizing number and type\" of advanced conventional weapon. \nThe Iran Threat Reduction and Syria Human Rights Act (ITRSHRA, P.L. 112-158 , signed August 10, 2012) created Section 5(b)(2) of ISA subjecting to sanctions entities determined by the Administration to participate in a joint venture with Iran relating to the mining, production, or transportation of uranium.\nImplementation: No ISA sanctions have been imposed on any entities under these provisions. \n\n\t\t\t\tTrigger 3: Sales of Gasoline to Iran\n\nSection 102(a) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195 , signed July 1, 2010) amended Section 5 of ISA to exploit Iran's dependency on imported gasoline (40% dependency at that time). It followed legislation such as P.L. 111-85 that prohibited the use of U.S. funds to fill the Strategic Petroleum Reserve with products from firms that sell gasoline to Iran; and P.L. 111-117 that denied Ex-Im Bank credits to any firm that sold gasoline or related equipment to Iran. The section subjects the following to sanctions: \nSales to Iran of over $1 million worth (or $5 million in a one year period) of gasoline and related aviation and other fuels. (Fuel oil, a petroleum by-product, is not included in the definition of refined petroleum.) Sales to Iran of equipment or services (same dollar threshold as above) which would help Iran make or import gasoline. Examples include equipment and services for Iran's oil refineries or port operations. \n\n\t\t\t\tTrigger 4: Provision of Equipment or Services for Oil, Gas, and Petrochemicals Production\n\nSection 201 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHA, P.L. 112-158 , signed August 10, 2012) codified an Executive Order, 13590 (November 21, 2011), by adding Section 5(a)(5 and 6) to ISA sanctioning firms that \nprovide to Iran $1 million or more (or $5 million in a one-year period) worth of goods or services that Iran could use to maintain or enhance its oil and gas sector. This subjects to sanctions, for example, transactions with Iran by global oil services firms and the sale to Iran of energy industry equipment such as drills, pumps, vacuums, oil rigs, and like equipment. provide to Iran $250,000 (or $1 million in a one year period) worth of goods or services that Iran could use to maintain or expand its production of petrochemical products. This provision was not altered by the JPA. \n\n\t\t\t\tTrigger 5: Transporting Iranian Crude Oil\n\nSection 201 of the ITRSHRA amends ISA by sanctioning entities the Administration determines \nowned a vessel that was used to transport Iranian crude oil. The section also authorizes but does not require the President, subject to regulations, to prohibit a ship from putting to port in the United States for two years, if it is owned by a person sanctioned under this provision (adds Section 5[ a ][ 7 ] to ISA) . This sanction does not apply in cases of transporting oil to countries that have received exemptions under P.L. 112-81 (discussed below). participated in a joint oil and gas development venture with Iran, outside Iran, if that venture was established after January 1, 2002. The effective date exempts energy ventures in the Caspian Sea, such as the Shah Deniz oil field there (adds Section 5[ a ][ 4 ] to ISA ) . \n\n\t\t\t\tIran Threat Reduction and Syria Human Rights Act (ITRSHRA): ISA Sanctions for insuring Iranian oil entities, purchasing Iranian bonds, or engaging in transactions with the IRGC\n\nSeparate provisions of the ITRSHR Act\u2014 which do not amend ISA \u2014 require the application of ISA sanctions (the same 5 out of 12 sanctions as required in ISA itself) on any entity that \nprovides insurance or reinsurance for the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) (Section 212). purchases or facilitates the issuance of sovereign debt of the government of Iran, including Iranian government bonds (Section 213). This sanction went back into effect on August 6, 2018 (90-day wind-down period). assists or engages in a significant transaction with the IRGC or any of its sanctioned entities or affiliates. (Section 302). This section of ITRSHRA was not waived to implement the JCPOA. \nImplementation . Section 312 of ITRSHRA required an Administration determination, within 45 days of enactment (by September 24, 2012) whether NIOC and NITC are IRGC agents or affiliates. Such a determination would subject financial transactions with NIOC and NITC to sanctions under CISADA (prohibition on opening U.S.-based accounts). On September 24, 2012, the Department of the Treasury determined that NIOC and NITC are affiliates of the IRGC. On November 8, 2012, the Department of the Treasury named NIOC as a proliferation entity under Executive Order 13382\u2014a designation that, in accordance with Section 104 of CISADA, bars any foreign bank determined to have dealt directly with NIOC (including with a NIOC bank account in a foreign country) from opening or maintaining a U.S.-based account. \nSanctions on dealings with NIOC and NITC were waived in accordance with the interim nuclear deal and the JCPOA, and designations of these entities under Executive Order 13382 were rescinded in accordance with the JCPOA. These entities were \"relisted\" again on November 5, 2018. Some NIOC have partners and independent Iranian energy firms have not been designated, including: Iranian Offshore Oil Company; National Iranian Gas Export Co.; Petroleum Engineering and Development Co.; Pasargad Oil Co., Zagros Petrochem Co.; Sazeh Consultants; Qeshm Energy; and Sadid Industrial Group. \n\n\t\t\t\tExecutive Order 13622: Sanctions on the Purchase of Iranian Crude Oil and Petrochemical Products, and Dealings in Iranian Bank Notes\n\nStatus: Revoked (by E.O. 13716) but will back into effect as stipulated below\nExecutive Order 13622 (July 30, 2012) imposes specified sanctions on the ISA sanctions menu, and bars banks from the U.S. financial system, for the following activities ( E .O. 13622 d id not amend ISA itself ):\nthe purchase of oil, other petroleum, or petrochemical products from Iran. Th e part of th is order pertaining to petrochemical purchases was suspended under the JPA. The wind-down period was 180 days (ending November 4, 2018). transactions with the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO) (180-day wind-down period). E.O. 13622 also blocks U.S.-based property of entities determined to have assisted or provided goods or services to NIOC, NICO, the Central Bank of Iran (180-day wind-down period). assisted the government of Iran in the purchase of U.S. bank notes or precious metals, precious stones, or jewels. (The provision for precious stones or jewels was added to this Order by E.O. 16345 below.) (90-day wind-down period.) \nE.O. 13622 sanctions do not apply if the parent country of the entity has received an oil importation exception under Section 1245 of P.L. 112-81 , discussed below. An exception also is provided for projects that bring gas from Azerbaijan to Europe and Turkey, if such project was initiated prior to the issuance of the Order. \n\n\t\t\tMandate and Time Frame to Investigate ISA Violations\n\nIn the original version of ISA, there was no firm requirement, and no time limit, for the Administration to investigate potential violations and determine that a firm has violated ISA's provisions. The Iran Freedom Support Act ( P.L. 109-293 , signed September 30, 2006) added a provision calling for, but not requiring , a 180-day time limit for a violation determination. CISADA (Section 102[g][5]) mandated that the Administration begin an investigation of potential ISA violations when there is \"credible information\" about a potential violation, and made mandatory the 180-day time limit for a determination of violation. \nThe Iran Threat Reduction and Syria Human Rights Act ( P.L. 112-158 ) defines the \"credible information\" needed to begin an investigation of a violation to include a corporate announcement or corporate filing to its shareholders that it has undertaken transactions with Iran that are potentially sanctionable under ISA. It also says the President may (not mandatory) use as credible information reports from the Government Accountability Office and the Congressional Research Service. In addition, Section 219 of ITRSHRA requires that an investigation of an ISA violation begin if a company reports in its filings to the Securities and Exchange Commission (SEC) that it has knowingly engaged in activities that would violate ISA (or Section 104 of CISADA or transactions with entities designated under E.O 13224 or 13382, see below). \n\n\t\t\t\tOversight\n\nSeveral mechanisms for Congress to oversee whether the Administration is investigating ISA violations were added by ITRSHRA. Section 223 of that law required a Government Accountability Office report, within 120 days of enactment, and another such report a year later, on companies that have undertaken specified activities with Iran that might constitute violations of ISA. Section 224 amended a reporting requirement in Section 110(b) of CISADA by requiring an Administration report to Congress every 180 days on investment in Iran's energy sector, joint ventures with Iran, and estimates of Iran's imports and exports of petroleum products. The GAO reports have been issued; there is no information available on whether the required Administration reports have been issued as well.\n\n\t\t\tInterpretations of ISA and Related Laws\n\nThe sections below provide information on how some key ISA provisions have been interpreted and implemented. \n\n\t\t\t\tApplication to Energy Pipelines\n\nISA's definition of \"investment\" that is subject to sanctions has been consistently interpreted by successive Administrations to include construction of energy pipelines to or through Iran. Such pipelines are deemed to help Iran develop its petroleum (oil and natural gas) sector. This interpretation was reinforced by amendments to ISA in CISADA, which specifically included in the definition of petroleum resources \"products used to construct or maintain pipelines used to transport oil or liquefied natural gas.\" In March 2012, then-Secretary of State Clinton made clear that the Obama Administration interprets the provision to be applicable from the beginning of pipeline construction. \n\n\t\t\t\tApplication to Crude Oil Purchases\n\nThe original version of ISA did not provide for sanctioning purchases of crude oil from Iran. However, subsequent laws and executive orders took that step. \n\n\t\t\t\tApplication to Purchases from Iran of Natural Gas\n\nThe Iran Freedom and Counterproliferation Act (IFCA, discussed below) authorized sanctions on transactions with Iran's energy sector, but s pecifically exclude d from sanctions purchases of natural gas from Iran . But construction of gas pipelines involving Iran is subject to sanctions. \n\n\t\t\t\tException for Shah Deniz and other Gas Export Projects\n\nThe effective dates of U.S. sanctions laws and Orders exclude long-standing joint natural gas projects that involve some Iranian firms\u2014particularly the Shah Deniz natural gas field and related pipelines in the Caspian Sea. These projects involve a consortium in which Iran's Naftiran Intertrade Company (NICO) holds a passive 10% share, and includes BP, Azerbaijan's natural gas firm SOCAR, Russia's Lukoil, and other firms. NICO was sanctioned under ISA and other provisions (until JCPOA Implementation Day), but an OFAC factsheet of November 28, 2012, stated that the Shah Deniz consortium, as a whole, is not determined to be \"a person owned or controlled by\" the government of Iran and transactions with the consortium are permissible. \n\n\t\t\t\tApplication to Iranian Liquefied Natural Gas Development\n\nThe original version of ISA did not apply to the development by Iran of a liquefied natural gas (LNG) export capability. Iran has no LNG export terminals, in part because the technology for such terminals is patented by U.S. firms and unavailable for sale to Iran. CISADA specifically included LNG in the ISA definition of petroleum resources and therefore made subject to sanctions LNG investment in Iran or supply of LNG tankers or pipelines to Iran.\n\n\t\t\t\tApplication to Private Financing but Not Official Credit Guarantee Agencies\n\nThe definitions of investment and other activity that can be sanctioned under ISA include financing for investment in Iran's energy sector, or for sales of gasoline and refinery-related equipment and services. Therefore, banks and other financial institutions that assist energy investment and refining and gasoline procurement activities could be sanctioned under ISA. \nHowever, the definitions of financial institutions are interpreted not to apply to official credit guarantee agencies\u2014such as France's COFACE and Germany's Hermes. These credit guarantee agencies are arms of their parent governments, and ISA does not provide for sanctioning governments or their agencies. \n\n\t\t\tImplementation of Energy-Related Iran Sanctions\n\nEntities sanctioned under the executive orders or laws cited in this section are listed in the tables at the end of this report. As noted, some of the Orders cited provide for blocking U.S.-based assets of the entities designated for sanctions. OFAC has not announced the blocking of any U.S.-based property of the sanctioned entities, likely indicating that those entities sanctioned do not have a presence in the United States. \n\n\t\tIran Oil Export Reduction Sanctions: Section 1245 of the FY2012 NDAA Sanctioning Transactions with Iran's Central Bank\n\n\t\t\tStatus: Back into effect November 5, 2018, and exceptions ended\n\nIn 2011, Congress sought to reduce Iran's exportation of oil by imposing sanctions on the mechanisms that importers use to pay Iran for oil. The Obama Administration asserted that such legislation could lead to a rise in oil prices and harm U.S. relations with Iran's oil customers, and President Obama, in his signing statement on the bill, indicated he would implement the provision so as not to damage U.S. relations with partner countries.\nThe law imposed penalties on transactions with Iran's Central Bank. Section 1245 of the FY2012 National Defense Authorization Act (NDAA, P.L. 112-81 , signed on December 31, 2011): \nRequires the President to prevent a foreign bank from opening an account in the United States\u2014or impose strict limitations on existing U.S. accounts\u2014if that bank is determined to have conducted a \"significant financial transaction\" with Iran's Central Bank or with any sanctioned Iranian bank . The provision applies to a foreign central bank only if the transaction with Iran's Central Bank is for oil purchases. The provision went into effect after 180 days (June 28, 2012). Significant Reduction Ex c eption (SRE): The law provides incentive for Iran's oil buyers to cut purchases of Iranian oil by providing for an exception (exemption) for the banks of any country determined to have \" significantly reduced \" its purchases of oil from Iran. The banks of countries granted the SRE may continue to conduct all transactions with the Central Bank (not just for oil) or with any sanctioned Iranian bank. The SRE exception is reviewed every 180 days and, to maintain the exception, countries are required to reduce their oil buys from Iran, relative to the previous 180-day period. ITRSHRA amended Section 1245 such that any country that completely ceased purchasing oil from Iran entirely would retain an exception. The law lacks a precise definition of \"significant reduction\" of oil purchases, but the Obama Administration adopted a standard set in a January 2012 letter by several Senators to then-Treasury Secretary Geithner setting that definition at an 18% purchase reduction based on total paid for the Iranian oil (not just volume reduction). Sanctions on transactions for oil apply only if the President certifies to Congress every 90 days, based on a report by the Energy Information Administration, that the oil market is adequately supplied, and, an Administration determination every 180 days that there is a sufficient supply of oil worldwide to permit countries to reduce purchases from Iran. The required EIA reports and Administration determinations have been issued at the prescribed intervals, even during the period when the law was in a state of waiver. Hum anitarian Exception . Paragraph (2) of Section 1245 exempts transactions with Iran's Central Bank that are for \"the sale of agricultural commodities, food, medicine, or medical devices to Iran\" from sanctions.\n\n\t\t\tImplementation\/SREs Issued and Ended\n\nThe Obama and Trump Administration have implemented the FY2012 NDAA with an eye toward balancing the global oil market with the intended effects on Iran's economy and behavior. The table below on major Iranian oil customers indicates cuts made by major customers compared to 2011.\nIn March 20, 2012, Japan received an SRE. In September 2012, following a July 2012 EU Iran oil embargo, 10 EU countries (Belgium, Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, and Britain) received the SRE because they ended purchases pursuant to the EU Iran oil purchase embargo of July 1, 2012. Seventeen EU countries were not granted the SRE because they were not buying Iran's oil and could not \"significantly reduce\" buys from Iran. In December 2012, the following countries\/jurisdictions received the SRE: China, India, Malaysia, South Africa, South Korea, Singapore, Sri Lanka, Turkey, and Taiwan. \n\n\t\t\t\tReactivation on November 5, 2018, and Exceptions Granted then Ended\n\nThe January 2016 waivers issued to implement the JCPOA suspended the requirement for a country to cut oil purchases from Iran in order to maintain their exceptions, and Iran's historic oil customers quickly resumed buying Iranian oil. The provision went back into effect on November 5, 2018. On June 26, 2018, a senior State Department official, in a background briefing, stated that department officials, in meetings with officials of countries that import Iranian oil, were urging these countries to cease buying Iranian oil entirely, but Administration officials later indicated that requests for exceptions would be evaluated based on the ease of substituting for Iranian oil, country-specific needs, and the need for global oil market stability. \nOn November 5, 2018, in the first SRE grants available under reimposed U.S. sanctions, the following eight countries received the SRE: China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey. The SREs expired on May 2, 2019. On April 22, 2019, the State Department announced that no more SREs would be granted after their expiration at 12:00 AM on May 2, 2019. The Administration indicated that the global oil market is well supplied enough to permit the decision, which is intended to \"apply maximum pressure on the Iranian regime until its leaders change their destructive behavior, respect the rights of the Iranian people, and return to the negotiating table.\" The announcement indicated that U.S. officials have had discussions with Saudi Arabia and the UAE to ensure that the global oil market remains well supplied. Left unclear is the extent to which, if at all, Iran's oil customers seek to continue importing Iranian oil and whether the Administration will penalize foreign banks for continuing transactions with Iran's Central Bank. \n\n\t\t\tIran Foreign Bank Account \"Restriction\" Provision\n\n\t\t\t\tStatus: Back in Effect on November 5, 2018\n\nThe ability of Iran to repatriate hard currency\u2014U.S. dollars are the primary form of payment for oil\u2014to its Central Bank was impeded by a provision of the ITRSHRA which went into effect on February 6, 2013 (180 days after enactment). Section 504 of the ITRSHRA amended Section 1245 of the FY2012 NDAA (adding \"clause ii\" to Paragraph D[1]) by requiring that any funds paid to Iran as a result of exempted transactions (oil purchases, for example) be credited to an account located in the country with primary jurisdiction over the foreign bank making the transaction. \nThis provision essentially prevents Iran from repatriating to its Central Bank any hard currency Iran held in foreign banks around the world. Most of Iran's funds held abroad are in banks located in Iran's main oil customers. The provision largely compels Iran to buy the products of the oil customer countries. Some press reports refer to this arrangement as an \"escrow account,\" but State Department officials describe the arrangement as \"restricted\" accounts. \n\n\tSanctions on Auto Production and Minerals Sectors\n\nSuccessive Administrations have expanded sanctions, primarily by executive order, on several significant nonoil industries and sectors of Iran's economy. The targeted sectors include Iran's automotive production sector, which is Iran's second-largest industry (after energy), and its mineral exports, which account for about 10% of Iran's export earnings. \n\n\t\tExecutive Order 13645: Application of ISA and Other Sanctions to Iran's Automotive Sector, Rial Trading, and Precious Stones\n\nJCPOA Status: Revoked (by E.O 13716) but most provisions below went back into effect as of August 6, 2018 (90-day wind-down period).\nExecutive Order 13645 of June 3, 2013 (effective July 1, 2013), contains the provisions below. (E.O. 13645 did not amend ISA itself.)\nImposes specified ISA-related sanctions on firms that supply goods or services to Iran's automotive (cars, trucks, buses, motorcycles, and related parts) sector, and blocks foreign banks from the U.S. market if they finance transactions with Iran's automotive sector. (An executive order cannot amend a law, so the order does not amend ISA.) Blocks U.S.-based property and prohibits U.S. bank accounts for foreign banks that conduct transactions in Iran's currency, the rial , or hold rial accounts. This provision mostly affected banks in countries bordering or near Iran. The order applies also to \"a derivative, swap, future, forward, or other similar contract whose value is based on the exchange rate of the Iranian rial .\"\u00a0 If Iran implements plans to develop a digital currency, or cryptocurrency, backed by or tied to rials, it would appear that the Order also applies to that digital currency. Expands the application of Executive Order 13622 (above) to helping Iran acquire precious stones or jewels (see above). Blocks U.S.-based property of a person that conducts transactions with an Iranian entity listed as a Specially Designated National (SDN) or Blocked Person. SDNs to be \"relisted\" on November 5, 2018.\n\n\t\tExecutive Order 13871 on Iran's Minerals and Metals Sectors\n\nOn May 8, 2019, President Trump issued Executive Order 13871 sanctioning transactions with Iran's key minerals and industrial commodities. The White House announcement stated that Iran earns 10% of its total export revenues from sales of the minerals and metals sanctioned under the order. The order does the following: \nblocks U.S.-based property of any entity that conducts a significant transaction for the \"sale, supply, or transfer to Iran\" of goods or services, or the transport or marketing, of the iron, steel, aluminum, and copper sectors of Iran; authorizes the Secretary of the Treasury to bar from the U.S. financial system any foreign bank that conducts or facilitates a financial transaction for steel, steel products, copper, or copper products from Iran; bars the entry into the United States of any person sanctioned under the order. \n\n\tSanctions on Weapons of Mass Destruction, Missiles, and Conventional Arms Transfers\n\n\t\tStatus: No sanctions in this section eased to implement JCPOA\n\nSeveral laws and executive orders seek to bar Iran from obtaining U.S. or other technology that can be used for weapons of mass destruction (WMD) programs. Sanctions on Iran's exportation of arms are discussed in the sections above on sanctions for Iran's support for terrorist groups. \n\n\t\tIran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act\n\nThe Iran-Iraq Arms Nonproliferation Act (Title XIV of the FY1993 National Defense Authorization Act, P.L. 102-484 , signed in October 1992) imposes a number of sanctions on foreign entities that supply Iran with WMD technology or \"destabilizing numbers and types of advanced conventional weapons.\" Advanced conventional weapons are defined as follows: \n(1) such long-range precision-guided munitions, fuel air explosives, cruise missiles, low observability aircraft, other radar evading aircraft, advanced military aircraft, military satellites, electromagnetic weapons, and laser weapons as the President determines destabilize the military balance or enhance the offensive capabilities in destabilizing ways; \n(2) such advanced command, control, and communications systems, electronic warfare systems, or intelligence collections systems as the President determines destabilize the military balance or enhance offensive capabilities in destabilizing ways; and\n(3) such other items or systems as the President may, by regulation, determine necessary for the purposes of this title. \nThe definition is generally understood to include technology used to develop ballistic missiles. \nSanctions to be i mposed : Sanctions imposed on violating entities include \na ban, for two years, on U.S. government procurement from the entity; a ban, for two years, on licensing U.S. exports to that entity; authority (but not a requirement) to ban U.S. imports from the entity.\nIf the violator is determined to be a foreign country, sanctions to be imposed are \na one-year ban on U.S. assistance to that country; a one-year requirement that the United States vote against international lending to it; a one-year suspension of U.S. coproduction agreements with the country; a one-year suspension of technical exchanges with the country in military or dual use technology; a one-year ban on sales of U.S. arms to the country; an authorization to deny the country most-favored-nation trade status; and to ban U.S. trade with the country.\nSection 1603 of the act amended an earlier law, the Iraq Sanctions Act of 1990 (Section 586G(a) of P.L. 101-513 ), to provide for a \"presumption of denial\" for all dual use exports to Iran (including computer software). \n\n\t\t\tImplementation\n\nA number of entities were sanctioned under the act in the 1990s, as shown in the tables at the end of this paper. None of the designations remain active, because the sanctions have limited duration. \n\n\t\tBanning Aid to Countries that Aid or Arm Terrorism List States: Anti-Terrorism and Effective Death Penalty Act of 1996\n\nAnother law reinforces the authority of the President to sanction governments that provide aid or sell arms to Iran (and other terrorism list countries). Under Sections 620G and 620H of the Foreign Assistance Act, as added by the Anti-Terrorism and Effective Death Penalty Act of 1996 (Sections 325 and 326 of P.L. 104-132 ), the President is required to withhold foreign aid from any country that provides to a terrorism list country financial assistance or arms. Waiver authority is provided. Section 321 of that act also makes it a criminal offense for U.S. persons to conduct financial transactions with terrorism list governments. \nNo foreign assistance cuts or other penalties under this law have been announced. \n\n\t\tProliferation-Related Provision of the Iran Sanctions Act\n\nAs noted above, Section 5(b)(1) of ISA subjects to ISA sanctions firms or persons determined to have sold to Iran (1) technology useful for weapons of mass destruction (WMD) or (2) \"destabilizing numbers and types\" of advanced conventional weapons. This, and Section 5(b)(2) pertaining to joint ventures to mine uranium, are the only provisions of ISA that were not waived to implement the JCPOA. \nAs noted, no sanctions under this section have been imposed.\n\n\t\tIran-North Korea-Syria Nonproliferation Act\n\nThe Iran Nonproliferation Act ( P.L. 106-178 , signed in March 2000) is now called the Iran-North Korea-Syria Nonproliferation Act (INKSNA) after amendments applying its provisions to North Korea and to Syria. It authorizes sanctions\u2014for two years unless renewed\u2014on foreign persons (individuals or corporations, not governments) that are determined in a report by the Administration to have assisted Iran's WMD programs. Sanctions imposed include (1) a prohibition on U.S. exportation of arms and dual use items to the sanctioned entity; and (2) a ban on U.S. government procurement and of imports to the United States from the sanctioned entity under Executive Order 12938 (of November 14, 1994). INKSNA also banned U.S. extraordinary payments to the Russian Aviation and Space Agency in connection with the international space station unless the President certified that the agency had not transferred any WMD or missile technology to Iran within the year prior. \n\n\t\t\tImplementation\n\nEntities that have been sanctioned under this law are listed in the tables at the end of the report. Designations more than two years old are no longer active. The JCPOA required the United States to suspend INKSNA sanctions against \"the acquisition of nuclear-related commodities and services for nuclear activities contemplated in the JCPOA,\" but no entities were \"delisted\" to implement the JCPOA. \n\n\t\tExecutive Order 13382 on Proliferation-Supporting Entities\n\n\t\t\tStatus: Order Remained in Force, but Numerous Entities \"Delisted\"\n\nExecutive Order 13382 (June 28, 2005) allows the President to block the assets of proliferators of weapons of mass destruction (WMD) and their supporters under the authority granted by the International Emergency Economic Powers Act (IEEPA; 50 U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et seq.), and Section 301 of Title 3, United States Code . \nImplementation. The numerous entities sanctioned under the order for dealings with Iran are listed in the tables at the end of this report. Entities delisted and which were to be delisted in accordance with the JCPOA (in October 2023) are in italics and boldface type, respectively. All entities delisted to implement the JCPOA are to be relisted on November 5, 2018, according to the Treasury Department. \n\n\t\tArms Transfer and Missile Sanctions: The Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44)\n\nThe CAATSA law, signed on August 2, 2017, mandates sanctions on arms sales to Iran and on entities that \"materially contribute\" to Iran's ballistic missile program. \nSection 104 references implementation of E.O. 13382, which sanctions entities determined by the Administration to be assisting Iran's ballistic missile program. The section mandates that the Administration impose the same sanctions as in E.O. 13382 on any activity that materially contributes to Iran's ballistic missile program or any system capable of delivering WMD. The section also requires an Administration report every 180 days on persons (beginning on January 29, 2018) contributing to Iran's ballistic missile program in the preceding 180 days. Section 107 mandates imposition of sanctions (the same sanctions as those contained in E.O. 13382) on any person that the President determines has sold or transferred to or from Iran, or for the use in or benefit of Iran: the weapons systems specified as banned for transfer to or from Iran in U.N. Security Council Resolution 2231. These include most major combat systems such as tanks, armored vehicles, warships, missiles, combat aircraft, and attack helicopters. The provision goes somewhat beyond prior law that mandates sanctions mainly on sales to Iran of \"destabilizing numbers and types of advanced conventional weapons.\" The imposition of sanctions is not required if the President certifies that a weapons transfer is in the national security of the United States; that Iran no longer poses a significant threat to the United States or U.S. allies; and that the Iranian government no longer satisfies the requirements for designation as a state sponsor of terrorism. \n\n\t\tForeign Aid Restrictions for Named Suppliers of Iran\n\nSome past foreign aid appropriations have withheld U.S. assistance to the Russian Federation unless it terminates technical assistance to Iran's nuclear and ballistic missiles programs. The provision applied to the fiscal year for which foreign aid is appropriated. Because U.S. aid to Russia generally has not gone to the Russian government, little or no funding was withheld as a result of the provision. The JCPOA makes no reference to any U.S. commitments to waive this sanction or to request that Congress not enact such a provision. \n\n\t\tSanctions on \"Countries of Diversion Concern\"\n\nTitle III of CISADA established authorities to sanction countries that allow U.S. technology that Iran could use in its nuclear and WMD programs to be re-exported or diverted to Iran. Section 303 of CISADA authorizes the President to designate a country as a \"Destination of Diversion Concern\" if that country allows substantial diversion of goods, services, or technologies characterized in Section 302 of that law to Iranian end-users or Iranian intermediaries. The technologies specified include any goods that could contribute to Iran's nuclear or WMD programs, as well as goods listed on various U.S. controlled-technology lists such as the Commerce Control List or Munitions List. For any country designated as a country of diversion concern, there would be prohibition of denial for licenses of U.S. exports to that country of the goods that were being re-exported or diverted to Iran. \nImplementation : To date, no country has been designated a \"Country of Diversion Concern.\" Some countries adopted or enforced anti-proliferation laws apparently to avoid designation. \n\n\tFinancial\/Banking Sanctions\n\nU.S. efforts to shut Iran out of the international banking system were a key component of the 2010-2016 international sanctions regime. \n\n\t\tTargeted Financial Measures\n\n\t\t\tStatus: Initiative Suspended during JCPOA Implementation\n\nDuring 2006-2016, the Department of the Treasury used long-standing authorities to persuade foreign banks to cease dealing with Iran, in part by briefing them on Iran's use of the international financial system to fund terrorist groups and acquire weapons-related technology. According to a GAO report of February 2013, the Department of the Treasury made overtures to 145 banks in 60 countries, including several visits to banks and officials in the UAE, and convinced at least 80 foreign banks to cease handling financial transactions with Iranian banks. Upon implementation of the JCPOA, the Treasury Department largely dropped this initiative, and instead largely sought to encourage foreign banks to conduct normal transactions with Iran. \n\n\t\tBan on Iranian Access to the U.S. Financial System\/Use of Dollars\n\n\t\t\tStatus: Remains in Force\n\nThere is no blanket ban on foreign banks or persons paying Iran for goods using U.S. dollars. But, U.S. regulations (ITRs, C.F.R. Section 560.516) ban Iran from direct access to the U.S. financial system. The regulations allow U.S. banks to send funds (including U.S. dollars) to Iran for allowed (licensed) transactions. However, the U.S. dollars cannot be directly transferred to an Iranian bank, but must instead be channeled through an intermediary financial institution, such as a European bank. Section 560.510 specifically allows for U.S. payments to Iran to settle or pay judgments to Iran, such as those reached in connection with the U.S.-Iran Claims Tribunal, discussed above. However, the prohibition on dealing directly with Iranian banks still applies. \nOn November 6, 2008, the Department of the Treasury broadened restrictions on Iran's access to the U.S. financial system by barring U.S. banks from handling any transactions with foreign banks that are handling transactions on behalf of an Iranian bank (\"U-turn transactions\"). This means a foreign bank or person that pays Iran for goods in U.S. dollars cannot access the U.S. financial system (through a U.S. correspondent account, which most foreign banks have) to acquire dollars for any transaction involving Iran. This ban remained in effect under the JCPOA implementation, and Iran argued that these U.S. restrictions deter European and other banks from reentering the Iran market, as discussed later in this report. \n\n\t\t\tRecent Developments\n\nThen-Treasury Secretary Lew in March and April 2016 suggested the Obama Administration was considering licensing transactions by foreign (non-Iranian) clearinghouses to acquire dollars that might facilitate transactions with Iran, without providing Iran with dollars directly. However, doing so was not required by the JCPOA and the Administration declined to take that step. Instead, the Obama Administration encouraged bankers to reenter the Iran market without fear of being sanctioned. The Trump Administration has not, at any time, expressed support for allowing Iran greater access to dollars. The reimposition of U.S. sanctions has further reduced the willingness and ability of foreign firms to use dollars in transactions with Iran.\n\n\t\t\tPunishments\/Fines Implemented against Some Banks.\n\nThe Department of the Treasury and other U.S. authorities has announced financial settlements (forfeiture of assets and imposition of fines) with various banks that have helped Iran (and other countries such as Sudan, Syria, and Cuba) access the U.S. financial system. The amounts were reportedly determined, at least in part, by the value, number, and duration of illicit transactions conducted, and the strength of the evidence collected by U.S. regulators. (As noted above, the FY2016 Consolidated Appropriation, P.L. 114-113 , provides for use of the proceeds of the settlements above to pay compensation to victims of Iranian terrorism.)\n\n\t\tCISADA: Sanctioning Foreign Banks That Conduct Transactions with Sanctioned Iranian Entities\n\n\t\t\tStatus: Remained in force after JCPOA, but Iranian banks \"delisted.\" Delisted banks will be \"relisted\" as of November 5, 2018.\n\nSection 104 of CISADA requires the Secretary of the Treasury to forbid U.S. banks from opening new \"correspondent accounts\" or \"payable-through accounts\" (or force the cancellation of existing such accounts) for \nany foreign bank that transactions business with an entity that is sanctioned by Executive Order 13224 or 13382 (terrorism and proliferation activities, respectively). These orders are discussed above. A full list of such entities is at the end of this report, and entities \"delisted\" are in italics. any foreign bank determined to have facilitated Iran's efforts to acquire WMD or delivery systems or provide support to groups named as Foreign Terrorist Organizations (FTOs) by the United States. any foreign bank that facilitates \"the activities of\" an entity designated under by U.N. Security Council resolutions that sanction Iran. any foreign bank that transacts business with the IRGC or any of its affiliates designated under any U.S. Iran-related executive order. any foreign bank that does business with Iran's energy, shipping, and shipbuilding sectors, including with NIOC, NITC, and IRISL. (This provision was contained in Section 1244(d) of the Iran Freedom and Counterproliferation Act, IFCA, discussed below, but d id not specifically amend CISADA . The provision was waived to implement the JCPOA. \nOne additional intent of the provision was to reduce the ability of Iran's pivotal import-export community (referred to in Iran as the \"bazaar merchants\" or \" bazaaris \") from obtaining \"letters of credit\" (trade financing) to buy or sell goods. The Department of the Treasury has authority to determine what constitutes a \"significant\" financial transaction. \n\n\t\t\tImplementation of Section 104: Sanctions Imposed\n\nOn July 31, 2012, the United States sanctioned the Bank of Kunlun in China and the Elaf Islamic Bank in Iraq under Section 104 of CISADA. On May 17, 2013, the Department of the Treasury lifted sanctions on Elaf Islamic Bank in Iraq, asserting that the bank had reduced its exposure to the Iranian financial sector and stopped providing services to the Export Development Bank of Iran. \n\n\t\tIran Designated a Money-Laundering Jurisdiction\/FATF\n\n\t\t\tStatus: Central Bank Remained Designated Under this Section during JCPOA\n\nOn November 21, 2011, the Obama Administration identified Iran as a \"jurisdiction of primary money laundering concern\" under Section 311 of the USA Patriot Act (31 U.S.C. 5318A), based on a determination that Iran's financial system, including the Central Bank, constitutes a threat to governments or financial institutions that do business with Iran's banks. The designation imposed additional requirements on U.S. banks to ensure against improper Iranian access to the U.S. financial system. \nThe Administration justified the designation as implementation of recommendations of the Financial Action Task Force (FATF)\u2014a multilateral standard-setting body for anti-money laundering and combating the financing of terrorism (AML\/CFT). In 2016, the FATF characterized Iran as a \"high-risk and non-cooperative jurisdiction\" with respect to AMF\/CFT issues. On June 24, 2016, the FATF welcomed an \"Action Plan\" filed by Iran to address its strategic AML\/CFT deficiencies and decided to suspend, for one year, \"countermeasures\"\u2014mostly voluntary recommendations of increased due diligence with respect to Iran transactions\u2014pending an assessment of Iran's implementation of its Action Plan. The FATF continued the suspension of countermeasures in June and November 2017, and February 2018. \nOn October 19, 2018, the FATF stated that Iran had only acted on 9 out of 10 of its guidelines, and that Iran's Majles had not completed legislation to adopt international standards. The FATF continued to suspend countermeasures and gave Iran until February 2019 to fully accede to all FATF guidelines. On February 22, 2019, the FATF stated that countermeasures remained suspended but that \"If by June 2019, Iran does not enact the remaining legislation in line with FATF Standards, then the FATF will require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran. The FATF also expects Iran to continue to progress with enabling regulations and other amendments.\" \nOn October 12, 2018, the Treasury Department Financial Crimes Enforcement Network (FINCEN) issued a warning to U.S. banks to guard against likely Iranian efforts to evade U.S. financial sanctions. Earlier, in January 1, 2013, OFAC issued an Advisory to highlight Iran's use of hawalas (traditional informal banking and money exchanges) in the Middle East and South Asia region to circumvent U.S. financial sanctions. Because the involvement of an Iranian client is often opaque, banks have sometimes inadvertently processed hawala transactions involving Iranians.\n\n\t\tUse of the SWIFT System\n\nSection 220 of the ITRSHRA required reports on electronic payments systems, such as the Brussels-based SWIFT (Society of Worldwide Interbank Financial Telecommunications), that do business with Iran. That law also authorizes\u2014but neither it nor any other U.S. law or executive order mandates\u2014sanctions against SWIFT or against electronic payments systems. Still, many transactions with Iran are subject to U.S. sanctions, no matter the payment mechanism. \n\n\tCross-Cutting Secondary Sanctions: The Iran Freedom and Counter-Proliferation Act (IFCA)\n\n\t\tStatus: Waived to implement JCPOA; will go back into effect as specified.\n\nThe National Defense Authorization Act for FY2013 ( H.R. 4310 , P.L. 112-239 , signed January 2, 2013)\u2014Subtitle D, The Iran Freedom and Counter-Proliferation Act (IFCA), sanctions a wide swath of Iran's economy, touching several sectors. Its provisions on Iran's human rights record are discussed in the section on \" Measures to Sanction Human Rights Abuses and Promote\u00a0the\u00a0Opposition .\"\nSection 1244 of IFCA mandates the blocking of U.S.-based property of any entity (Iranian or non-Iranian) that provides goods, services, or other support to any Iranian entity designated by the Treasury Department as a \"specially designated national\" (SDN). The tables at the end of this report show that hundreds of Iranian entities are designated as SDNs under various executive orders. The Iranian entities designated for civilian economic activity were \"delisted\" to implement the JCPOA, but will be relisted on November 5, 2018. Section 1247 of IFCA prohibits from operating in the United States any bank that knowingly facilitates a financial transaction on behalf of an Iranian SDN. The section also specifically sanctions foreign banks that facilitate payment to Iran for natural gas unless the funds owed to Iran for the gas are placed in a local account. The section provides for a waiver for a period of 180 days. \nSeveral sections of IFCA impose ISA sanctions on entities determined to have engaged in specified transactions below. ( The provision s apply ISA sanctions but do not amend ISA .) \nEnergy, Shipbuilding, and Shipping Sector . Section 1244 mandates 5 out of 12 ISA sanctions on entities that provide goods or services to Iran's energy, shipbuilding, and shipping sectors, or to port operations there\u2014or which provide insurance for such transactions. The sanctions d o not apply when such transactions involve d purchases of Iranian oil by countries that have exemptions under P.L. 112-81 , or to the purchase of natural gas from Iran . This section goes back into effect after a 180-day wind-down period (by November 4, 2018). Dealings in Precious Metals . Section 1245 imposes 5 out of 12 ISA sanctions on entities that provide precious metals to Iran (including gold) or semifinished metals or software for integrating industrial processes. The section affected foreign firms that transferred these items or other precious metals to Iran in exchange for\u00a0oil or any other product. There is no exception to this sanction for countries exempted under P.L. 112-81 . This section went back into effect after a 90-day wind-down period (August 6, 2018). Insurance for Related Activities . Section 1246 imposes 5 out of 12 ISA sanctions on entities that provide underwriting services, insurance, or reinsurance for any transactions sanctioned under any executive order on Iran, ISA, CISADA, the Iran Threat Reduction Act, INKSNA, other IFCA provisions, or any other Iran sanction, as well as to any Iranian SDN. ( There is no exception for countries exempted under P.L. 112-81 .) This provision goes back into effect after a 180-day wind-down period (by November 4, 2018). Exception for Afghanistan Reconstruction . Section 1244(f) of IFCA provides a sanctions exemption for transactions that provide reconstruction assistance for or further the economic development of Afghanistan. See JCPOA waivers below. \n\n\t\tImplementation\n\nOn August 29, 2014, the State Department sanctioned UAE-based Goldentex FZE in accordance with IFCA for providing support to Iran's shipping sector. It was \"delisted\" from sanctions on Implementation Day of the JCPOA. \nOn October 16, 2018, OFAC designated as terrorism-related entities several Iranian industrial companies on the grounds that they provide the Basij s ecurity force with revenue to support its operations in the Middle East. The designations, pursuant to E.O. 13224, mean that foreign firms that transact business with these Iranian industrial firms could be subject to U.S. sanctions under IFCA. The industrial firms\u2014which were not previously designated and were therefore not \"relisted\" as SDNs on November 5, 2018, were Technotar Engineering Company; Iran Tractor Manufacturing Company; Iran's Zinc Mines Development Company and several related zinc producers; and Esfahan Mobarakeh Steel Company, the largest steel producer in the Middle East. \n\n\t\tExecutive Order 13608 on Sanctions Evasion\n\nExecutive Order 13608 of May 1, 2012, gives the Department of the Treasury the ability to identify and sanction (cutting them off from the U.S. market) foreign persons who help Iran (or Syria) evade U.S. and multilateral sanctions. \nSeveral persons and entities have been designated for sanctions, as shown in the tables at the end of the report. \n\n\tSanctions on Iran's Cyber and Transnational Criminal Activities\n\n\t\tStatus: All in Force during JCPOA Period\n\nThe Trump Administration appears to be making increasing use of executive orders issued during the Obama Administration to sanction Iranian entities determined to be engaged in malicious cyberactivities or in transnational crime. Iranian entities have attacked, or attempted to attack, using cyberactivity, infrastructure in the United States, Saudi Arabia, and elsewhere. Iran's ability to conduct cyberattacks appears to be growing. Separately, the Justice Department has prosecuted Iranian entities for such activity. The section below discusses Executive Order 13694 on malicious cyberactivities and Executive Order 13581 on transnational crime. \n\n\t\tExecutive Order 13694 (April 1, 2015)\n\nExecutive Order 13694 blocks U.S.-based property of foreign entities determined to have engaged in cyber-enabled activities that (1) harm or compromise the provision of services by computers or computer networks supporting in the critical infrastructure sector; (2) compromise critical infrastructure; (3) disrupt computers or computer networks; or (4) cause misappropriation of funds, trade secrets, personal identifiers, or financial information for financial advantage or gain. \n\n\t\tExecutive Order 13581 (July 25, 2011)\n\nExecutive Order 13581 blocks the U.S.-based property of entities determined (1) to be a foreign person that constitutes a significant transnational criminal organization; (2) to have materially assisted any person sanctioned under this order; or (3) to be owned or controlled by or to have acted on behalf of a person sanctioned under the order. \n\n\t\t\tImplementation\n\nIran-related entities sanctioned under the Orders are listed in the tables at the end of this report. \n\n\tDivestment\/State-Level Sanctions\n\nSome U.S. laws require or call for divestment of shares of firms that conduct certain transactions with Iran. A divestment-promotion provision was contained in CISADA, providing a \"safe harbor\" for investment managers who sell shares of firms that invest in Iran's energy sector at levels that would trigger U.S. sanctions under the Iran Sanctions Act. As noted above, Section 219 of the ITRSHRA of 2012 requires companies to reports to the Securities and Exchange Commission whether they or any corporate affiliate has engaged in any transactions with Iran that could trigger sanctions under ISA, CISADA, and E.O 13382 and 13224. \nImplementation : Numerous states have adopted laws, regulations, and policies to divest from\u2014or avoid state government business with\u2014foreign companies that conduct certain transactions with Iran. The JCPOA requires the United States to work with state and local governments to ensure that state-level sanctions do not conflict with the sanctions relief provided by the federal government under the JCPOA. Most states that have adopted Iran sanctions continue to enforce those measures. \n\n\tSanctions and Sanctions Exemptions to Support Democratic Change\/Civil Society in Iran\n\n\t\tPost-JCPOA Status: Virtually All Sanctions in This Section Remain in Effect. No Entities \"Delisted.\"39\n\nA trend in U.S. policy and legislation since the June 12, 2009, election-related uprising in Iran has been to support the ability of the domestic opposition in Iran to communicate and to sanction Iranian officials that commit human rights abuses. Sanctions on the IRGC represent one facet of that trend because the IRGC is a key suppressive instrument. Individuals and entities designated under the executive orders and provisions discussed below are listed in the tables at the end of this report. For those provisions that ban visas to enter the United States, the State Department interprets the provisions to apply to all members of the designated entity. \n\n\t\tExpanding Internet and Communications Freedoms\n\nSome laws and Administration action focus on expanding internet freedom in Iran or preventing the Iranian government from using the internet to identify opponents. Subtitle D of the FY2010 Defense Authorization Act ( P.L. 111-84 ), called the \"VOICE\" (Victims of Iranian Censorship) Act, contained several provisions to increase U.S. broadcasting to Iran and to identify (in a report to be submitted 180 days after enactment) companies that are selling Iran technology equipment that it can use to suppress or monitor the internet usage of Iranians. The act authorized funds to document Iranian human rights abuses since the June 2009 Iranian presidential election. Section 1241 required an Administration report by January 31, 2010, on U.S. enforcement of sanctions against Iran and the effect of those sanctions on Iran. \n\n\t\t\tCountering Censorship of the Internet: CISADA, E.O. 13606, and E.O. 13628\n\nSection 106 of CISADA prohibits U.S. government contracts with foreign companies that sell technology that Iran could use to monitor or control Iranian usage of the internet. The provisions were directed, in part, against Nokia (Finland) and Siemens (Germany) for reportedly selling internet monitoring and censorship technology to Iran in 2008. The provision was derived from the Reduce Iranian Cyber-Suppression Act (111 th Congress, S. 1475 and H.R. 3284 ). On April 23, 2012, President Obama issued an executive order (13606) sanctioning persons who commit \"Grave Human Rights Abuses by the Governments of Iran and Syria via Information Technology (GHRAVITY).\" The order blocks the U.S.-based property and essentially bars U.S. entry and bans any U.S. trade with persons and entities listed in an Annex and persons or entities subsequently determined to be (1) operating any technology that allows the Iranian (or Syrian) government to disrupt, monitor, or track computer usage by citizens of those countries or assisting the two governments in such disruptions or monitoring; or (2) selling to Iran (or Syria) any technology that enables those governments to carry out such actions. Section 403 of the ITRSHRA sanctions (visa ban, U.S.-based property blocked) persons\/firms determined to have engaged in censorship in Iran, limited access to media, or\u2014for example, a foreign satellite service provider\u2014supported Iranian government jamming or frequency manipulation. On October 9, 2012, the President issued Executive Order 13628 implementing Section 403 by blocking the property of persons\/firms determined to have committed the censorship, limited free expression, or assisted in jamming communications. The order also specifies the sanctions authorities of the Department of State and of the Treasury.\n\n\t\t\tLaws and Actions to Promote Internet Communications by Iranians\n\nOn March 8, 2010, OFAC amended the Iran Transactions Regulations to allow for a general license for providing free mass market software to Iranians. The ruling incorporated major features of the Iran Digital Empowerment Act ( H.R. 4301 in the 111 th Congress). The OFAC determination required a waiver of the provision of the Iran-Iraq Arms Nonproliferation Act (Section 1606 waiver provision) discussed above. Section 103(b)(2) of CISADA exempts from the U.S. export ban on Iran equipment to help Iranians communicate and use the internet. On March 20, 2012, the Department of the Treasury amended U.S.-Iran trade regulations to permit several additional types of software and information technology products to be exported to Iran under general license, provided the products were available at no cost to the user . The items included personal communications, personal data storage, browsers, plug-ins, document readers, and free mobile applications related to personal communications. On May 30, 2013, the Department of the Treasury amended the trade regulations further to allow for the sale, on a cash basis (no financing), to Iran of equipment that Iranians can use to communicate (e.g., cellphones, laptops, satellite internet, website hosting, and related products and services). \n\n\t\tMeasures to Sanction Human Rights Abuses and Promote the Opposition\n\nSome legislation has sought to sanction regime officials involved in suppressing the domestic opposition in Iran or in human rights abuses more generally. Much of this legislation centers on amendments to Section 105 of CISADA. \nSanctions against Iranian Human Rights Abusers. Section 105 of CISADA bans travel and freezes the U.S.-based assets of those Iranians determined to be human rights abusers. On September 29, 2010, pursuant to Section 105, President Obama issued Executive Order 13553 providing for CISADA sanctions against Iranians determined to be responsible for or complicit in post-2009 Iran election human rights abuses. Those sanctioned under the provisions are listed in the tables at the end of this report. Section 105 terminates if the President certifies to Congress that Iran has (1) unconditionally released all political prisoners detained in the aftermath of the June 2009 uprising; (2) ceased its practices of violence, unlawful detention, torture, and abuse of citizens who were engaged in peaceful protest; (3) fully investigated abuses of political activists that occurred after the uprising; and (4) committed to and is making progress toward establishing an independent judiciary and respecting human rights. Sanctions on Sales of Anti-Riot Equipment. Section 402 of the ITRSHRA amended Section 105 by adding provisions that sanction (visa ban, U.S. property blocked) any person or company that sells the Iranian government goods or technologies that it can use to commit human rights abuses against its people. Such goods include firearms, rubber bullets, police batons, chemical or pepper sprays, stun grenades, tear gas, water cannons, and like goods. In addition, ISA sanctions are to be imposed on any person determined to be selling such equipment to the IRGC. Sanctions a gainst Iranian Government Broadcasters \/IRIB . Section 1248 of IFCA (Subtitle D of P.L. 112-239 ) mandates inclusion of the Islamic Republic of Iran Broadcasting (IRIB), the state broadcasting umbrella group, as a human rights abuser. IRIB was designated as an SDN on February 6, 2013, under E.O. 13628 for limiting free expression in Iran. On February 14, 2014, the State Department waived IFCA sanctions under Sections 1244, 1246, or 1247, on any entity that provides satellite connectivity services to IRIB. The waiver has been renewed each year since. Sanctions a gainst Iranian Profiteers . Section 1249 of IFCA amends Section 105 by imposing sanctions on any person determined to have engaged in corruption or to have diverted or misappropriated humanitarian goods or funds for such goods for the Iranian people. The measure is intended to sanction Iranian profiteers who are, for example, using official connections to corner the market for vital medicines. This provision, which remains in forces, essentially codifies a similar provision of Executive Order 13645. The Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44 ). Section 106 authorizes, but does not require, the imposition of the same sanctions as those prescribed in E.O. 13553 on persons responsible for extrajudicial killings, torture, or other gross violations of internationally recognized human rights against Iranians who seek to expose illegal activity by officials or to defend or promote human rights and freedoms in Iran. The persons to be sanctioned are those named in a report provided 90 days after CAATSA enactment (by October 31, 2017) and annually thereafter. The provision is similar to E.O. 13553 but, in contrast, applies broadly to Iranian human rights abuses and is not limited to abuses connected to suppressing the June 2009 uprising in Iran. Additional designations of Iranian human rights abusers under E.O. 13533 were made subsequent to the enactment of CAATSA and the October 31, 2017, CAATSA report deadline. Separate Visa Bans. On July 8, 2011, the State Department imposed visa restrictions on 50 Iranian officials for participating in political repression in Iran, but it did not name those banned on the grounds that visa records are confidential. The action was taken under the authorities of Section 212(a)(3)(C) of the Immigration and Nationality Act, which renders inadmissible to the United States a foreign person whose activities could have serious consequences for the United States. On May 30, 2013, the State Department announced it had imposed visa restrictions on an additional 60 Iranian officials on similar grounds. High Level Iranian Visits . There are certain exemptions in the case of high level Iranian visits to attend U.N. meetings in New York. The U.N. Participation Act (P.L. 79-264) provides for U.S. participation in the United Nations and as host nation of U.N. headquarters in New York, and visas are routinely issued to heads of state and their aides attending these meetings. In September 2012, the State Department refused visas for 20 members of Iranian President Ahmadinejad's traveling party on the grounds of past involvement in terrorism or human rights abuses. Still, in line with U.S. obligations under the act, then-President Ahmadinejad was allowed to fly to the United States on Iran Air, even though Iran Air was at the time a U.S.-sanctioned entity, and his plane reportedly was allowed to park at Andrews Air Force base. \n\n\tU.N. Sanctions\n\nU.N. sanctions on Iran, enacted by the Security Council under Article 41 of Chapter VII of the U.N. Charter, applied to all U.N. member states. During 2006-2008, three U.N. Security Council resolutions\u20141737, 1747, and 1803\u2014imposed sanctions on Iran's nuclear program and weapons of mass destruction (WMD) infrastructure. Resolution 1929, adopted on June 9, 2010, was key for its assertion that major sectors of the Iranian economy support Iran's nuclear program\u2014giving U.N. member states authorization to sanction civilian sectors of Iran's economy. It also imposed strict limitations on Iran's development of ballistic missiles and imports and exports of arms. \n\n\t\tResolution 2231 and U.N. Sanctions Eased\n\nU.N. Security Council Resolution 2231 of July 20, 2015\nendorsed the JCPOA and superseded all prior Iran-related resolutions as of Implementation Day (January 16, 2016). lifted all U.N. sanctions discussed above. The Resolution did not continue the mandate of the \"the panel of experts\" and the panel ended its operations. \"calls on\" Iran not to develop ballistic missiles \"designed to be capable\" of delivering a nuclear weapon for a maximum of eight years from Adoption Day (October 18, 2015). The restriction expires on October 18, 2023. And, 2231 is far less restrictive on Iran's missile program than is Resolution 1929. No specific sanctions are mandated in the Resolution if Iran conducted missile tests inconsistent with the Resolution. The JCPOA did not impose any specific missile-related requirements. requires Security Council approval for Iran to export arms or to purchase any arms (major combat systems named in the Resolution) for a maximum of five years from Adoption Day (until October 18, 2020). The JCPOA does not impose arms requirements. \nThe U.S. withdrawal from the JCPOA did not change the status of Resolution 2231. \n\n\t\t\tIran Compliance Status\n\nU.N. and International Atomic Energy Agency reports since the JCPOA began implementation have stated that Iran is complying with its nuclear obligations under the JCPOA. That assessment was corroborated by U.S. intelligence leaders in January 29, 2019, testimony before the Senate Select Committee on Intelligence. \nU.N. reports on Iranian compliance with Resolution 2231 have noted assertions by several U.N. Security Council members, including the United States, that Iranian missile tests have been inconsistent with the Resolution. U.S. officials have called some of Iran's launches of its Khorramshahr missile as violations of the Resolution. The reports required by Resolution 2231, as well as those required by other Resolutions pertaining to various regional crises, such as that in Yemen, also note apparent violations of the Resolution 2231 restrictions on Iran's exportation of arms. The Security Council is responsible for prescribing penalties on Iran for violations, and no U.N. Security Council actions have been taken against Iran for these violations to date. \n\n\t\t\tU.N. List of Sanctioned Entities\n\nUnder Paragraph 6(c) of Annex B of Resolution 2231, entities sanctioned by the previous Iran-related Resolutions would continue to be sanctioned for up to eight years from Adoption Day (until October 2023). An attachment to the Annex listed 36 entities for which this restriction would no longer apply (entities \"delisted\") as of Implementation Day. Most of the entities immediately delisted were persons and entities connected to permitted aspects of Iran's nuclear program and its civilian economy. According to press reports, two entities not on the attachment list, Bank Sepah and Bank Sepah International PLC, also were delisted on Implementation Day by separate Security Council action. Paragraph 6(c) provides for the Security Council to be able to delist a listed entity at any time, as well as to add new entities to the sanctions list. Delisted entities are in italics in the table of U.N.-listed sanctioned entities at the end of the report. \n\n\tSanctions Application under Nuclear Agreements\n\nThe following sections discuss sanctions relief provided under the November 2013 interim nuclear agreement (JPA) and, particularly, the JCPOA. Later sections discuss the degree to which Iran is receiving the expected benefits of sanctions relief. \n\n\t\tSanctions Eased by the JPA\n\nU.S. officials said that the JPA provided \"limited, temporary, targeted, and reversible\" easing of international sanctions. Under the JPA (in effect January 20, 2014-January 16, 2016) \nIran's oil customers were not required reduce their oil purchases from Iran because waivers were issued for Section 1245(d)(1) of the National Defense Authorization Act for FY2012 ( P.L. 112-81 ) and Section 1244c(1) of IFCA. The Waivers of ITRSHRA and ISA provisions were issued to permit transactions with NIOC. The European Union amended its regulations to allow shipping insurers to provide insurance for ships carrying oil from Iran. A waiver of Section 1245(d)(1) of IFCA allowed Iran to receive directly $700 million per month in hard currency from oil sales and $65 million per month to make tuition payments for Iranian students abroad (paid directly to the schools). Executive Orders 13622 and 13645 and several provisions of U.S.-Iran trade regulations were suspended. Several sections of IFCA were waived to enable Iran to sell petrochemicals and trade in gold and other precious metals, and to conduct transactions with foreign firms involved in Iran's automotive manufacturing. Executive Order 13382 provisions and certain provisions of U.S.-Iran trade regulations were suspended for equipment sales to Iran Air. The United States licensed some safety-related repairs and inspections for certain Iranian airlines and issued a new \"Statement of Licensing Policy\" to enable U.S. aircraft manufacturers to sell equipment to Iranian airlines. The JPA required that the P5+1 \"not impose new nuclear-related sanctions ... to the extent permissible within their political systems.\" \n\n\t\tSanctions Easing under the JCPOA and U.S. Reimposition\n\nUnder the JCPOA, sanctions relief occurred at Implementation Day (January 16, 2016), following IAEA certification that Iran had completed stipulated core nuclear tasks. U.S. secondary sanctions were waived or terminated, but most sanctions on direct U.S.-Iran trade. The secondary sanctions eased included (1) sanctions that limited Iran's exportation of oil and sanction foreign sales to Iran of gasoline and energy sector equipment, and which limit foreign investment in Iran's energy sector; (2) financial sector sanctions; and (3) sanctions on Iran's auto sector and trading in the rial . The EU lifted its ban on purchases of oil and gas from Iran; and Iranian banks were readmitted to the SWIFT electronic payments system. All U.N. sanctions were lifted. \nAll of the U.S. sanctions that were eased will go back into effect on November 4, 2018, in accordance with the May 8, 2018, announcement that the United States will cease participating in the JCPOA. The Administration has stated that the purpose of reimposing the sanctions is to deny Iran the revenue with which to conduct regional malign activities and advance its missile, nuclear, and conventional weapons programs. \nThe sanctions that went back into effect on August 7, 2018 (90-day wind-down period), are on\nthe purchase or acquisition of U.S. bank notes by Iran; Iran's trade in gold and other precious metals; transactions in the Iranian rial ; activities relating to Iran's issuing of sovereign debt; transactions with Iran in graphite, aluminum, steel, coal, and industrial software; importation of Iranian luxury goods to the United States; and the sale to Iran of passenger aircraft (and aircraft with substantial U.S. content). \nThe sanctions that went back into effect on November 5, 2018, are on \npetroleum-related transactions with Iran. port operators and energy, shipping, and shipbuilding sectors; and transactions by foreign banks with Iran's Central Banks (including the provision that restricts Iran's access to hard currency held in banks abroad).\n\n\t\t\tU.S. Laws Waived and Executive Orders Terminated, and Reimposition52\n\nThe laws below required waivers to implement U.S. commitments under the JCPOA, and all waivers were revoked in concert with the Trump Administration exit from the accord. All the provisions discussed below went back into effect on November 5, 2018. \nIran Sanctions Act . The blanket energy\/economic-related provisions of the ISA of P.L. 104-172 , as amended. (Section 4(c)(1)(A) waiver provision.) The WMD-related provision of ISA was not waived. FY2012 NDAA . Section 1245(d) of the National Defense Authorization Act for FY2012 ( P.L. 112-81 ) imposes sanctions on foreign banks of countries that do not reduce Iran oil imports. Iran Threat Reduction and Syria Human Rights Act ( P.L. 112-158 ) . Sections 212 and 213\u2014the economy-related provisions of the act\u2014were waived. The human rights-related provisions of the law were not waived. Iran Freedom and Counter-proliferation Act . Sections 1244, 1245, 1246, and 1247 of the Iran Freedom and Counter-Proliferation Act (Subtitle D of P.L. 112-239 ). The core provision of CISADA ( P.L. 111-195 ) that sanctions foreign banks was not waived, but most listed Iranian banks were \"delisted\" to implement the JCPOA, thereby making this CISADA provision largely moot. The Administration relisted all delisted Iranian banks on November 5, 2018. Executive Orders: 13574, 13590, 13622, 13645, and Sections 5-7 and 15 of Executive Order 13628 were revoked outright by Executive Order 13716. The orders were reinstated on August 6, 2018, by Executive Order 13846. The United States \"delisted\" for sanctions the specified Iranian economic entities and personalities listed in Attachment III of the JCPOA, including the National Iranian Oil Company (NIOC), various Iranian banks, and many energy and shipping-related institutions. That step enabled foreign companies\/banks to resume transactions with those entities without risking being penalized by the United States. The tables at the end of the report depict in italics those entities delisted. Entities that were to be delisted on \"Transition Day\" (October 2023) are in bold type. The Administration relisted these entities for secondary sanctions, with selected exceptions (such as the AEOI and 23 subsidiaries), on November 5, 2018. The continued de-listing of the nuclear entities was in order to allow European and other U.S. partners to continue providing civilian nuclear assistance to Iran as permitted under the JCPOA. The JCPOA required the U.S. Administration, by \"Transition Day,\" to request that Congress lift virtually all of the sanctions that were suspended under the JCPOA. No outcome of such a request is mandated. The JCPOA requires all U.N. sanctions to terminate after 10 years of adoption (\"Termination Day\"). The U.S.-related provisions are rendered moot by the U.S. exit from the JCPOA.\n\n\t\t\t\tExceptions and Waivers Provided by the Trump Administration\n\nEven though it has reimposed all U.S. sanctions on Iran, the Trump Administration has issued some exceptions that are provided for under the various U.S. sanctions laws, including the following:\nAs noted above, on November 5, 2018, eight countries were given the SRE to enable them to continue transactions with Iran's Central Bank and to purchase Iranian oil. At an April 10 hearing of the Senate Foreign Relations Committee, Secretary Pompeo appeared to indicate that the SREs would be renewed. However, on April 22 the Administration announced termination of the SREs as of their expiration on May 2, 2019. On May 3, the Administration ended some waivers under IFCA and various antiproliferation laws (discussed above) that allow international technical assistance to Iran's three nuclear sites permitted to operate under the JCPOA\u2014the Fordow facility, the Bushehr nuclear power reactor, and the Arak heavy water plant. The Administration ended the waiver that enabled Rosatom (Russia) to remove Iran's LEU that exceeds the 300kg allowed stockpile, and that allowed Iran to export heavy water that exceeded the limits on that product to Oman. The waiver limitations also will prohibit the expansion of the Bushehr reactor by any supplier. In response, President Rouhani announced that Iran would no longer abide by the JCPOA stockpile limits. The Administration waived Section 1247(e) of IFCA to enable Iraq to continue paying for purchases of natural gas from Iran. The waiver term for that section is up to 180 days, but the Administration has been providing the waiver for 90-day increments. The Administration has issued the permitted IFCA exception for Afghan reconstruction to enable India to continue work at Iran's Chahbahar Port. A U.S. State Department official told Afghan leaders in mid-May 2019 that the exception would continue. The Administration has renewed the licenses of certain firms to enable them to continue developing the Rhum gas field in the North Sea that Iran partly owns. \n\n\t\t\tU.S. Sanctions that Remained in Place during JCPOA and Since\n\nThe JCPOA did not commit the United States to suspend U.S. sanctions on Iran for terrorism or human rights abuses, on foreign arms sales to Iran or sales of proliferation-sensitive technology such as ballistic missile technology, or on U.S.-Iran direct trade (with the selected exceptions of the latter discussed above). The sanctions below remained in place during JCPOA implementation and remain in effect now: \nE.O. 12959, the ban on U.S. trade with and investment in Iran; E.O. 13224 sanctioning terrorism entities, any sanctions related to Iran's designation as a state sponsor or terrorism, and any other terrorism-related sanctions. The JCPOA does not commit the United States to revoke Iran's placement on the terrorism list; E.O. 13382 sanctioning entities for proliferation; the Iran-Iraq Arms Non-Proliferation Act; the Iran-North Korea-Syria Non-Proliferation Act (INKSNA); the section of ISA that sanctions WMD- and arms-related transactions with Iran; E.O. 13438 on Iran's interference in Iraq and E.O. 13572 on repression in Syria; Executive Orders (E.O. 13606 and E.O. 13628) and the provisions of CISADA, ITRSHRA, and IFCA that pertain to human rights or democratic change in Iran; all sanctions on the IRGC, military, proliferation-related, and human rights- and terrorism-related entities, which were not \"delisted\" from sanctions; Treasury Department regulations barring Iran from access to the U.S. financial system. Foreign banks can pay Iran in dollars out of their existing dollar supply, and the Treasury Department revised its guidance in October 2016 to stress that such transactions are permitted. \n\n\t\t\t\tOther Mechanisms to \"Snap-Back\" Sanctions on Iran\n\nSanctions might have been reimposed by congressional action in accordance with President Trump's withholding of certification of Iranian compliance with the JCPOA. Such certification under the Iran Nuclear Agreement Review Act (INARA, P.L. 114-17 ), was withheld in October 2017 and January and April of 2018. Congress had the opportunity to act on legislation, under expedited procedures, to reimpose sanctions that were suspended. Congress did not take such action.\nAdditionally, the JCPOA (paragraph 36 and 37) contains a mechanism for the \"snap back\" of U.N. sanctions if Iran does not satisfactorily resolve a compliance dispute. According to the JCPOA (and Resolution 2231), the United States (or any veto-wielding member of the U.N. Security Council) would be able to block a U.N. Security Council resolution that would continue the lifting of U.N. sanctions despite Iran's refusal to resolve the dispute. In that case \"... the provisions of the old U.N. Security Council resolutions would be reimposed, unless the U.N. Security Council decides otherwise.\" There are no indications that the Administration plans to try to snap back U.N. sanctions under this process. However, some observers maintain that the Administration assertions in 2019 that Iran was not forthcoming with the IAEA about its past nuclear weapons research could potentially indicate that the Administration will trigger the snap-back mechanism. \n\n\tInternational Implementation and Compliance59\n\nDuring 2010-2016, converging international views on Iran produced global consensus to pressure Iran through sanctions. In addition to asserting that the international community needed to ensure that Iran did not develop a nuclear weapon, some countries joined the sanctions regime to head off unwanted U.S. or other military action against Iran. Some countries cooperated in order to preserve their close relationships with the United States. This section assesses international cooperation and compliance with U.S. sanctions, and cooperation with U.S. sanctions reimposed as a consequence of the May 8, 2018, U.S. exit from the JCPOA. All the JCPOA parties publicly opposed the U.S. decision to exit the JCPOA and have sought to stay engaged in the Iran market in order to continue to provide the JCPOA's economic benefits to Iran. \nA comparison between U.S., U.N., and EU sanctions against Iran is contained in Table A-1 below. Broader issues of Iran's relations with the countries discussed in this section can be found in CRS Report R44017, Iran's Foreign and Defense Policies , by Kenneth Katzman.\n\n\t\tEuropean Union (EU)\n\nAfter the passage of Resolution 1929 in June 2010, European Union (EU) sanctions on Iran became nearly as extensive as those of the United States\u2014a contrast from most of the 1990s, when the EU countries refused to join the 1995 U.S. trade and investment ban on Iran and (along with Japanese creditors) rescheduled $16 billion in Iranian debt bilaterally. In July 2002, Iran tapped international capital markets for the first time since the Islamic revolution, selling $500 million in bonds to European banks and, during 2002-2005, there were negotiations between the EU and Iran on a \"Trade and Cooperation Agreement\" (TCA) that would have lowered the tariffs or increased quotas for Iranian exports to the EU countries. \nUnder the JCPOA, EU sanctions, most of which were imposed in 2012, were lifted, including the following: \nthe ban on oil and gas imports from Iran. a ban on insurance for shipping oil or petrochemicals from Iran and a freeze on the assets of several Iranian firms involved in shipping. a ban on trade with Iran in gold, precious metals, diamonds, and petrochemicals. a freeze of the assets of Iran's Central Bank (except for approved civilian trade). a ban on transactions between European and all Iranian banks and on short-term export credits, guarantees, and insurance. a ban on exports to Iran of graphite, semi-finished metals such as aluminum and steel, industrial software, shipbuilding technology, oil storage capabilities, and flagging or classification services for Iranian tankers and cargo vessels. The cutoff of 14 EU-sanctioned Iranian banks from the Brussels-based SWIFT electronic payments system was lifted, and the Iranian banks resumed accessing the system in February 2016. A large number of entities that had been sanctioned by EU Council decisions and regulations over the years were \"delisted\" by the EU on Implementation Day. \nThe following EU sanctions have remained in place:\nan embargo on sales to Iran of arms, missile technology, other proliferation-sensitive items, and gear for internal repression. a ban on 84 Iranian persons and one entity\u2014all designated for human rights abuses or supporting terrorism\u2014from visiting EU countries, and a freeze on their EU-based assets (see Table C-1 below).\n\n\t\t\tU.S. JCPOA Exit-Driven Divestment\n\nThe EU countries have not reimposed sanctions on Iran and instead have sought to preserve the JCPOA by maintaining economic relations with Iran. However, to avoid risk to their positions in the large U.S. market, more than 100 companies\u2014mostly in Europe\u2014have left Iran since May 2018. In some cases, European companies have stopped doing business with Iran after being threatened with U.S. sanctions by U.S. diplomats. \nSome of the 100+ European companies that have ended investments in or transactions with Iran to avoid reimposed U.S. sanctions include the following:\nOil Importation. No EU state has bought Iranian oil since U.S. energy sanctions went back into effect in November 2018, even though Italy and Greece were given SRE sanctions exemptions from November 5, 2018, until May 2, 2019. Cars. Renault and Citroen of France suspended their post-JCPOA $1 billion investments in a joint venture with two Iranian firms to boost Renault's car production capacity in Iran to 350,000 cars per year. On August 6, 2018, Daimler (manufacturer of Mercedes Benz autos) announced it was suspending its activities in Iran. Volkswagen followed suit one month later. Buses. Scania of Sweden established a factory in Iran to supply the country with 1,350 buses, but it is not clear whether this venture is still operating. Other Industry . German industrial giant Siemens signed an agreement in March 2016 with Iranian firm Mapna to transfer technology to produce gas turbines in Iran, and other contracts to upgrade Iran's railways. Siemens said in late 2018 that it would pursue no new Iranian business. Italy's Danieli industrial conglomerates and Gruppo Ventura have exited the Iranian market. Banking . Several banks have announced since the U.S. JCPOA exit a cessation of transactions with Iran: DZ Bank and Allianz of Germany; Oberbank of Austria; and Banque Wormser Freres of France. In July 2018, at U.S. request, Germany's central bank (Deutsche Bundesbank) introduced a rule change that blocked Iran's withdrawal of $400 million in cash from the Europaische-Iranische Handlesbank (EIH). EIH is reportedly at least partly owned by Iran and has often partnered on transactions with the Bundesbank. (EIH was \"de-listed\" from sanctions by the United States to implement the JCPOA, but was relisted on November 5, 2018.) Energy. On energy issues: Total SA has exited a nearly $5 billion energy investment in South Pars gas field, and it is transferring its stake to its joint venture partner, China National Petroleum Corporation. As noted above, European countries have reduced their purchases of Iranian oil. OMV of Austria has announced it would halt energy development work. Norway's Saga Energy (Norway is not in the EU) signed a $3 billion deal to build solar power plants in Iran, and Italy's FS signed a $1.4 billion agreement to build a high speed railway between Qom and Arak. These deals are still active. Shipping. Hapag-Lloyd of Germany and Denmark's AP Moller-Maersk have ceased shipping services to Iran. Telecommunications. Germany telecommunications firm Deutsche Telekom announced in September 2018 that it would end its business in Iran. Flights. Although air service is not subject to U.S. sanctions per se, Air France and British Air announced in September 2018 that they would cease service to Iran due to lack of demand. Rhum Gas Field . One project, the Rhum gas field in the North Sea that is partly owned by Iranian Oil Company (a subsidiary of NIOC), has been able to continue operating. In part because the field supplies about 5% of Britain's demand for natural gas, in October 2018, the Trump Administration renewed the license of BP and Serica Energy to continue providing goods and services to the field, despite the Iranian involvement in the project. \n\n\t\t\tEuropean Counterefforts\/Special Purpose Vehicle\/INSTEX\n\nThe EU countries, in an attempt to persuade Iran to continue to adhere to the JCPOA, have undertaken several steps that run counter to Trump Administration policy. On August 6, 2018, a 1996 EU \"blocking statute\" that seeks to protect EU firms from reimposed U.S. sanctions took effect. In September 2018, EU countries announced small amounts of development assistance to Iran, apparently in order to demonstrate that the EU is making good faith efforts to provide Iran the economic benefits of the JCPOA. \nThe EU subsequently designed a mechanism under which EU countries could continue to trade with Iran with relative immunity from U.S. sanctions. On September 25, 2018, Germany, France, and Britain, joined by Russia and China, as well as Iran, endorsed the creation of a \"special purpose vehicle\" (SPV)\u2014an entity that would facilitate trade without utilizing dollar-denominated transactions with Iran, and without exposure to the U.S. market. In a January 31, 2019, joint statement, France, Britain, and Germany announced the formal registration of the SPV, formally termed the Instrument for Supporting Trade Exchanges (INSTEX). It is based in France, with German governance, and financial support from the three governments. It will initially focus on the sectors most essential to Iran, including medicines, medical devices, and food, and perhaps eventually provide a platform for non-European countries to trade with Iran in oil and other products. The operation of INSTEX depended on Iran setting up a counterparty vehicle in Europe and, in April 2019, Iran set up that counterparty as the \"Special Trade and Finance Instrument\" (STFI). \nSecretary of State Michael Pompeo denounced the plan as counterproductive, and Vice President Mike Pence, in mid-February 2019, criticized INSTEX as an outright attempt to undermine U.S. sanctions against Iran. Amid reported agitation among Iranian regime hardliners to exit the JCPOA because of the EU's failure to prevent harm to the Iranian economy, Iranian officials indicated the announcement represented a positive first step. Indicative of U.S. pressure on the EU not to begin INSTEX operations, on May 7, 2019, Treasury Department Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said that INSTEX is unlikely to fulfill EU pledges to prevent INSTEX from being used by Iran to launder money or fund terrorism. Mandelker's statement included an implicit threat to potentially sanction INSTEX or its counterparties. The U.S. concerns about INSTEX might be a product, at least in part, of the alleged involvement of sanctioned Iranian banks in Iran's STFI counterparty. \n\n\t\t\tEU Antiterrorism and Anti-proliferation Actions\n\nWhile attempting to preserve civilian economic engagement with Iran, the European countries have sought to support U.S. efforts to counter Iran's terrorism and proliferation activities. \nIn December 2018, Albania expelled Iran's ambassador and one other Iranian diplomat for involvement in a terrorism plot that was thwarted. In January 2019, the EU added Iran's intelligence service (MOIS) and two intelligence operatives to its terrorism-related sanctions list in response to allegations of Iranian terrorism plotting in Europe. Germany followed that move by denying landing rights to Iran's Mahan Air, which the United States has designated as a terrorism supporting entity. \n\n\t\t\tSWIFT Electronic Payments System\n\nThe management of the Brussels-based Swift electronic payments system has sought to balance financial risks with the policies of the EU governments. In March 2012, SWIFT acceded to an EU request to expel sanctioned Iranian banks. Some Iranian banks were still able to conduct electronic transactions with the European Central Bank via the \"Target II\" system. EU diplomats indicated they would not comply with U.S. requests to ask SWIFT to expel Iranian banks again, and no EU request to SWIFT to again expel sanctioned Iranian banks was made. However, SWIFT is run by an independent board and seeks to avoid risk of U.S. penalties. In late 2018, the system again disconnected the Iranian banks that were \"relisted\" for U.S. sanctions as of November 5, 2018. \n\n\t\tChina and Russia\n\nRussia and China, two permanent members of the U.N. Security Council and parties to the JCPOA, historically have imposed only those sanctions required by Security Council resolutions. Both governments opposed the U.S. withdrawal from the JCPOA. Many observers expect that, because companies in both countries have limited U.S. exposure and are strongly influenced by their governments, much of Iran's trade and economic engagement will shift to China and Russia from EU countries, Japan, and South Korea. \n\n\t\t\tRussia\n\nIncreasingly close politically primarily on the issue of the conflict in Syria, Iran and Russia have discussed expanding energy and trade cooperation. The two countries reportedly agreed on broad energy development deals during President Putin's visit to Tehran in late October 2017, with an estimated investment value of up to $30 billion, although implementation remains uncertain. In December 2018, Iran signed a free trade deal with the Russia-led \"Eurasian Economic Union,\" suggesting Russian intent not to abide by reimposed U.S. sanctions on Iran. The revenues of Russia's Rosatam conglomerate are likely to be reduced as a consequence of the Trump Administration's May 2019 ending of waivers for some assistance to Iran's nuclear program. \nIn April 2015, Russia lifted its own restriction on delivering the S-300 air defense system that it sold Iran in 2007 but refused to deliver after Resolution 1929 was adopted\u2014even though that Resolution technically did not bar supply of that defensive system. In April 2016, Russia began delivering the five S-300 batteries. Iran's Defense Minister visited Russia in February 2016 to discuss possible future purchases of major combat systems. No sales have been announced. \n\n\t\t\tChina\n\nChina is a major factor in the effectiveness of any sanctions regime on Iran because China is Iran's largest oil customer. During 2012-2016, China was instrumental in reducing Iran's total oil exports because it cut its buys from Iran to about 435,000 barrels per day from its 2011 average of 600,000 barrels per day. The State Department asserted that, because China was the largest buyer of Iranian oil, percentage cuts by China had a large impact in reducing Iran's oil sales by volume and China merited an SRE. After sanctions were lifted in early 2016, China increased its purchases of Iranian oil to levels that sometimes exceeded those of 2011. Several Chinese energy firms that invested in Iran's energy sector put those projects on hold in 2012, but resumed or considered resuming work after sanctions were eased in 2016. Chinese firms also took over some EU country energy investments that have been divested after the reimposition of U.S. sanctions. \nSince the reimposition of U.S. sanctions, China appears to have reduced its oil imports from Iran somewhat (see Table 1 . The Administration gave China a SRE sanctions exception on November 5, 2018, in part to recognize import reductions but also possibly to avoid further complicating U.S. relations with China. However, China reportedly is continuing to import at least some Iranian oil despite the ending of the SRE as of May 2, 2019, in large part on the expectation that the Trump Administration will be hesitant to impose actual sanctions on Chinese banks for continuing to engage with Iran on oil payments. Prior to the expiration of the SREs, China had stockpiled 20 million barrels of Iranian oil at its Dalian port. \nSanctions have complicated Iran-China banking and trade relations. During 2012-2016, China settled much of its trade balance with Iran with goods rather than hard currency, which was highly favorable to China financially. Iran's automotive sector obtains a significant proportion of its parts from China, including from China-based Geelran and Chery companies, and Iran's auto parts imports from China often fluctuate depending on the availability of trade financing. Iran and China also have a separate escrow account to pay for China's infrastructure projects in Iran, such as the long Niayesh Tunnel, funded by about $20 billion of Iran's hard currency reserves. However, suggesting that reimposed U.S. sanctions have again complicated Iran-China banking relations, China's Kunlun Bank\u2014an affiliate of China's energy company CNPC and which was sanctioned under CISADA in 2012 as the main channel for money flows between the two countries\u2014reportedly stopped accepting Euro and then China currency-denominated payments from Iran in November 2018. Existing Iranian accounts at the bank presumably can still be used to pay for Iranian imports from China. \nChina's President Xi Jinping visited Iran and other Middle East countries in the immediate aftermath of the JCPOA, and he has stated that Iran is a vital link in an effort to extend its economic influence westward through its \"One Belt, One Road\" initiative. Chinese firms and entrepreneurs are integrating Iran into this vision by modernizing Iran's rail and other infrastructure, particularly where that infrastructure links to that of neighboring countries, including the Sultanate of Oman, funded by loans from China. Iran's place in this initiative offers China's government and firms incentive to avoid cooperating with U.S. sanctions. \nIn April 2018, the Commerce Department (Bureau of Industry and Security, BIS, which administers Export Administration Regulations) issued a denial of export privileges action against China-based ZTE Corporation and its affiliates. The action was taken on the grounds that ZTE did not uphold the terms of March 2017 settlement agreement with BIS over ZTE's shipment of prohibited U.S. telecommunications technology to Iran (and North Korea). On March 27, 2019, OFAC announced a $1.9 million settlement with a Chinese subsidiary of the U.S. Black and Decker tool company for unauthorized exports of tools and parts to Iran. \n\n\t\tJapan\/Korean Peninsula\/Other East Asia\n\nDuring 2010-2016, Japan and South Korea enforced sanctions on Iran similar to those imposed by the United States and the EU. Both countries cut imports of Iranian oil sharply after 2011, and banks in the two countries restricted Iran's access to the foreign exchange assets Iran held in their banks. From 2016-2018, both countries increased importation of Iranian oil, and Iran has been able to access funds in banks in both countries. Japan exports to Iran significant amounts of chemical and rubber products, as well as consumer electronics. South Korean firms have been active in energy infrastructure construction in Iran, and its exports to Iran are mainly iron, steel, consumer electronics, and appliances\u2014meaning that South Korea could be affected significantly by the May 2019 executive order sanctioning transactions with Iran's minerals and metals sector. \nBoth countries\u2014and their companies\u2014have historically been unwilling to undertake transactions with Iran that could violate U.S. sanctions, and firms in both countries have said they will comply with reimposed U.S. sanctions. South Korea, in particular, sought Administration concurrence to continue to import Iranian condensates (a petroleum product sometimes considered as crude oil), on which South Korea depends. Both countries reduced their Iranian oil purchases to zero in October 2018 and both countries received SRE sanctions exceptions on November 5. Japan resumed some Iranian oil importation in early 2019, and South Korea has been purchasing about 200,000 barrels per day of Iranian condensates. Both countries are widely assessed as likely to cease energy transactions with Iran entirely as a result of the Administration's decision to end SREs as of May 2, 2019, and South Korea reportedly is seeking to replace Iranian condensates supplies with those of Qatar and Australia. \nThe following firms have announced their postures following the U.S. exit from the JCPOA:\nDaelim of South Korea terminated a $2 billion contract to expand an Iranian oil refinery. In late October, Hyundai cancelled a $500 million contract to build a petrochemical plant in Iran, citing \"financing difficulties.\" Car companies Mazda and Toyota of Japan and Hyundai of South Korea have suspended joint ventures to produce cars in Iran. Among banks, South Korea's Woori Bank and Industrial Bank of Korea have partly suspended transactions with Iran. Woori Bank reportedly is only using an Iran Central Bank account held there to process payments for South Korean humanitarian goods sold to Iran. Nomura Holdings of Japan has taken a similar position. The South Korean conglomerate POSCO withdrew from a 2016 deal to build a steel plant in Iran's free trade zone at the port of Chahbahar.\n\n\t\t\tNorth Korea\n\nNorth Korea, like Iran, has been subject to significant international sanctions. North Korea has never pledged to abide by international sanctions against Iran, and it reportedly cooperates with Iran on a wide range of WMD-related ventures, particularly the development of ballistic missiles. A portion of the oil that China buys from Iran (and from other suppliers) is reportedly sent to North Korea, but it is not known if North Korea buys any Iranian oil directly. The potential for North Korea to try to buy Iranian oil illicitly increased in the wake of the adoption in September 2017 of U.N. Security Council sanctions that limit North Korea's importation of oil, but there are no publicly known indications that it is doing so. While serving as Iran's president in 1989, the current Supreme Leader, Ayatollah Ali Khamene'i, visited North Korea. North Korea's titular head of state Kim Yong Nam attended President Rouhani's second inauguration in August 2017, and during his visit signed various technical cooperation agreements of unspecified scope.\n\n\t\t\tTaiwan\n\nTaiwan has generally been a small buyer of Iranian oil. It resumed imports of Iranian oil after sanctions were eased in 2016. Taiwan received an SRE as of November 5, 2018, but has bought no Iranian oil since late 2018. It is unlikely to resume any Iranian oil imports now that the SREs have ended as of May 2, 2019. \n\n\t\tSouth Asia\n\n\t\t\tIndia\n\nIndia cites U.N. Security Council resolutions on Iran as justification for its stances on trade with Iran. During 2011-2016, with U.N. sanctions in force, India's private sector assessed Iran as a \"controversial market\"\u2014a term describing markets that entail reputational and financial risks. India's central bank ceased using a Tehran-based regional body, the Asian Clearing Union, to handle transactions with Iran, and the two countries agreed to settle half of India's oil buys from Iran in India's currency, the rupee. Iran used the rupee accounts to buy India's wheat, pharmaceuticals, rice, sugar, soybeans, auto parts, and other products. \nIndia reduced its imports of Iranian oil substantially after 2011, in the process incurring significant costs to retrofit refineries that were handling Iranian crude. However, after sanctions were eased in 2016, India's oil imports from Iran increased to as much as 800,000 bpd in July 2018\u2014well above 2011 levels. Indian firms resumed work that had been ended or slowed during 2012-2016. India also paid Iran the $6.5 billion it owed for oil purchased during 2012-2016.\nIndia's cooperation with reimposed U.S. sanctions is mixed because no U.N. sanctions have been reimposed. In June 2018, the two countries again agreed to use rupee accounts for their bilateral trade. Nonetheless, India's purchases of Iranian oil appear to have fallen from levels of most of 2018, but volumes remain substantial. India received the SRE exception on November 5, 2018. Because some Indian banks do not have or seek a presence in the United States, it was widely expected that India and Iran will work out alternative payment arrangements under which India will continue importing at least some Iranian oil despite the end of the SRE as of May 2, 2019. However, Indian officials said in early May 2019 that India would comply with U.S. sanctions and find alternative suppliers, although some industry sources indicate that Indian refiners might still be buying some Iranian oil as of mid-May 2019. \nIn 2015, India and Iran agreed that India would help develop Iran's Chahbahar port that would enable India to trade with Afghanistan unimpeded by Pakistan. With sanctions lifted, the project no longer entails risk to Indian firms involved. In May 2016, Indian Prime Minister Narendra Modi visited Iran and signed an agreement to invest $500 million to develop the port and related infrastructure. Construction at the port is proceeding. As noted above, the Administration has utilized the \"Afghanistan reconstruction\" exception under Section 1244(f) of IFCA to allow for firms to continue developing it. \n\n\t\t\tPakistan\n\nOne test of Pakistan's compliance with sanctions was a pipeline project that would carry Iranian gas to Pakistan\u2014a project that U.S. officials on several occasions stated would be subject to ISA sanctions. Despite that threat, agreement on the $7 billion project was finalized on June 12, 2010, and construction was formally inaugurated in a ceremony attended by the Presidents of both countries on March 11, 2013. In line with an agreed completion date of mid-2014, Iran reportedly completed the pipeline on its side of the border. China's announcement in April 2015 of a $3\u00a0billion investment in the project seemed to remove financial hurdles to the line's completion, and the JCPOA removed sanctions impediments to the project. However, during President Hassan Rouhani's visit to Pakistan in March 2016, Pakistan still did not commit to complete the line, and observers note that there are few indications of progress on the project. In 2009, India dissociated itself from the project over concerns about the security of the pipeline, the location at which the gas would be transferred to India, pricing of the gas, and tariffs. \n\n\t\tTurkey\/South Caucasus\n\nIran has substantial economic relations with Turkey and the countries of the South Caucasus. \n\n\t\t\tTurkey\n\nTurkey buys about 40% of its oil from Iran, and bought about 6% of its total gas imports from Iran in 2017. Turkey reduced purchases of Iranian oil during 2012-2016, but its buys returned to 2011 levels after sanctions on Iran were eased in 2016. Turkey's leaders have said that the country will not cooperate with reimposed U.S. sanctions, but its oil import volumes from Iran have fallen since late 2018. Turkey received an SRE sanctions exemption on November 5, 2018, and its officials strongly indicated in late April 2019 that Turkey expected to receive another SRE as of the May 2, 2019, expiration. Turkey's insistence on being allowed to buy Iranian oil without fear of U.S. penalty\u2014as well as its overall dependence on Iranian oil\u2014might underpin a reported decision by Turkey to continue buying at least some Iranian oil despite the expiration of the SRE exception. \nTurkey also is Iran's main gas customer via a pipeline built in 1997, which at first was used for a swap arrangement under which gas from Turkmenistan was exported to Turkey. Direct Iranian gas exports to Turkey through the line began in 2001 (with additional such exports through a second pipeline built in 2013), but no ISA sanctions were imposed on the grounds that the gas supplies were crucial to Turkey's energy security. Prior to the October 2012 EU ban on gas purchases from Iran, this pipeline was a conduit for Iranian gas exports to Europe (primarily Bulgaria and Greece). \nPre-JCPOA, in response to press reports that Turkey's Halkbank was settling Turkey's payments to Iran for energy with gold, U.S. officials testified on May 15, 2013, that the gold going from Turkey to Iran consists mainly of Iranian private citizens' purchases of Turkish gold to hedge against the value of the rial . A U.S. criminal case involved a dual Turkish-Iranian gold dealer, Reza Zarrab, arrested in the United States in 2016 for allegedly violating U.S. sanctions prohibiting helping Iran deal in precious metals. \nAmong past cases of possible Turkish violations of Iran sanctions, on November 7, 2016, the U.S. Attorney for New York's Southern District indicted several individuals for using money services businesses in Turkey and in the UAE for conspiring to conceal from U.S. banks transactions on behalf of and for the benefit of sanctioned Iranian entities, including Mahan Air. On January 6, 2014, the Commerce Department blocked a Turkey-based firm (3K Aviation Consulting and Logistics) from re-exporting two U.S.-made jet engines to Iran's Pouya Airline. \n\n\t\t\tCaucasus and Caspian Sea\n\nThe rich energy reserves of the Caspian Sea create challenges for U.S. efforts to deny Iran financial resources. The Clinton and George W. Bush Administrations cited potential ISA sanctions to deter oil pipeline routes involving Iran\u2014thereby successfully promoting an the alternate route from Azerbaijan (Baku) to Turkey (Ceyhan), which became operational in 2005. Section 6 of Executive Order 13622 exempts from sanctions any pipelines that bring gas from Azerbaijan to Europe and Turkey. \nAgreements reached in 2018 between Russia and the Caspian Sea states on the legal division of the sea could spawn new energy development in the Caspian. Iran's energy firms will undoubtedly become partners in joint ventures to develop the Caspian's resources, and Iran's involvement in such projects will require the Administration to determine whether to impose sanctions. \nIran's relations with Azerbaijan\u2014even though that country is inhabited mostly by Shiite Muslims\u2014are hindered by substantial political and ideological differences. Iran and Azerbaijan have in recent years tried to downplay these differences for joint economic benefit, and they have been discussing joint energy and infrastructure projects among themselves and with other powers, including Russia. \nIran and Armenia\u2014Azerbaijan's adversary\u2014have long enjoyed extensive economic relations: Armenia is Iran's largest direct gas customer, after Turkey. In May 2009, Iran and Armenia inaugurated a natural gas pipeline between the two, built by Gazprom of Russia. No determination of ISA sanctions was issued. Armenia has said its banking controls are strong and that Iran is unable to process transactions illicitly through Armenia's banks. However, observers in the South Caucasus assert that Iran is using Armenian banks operating in the Armenia-occupied Nagorno-Karabakh territory to circumvent international financial sanctions. \n\n\t\tPersian Gulf States and Iraq82\n\nThe Gulf Cooperation Council states (GCC: Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Oman) are oil exporters and close allies of the United States. As Iranian oil exports decreased after 2012, the Gulf states supplied the global oil market with additional oil. Since the U.S. exit from the JCPOA, U.S. officials have worked with Gulf oil exporters to ensure that the global oil market is well supplied even as Iranian oil exports fall. And the State Department's SRE announcement on April 22, 2019, indicated that the Administration is looking to Saudi Arabia and the UAE, in particular, to keep the global oil market well supplied after SREs end on May 2, 2019. Still, in order not to antagonize Iran, the Gulf countries maintain relatively normal trade with Iran. Some Gulf-based shipping companies, such as United Arab Shipping Company reportedly continued to pay port loading fees to such sanctioned IRGC-controlled port operators as Tidewater. \nThe UAE has attracted U.S. scrutiny because of the large presence of Iranian firms there, and several UAE-based firms have been sanctioned, as noted in the tables at the end of the report. U.S. officials praised the UAE's March 1, 2012, ban on transactions with Iran by Dubai-based Noor Islamic Bank, which Iran reportedly used to process oil payments. Some Iranian gas condensates (120,000 barrels per day) were imported by Emirates National Oil Company (ENOC) and refined mostly into jet fuel. Subsequent to the May 8, 2018, U.S. exit from the JCPOA, ENOC officials said they were trying to find alternative supplies of the hydrocarbon products it buys from Iran.\nIran and several of the Gulf states have had discussions on various energy and related projects, but few have materialized because of broad regional disputes between Iran and the Gulf states. Kuwait and Iran have held talks on the construction of a 350-mile pipeline that would bring Iranian gas to Kuwait, but the project does not appear to be materializing. Bahrain's discussions of purchasing Iranian gas have floundered over sharp political differences. Qatar and Iran share the large gas field in the Gulf waters between them, and their economic relations have become closer in light of the isolation of Qatar by three of its GCC neighbors, Saudi Arabia, UAE, and Bahrain. The only GCC state that has moved forward with economic joint ventures with Iran is Oman, particularly in the development of Oman's priority project to expand its port at Al Duqm port, which Oman and Iran envision as a major hub for regional trade. In September 2015, the two countries also recommitted to a gas pipeline joint venture. \nOmani banks, some of which operate in Iran, were used to implement some of the financial arrangements of the JPA and JCPOA. As a consequence, a total of $5.7 billion in Iranian funds had built up in Oman's Bank Muscat by the time of implementation of the JCPOA in January 2016. In its efforts to easily access these funds, Iran obtained from the Office of Foreign Assets Control (OFAC) of the Treasury Department a February 2016 special license to convert the funds (held as Omani rials) to dollars as a means of easily converting the funds into Euros. Iran ultimately used a different mechanism to access the funds as hard currency, but the special license issuance resulted in a May 2018 review by the majority of the Senate Permanent Subcommittee on Investigation to assess whether that license was consistent with U.S. regulations barring Iran access to the U.S. financial system. \n\n\t\t\tIraq\n\nIraq's attempts to remain close to its influential neighbor, Iran, have complicated Iraq's efforts to rebuild its economy yet avoid running afoul of the United States and U.S. sanctions on Iran. As noted above, in 2012, the United States sanctioned an Iraqi bank that was a key channel for Iraqi payments to Iran, but lifted those sanctions when the bank reduced that business. Iraq presented the United States with a sanctions-related dilemma in July 2013, when it signed an agreement with Iran to buy 850 million cubic feet per day of natural gas through a joint pipeline that enters Iraq at Diyala province and would supply several power plants. No sanctions were imposed on the arrangement, which was agreed while applicable sanctions were in effect. In May 2015, the Treasury Department sanctioned Iraq's Al Naser Airlines for helping Mahan Air (sanctioned entity) acquire nine aircraft. \nThe Trump Administration reportedly is seeking to accommodate Iraq's need for Iranian electricity supplies and other economic interactions. As of October 2018, Iraq reportedly has discontinued crude oil swaps with Iran\u2014about 50,000 barrels per day\u2014in which Iranian oil flowed to the Kirkuk refinery and Iran supplied oil to Iraq's terminals in the Persian Gulf. \nThe Administration reportedly has given Iraq waiver permission\u2014apparently under Section 1247 of IFCA\u2014to buy the Iranian natural gas that runs Iraq's power plants. That section provides for waivers of up to 180 days, but press reports indicate that the Administration has limited the waiver period to 90-day increments to give Iraq time to line up alternative supplies and equipment to generate electricity. The latest waiver rollover was in March 2019 and extends until June 2019. Iranian arms exports to Shia militias in Iraq remain prohibited by Resolution 2231, but no U.N. sanctions on that activity have been imposed to date. \n\n\t\tSyria and Lebanon\n\nIran has extensive economic relations with both Syria and Lebanon, countries where Iran asserts that core interests are at stake. The compliance of Syrian or Lebanese banks and other institutions with international sanctions against Iran was limited even during 2012-2015. Iran reportedly uses banks in Lebanon to skirt financial sanctions, according to a wide range of observers, and these banks are among the conduits for Iran to provide financial assistance to Hezbollah as well as to the regime of Syrian President Bashar Al Assad. However, some reports indicate that sanctions on Iran are adversely affecting Hezbollah's finances to the point where the party has had to cut expenses, request donations, and delay or reduce payments to its fighters. \nIn January 2017, Iran and Syria signed a series of economic agreements giving Iranian firms increased access to Syria's mining, agriculture, and telecommunications sectors, as well as management of a Syrian port. \n\n\t\tAfrica and Latin America\n\nDuring the presidency of Ahmadinejad, Iran looked to several Latin American and African countries to try to circumvent international sanctions. For the most part, however, Iran's trade and other business dealings with these regions are apparently too modest to weaken the effect of international sanctions significantly. \n\n\t\tWorld Bank and WTO\n\nThe united approach to sanctions on Iran during 2010-2016 carried over to international lending to Iran. The United States representative to international financial institutions is required to vote against international lending, but that vote, although weighted, is not sufficient to block international lending. No new loans have been approved to Iran since 2005, including several environmental projects under the Bank's \"Global Environmental Facility\" (GEF). The initiative slated more than $7.5 million in loans for Iran to dispose of harmful chemicals. The 2016 lifting of sanctions increased international support for new international lending to Iran, but the U.S. exit from the JCPOA will likely lead to differences between the United States and other lenders over extending any new loans to Iran. \nEarlier, in 1993, the United States voted its 16.5% share of the World Bank against loans to Iran of $460 million for electricity, health, and irrigation projects, but the loans were approved. To block that lending, the FY1994-FY1996 foreign aid appropriations ( P.L. 103-87 , P.L. 103-306 , and P.L. 104-107 ) cut the amount appropriated for the U.S. contribution to the bank by the amount of those loans, contributing to a temporary halt in new bank lending to Iran. But, in May 2000, the United States' allies outvoted the United States to approve $232 million in loans for health and sewage projects. During April 2003-May 2005, a total of $725 million in loans were approved for environmental management, housing reform, water and sanitation projects, and land management projects, in addition to $400 million in loans for earthquake relief.\n\n\t\t\tWTO Accession\n\nAn issue related to sanctions is Iran's request to join the World Trade Organization (WTO). Iran began accession talks in 2006 after the George W. Bush Administration dropped its objection to Iran's application as part of an effort to incentivize Iran to reach an interim nuclear agreement. The lifting of sanctions presumably paves the way for talks to accelerate, but the accession process generally takes many years. Accession generally takes place by consensus of existing WTO members. Iran's accession might be complicated by the requirement that existing members trade with other members; as noted above, the U.S. ban on trade with Iran remains in force. The Trump Administration does not advocate Iran's admission to that convention.\n\n\tEffectiveness of Sanctions on Iranian Behavior\n\nIt can be argued that the question \"are sanctions on Iran 'working'?\" should be assessed based on an analysis of the goals of the sanctions. The following sections try to assess the effectiveness of Iran sanctions according to a number of criteria. \n\n\t\tEffect on Iran's Nuclear Program and Strategic Capabilities\n\nThe international sanctions regime of 2011-2016 is widely credited with increasing Iran's willingness to accept restraints on its nuclear program, as stipulated in the JCPOA. Hassan Rouhani was elected president of Iran in June 2013 in part because of his stated commitment to achieving an easing of sanctions and ending Iran's international isolation. Still, as to the long-term effects of sanctions, the intelligence community assesses that it \"does not know\" whether Iran plans to eventually develop a nuclear weapon, and the JCPOA restrictions begin to expire in 2025. \nIran remained in the JCPOA despite the U.S. exit from it, but Rouhani has announced that, in response to the ending of U.S. nuclear waivers and other steps such as the FTO designation of the IRGC, Iran will cease abiding by JCPOA restrictions on stockpiles of low-enriched uranium and heavy water. Still, Iran has not withdrawn from the JCPOA outright. Yet, Iranian leaders have not, to date, taken up the Trump Administration's stated offer for negotiations on a new agreement that would cover not only Iran's nuclear program but also its missile program and its regional malign activities. Both President Trump and President Rouhani have publicly said they would accept bilateral talks without conditions, but both leaders generally indicate that the other's demands are too extensive to make such a meeting productive. \nThere is little evidence that even the strict sanctions of 2011-2016 slowed Iran's nuclear program or its missile program. And, even though U.S. and EU sanctions remain on Iran's missile programs, U.S. intelligence officials have testified that Iran continues to expand the scale, reach, and sophistication of its ballistic missile arsenal. Still, some U.S. officials have asserted that Iran's nuclear and missile programs might have advanced faster were sanctions not imposed.\nSanctions have apparently prevented Iran from buying significant amounts of major combat systems since the early 1990s. Iran's indigenous arms industry has grown over the past two decades. U.S. intelligence directors testified in January 2019 that Iran continues to field increasingly lethal weapons systems, including more advanced naval mines and ballistic missiles, small submarines, armed UAVs (unmanned aerial vehicles), coastal defense cruise missile batteries, attack craft, and anti-ship ballistic missiles. Iran has been able to acquire some defensive systems that were not specifically banned by Resolution 2231; Russia delivered the S-300 air defense system in April 2016.\n\n\t\tEffects on Iran's Regional Influence\n\nNeither the imposition, lifting, nor reimposition of strict sanctions has appeared to affect Iran's regional behavior. Iran intervened extensively in Syria, Iraq, and Yemen during the 2012-2016 period when sanctions had a significant adverse effect on Iran's economy. Iran apparently is able to manufacture domestically much of the weaponry it supplies to its regional allies. Iran has remained engaged in these regional conflicts since sanctions were eased in early 2016. \nOn the other hand, press reports since March 2019 note that Iran has scaled back payments to Hezbollah and to various pro-Iranian fighters in Syria, perhaps as a reflection of Iranian financial difficulties. An alternate explanation is that Iran is adjusting its expenditures in the Syria conflict to the reduced activity on the battlefield there. The Administration points to reports of the reduced payments as evidence that its \"maximum pressure\" campaign on Iran is working.\nThe Administration has asserted that the easing of sanctions during the period of U.S. implementation of the JCPOA (2016-2018) caused Iran to expand its regional activities. President Trump stated that Iran's defense budget had increased 40% during that time. He stated on August 6, 2018, that \"Since the deal [JCPOA] was reached, Iran's aggression has only increased. The regime has used the windfall of newly accessible funds it received under the JCPOA to build nuclear-capable missiles, fund terrorism, and fuel conflict across the Middle East and beyond.... The reimposition of nuclear-related sanctions through today's actions further intensifies pressure on Tehran to change its conduct.\" However, most outside Iran experts who assess Iran's regional activities asserted that Iran's regional activities were not facilitated by the easing of sanctions during that period, but instead increased because of the opportunities to expand its influence that were provided by Iran by the region's several conflicts. \nIn terms of congressional oversight, a provision of the FY2016 Consolidated Appropriation ( P.L. 114-113 ) required an Administration report to Congress on how Iran has used the financial benefits of sanctions relief. And, a provision of the Iran Nuclear Agreement Review Act ( P.L. 114-17 ) requires that a semiannual report on Iran's compliance with the JCPOA include information on any Iranian use of funds to support acts of terrorism. \n\n\t\tPolitical Effects\n\nNo U.S. Administration, including the Trump Administration, has asserted that sanctions on Iran are intended to bring about the change of Iran's regime, although some experts assert that this might be a desired Trump Administration goal. Iranians seeking reintegration with the international community and sanctions relief helped propel the relatively moderate Rouhani to election victories in both 2013 and 2017. Many Iranians cheered the finalization of the JCPOA on July 15, 2015, undoubtedly contributing to Supreme Leader Khamene'i's acceptance of the deal. Despite the Trump Administration's withdrawal from the JCPOA and its additional steps to pressure Iran in 2019, there does not appear to be an imminent political threat to Rouhani's grip on his office.\nStill, the IRGC and other hardliners control domestic security and the judiciary, and these factions have criticized Rouhani for remaining in the JCPOA despite the U.S. exit. In July 2018, the IRGC and Iran's parliament ( Majles ) called for cabinet changes to address economic mismanagement and, in September 2018, the Majles compelled Rouhani to be questioned about the economic situation. In July 2018, Rouhani replaced Iran's Central Bank governor as an apparent gesture to indicate responsiveness to economic concerns. In February 2019, apparently under pressure from hardliners, Foreign Minister Mohammad Javad Zarif announced his resignation, but Rouhani\u2014apparently as a challenge to the hardliners\u2014did not accept the resignation and reinstated him. \nSome assert that the sanctions are sustaining the periodic unrest that has erupted in Iran since late 2017. In 2018 and thus far in 2019, labor strikes and unrest among women protesting the strict public dress code have continued, although not at a level that appears to threaten the regime. Other protests occurred over flooding in the southwest in March-April 2019, but again not to the level where the regime was threatened. Still, some protesters complain that the country's money is being spent on regional interventions rather than on the domestic economy. \n\n\t\tEconomic Effects\n\nThe U.S. sanctions enacted since 2011, when fully implemented, take a substantial toll on Iran's economy. \nGDP and Employment Trends . At the height of the sanctions regime in April 2015, then-Treasury Secretary Jacob Lew said that Iran's gross domestic product (GDP) was 15%-20% smaller than it would have been had global sanctions not been imposed in 2011. The unemployment rate rose to about 20% by 2014, and many Iranians worked unpaid or partially paid. In 2015, Iran's GDP was about $400 billion at the official exchange rate ($1.4 trillion if assessed on a purchasing power parity [PPP] basis). The 2016 lifting of sanctions enabled Iran to achieve 7% annual growth during 2016-2018. The reimposition of U.S. sanctions in mid-2018 caused Iran's GDP to decline 2% from March 2018 to March 2019, and it is projected to decline by more than 5% during March 2019-March 2020. Oil Exports . Global Iran sanctions (2011-2016) reduced Iran's crude oil sales about 60% from the 2.5 mbd level of 2011, causing Iran to lose over $160 billion in oil revenues during that time. The JCPOA sanctions relief enabled Iran to increase its oil exports to 2011 levels, but the reimposition of U.S. sanctions has driven Iran's oil exports to under 1 mbd as of the end of April 2019. The Trump Administration said in an April 2019 factsheet that the reimposition of sanctions since May 2018 has cost Iran $10 billion in lost oil revenues. The May 2019 end to SREs was an effort to cause Iran's oil exports to fall to zero, although results will depend on whether China, India, and Turkey continue buying Iran oil. Bankin g. Global banks mostly left the Iranian market after 2011 because of the international sanctions in force. Banks were hesitant to reenter the Iran market after the 2016 easing of sanctions because of (1) reported concerns that the United States might still sanction their transactions with Iran; (2) a lack of transparency in Iran's financial sector; (3) lingering concerns over past financial penalties for processing Iran-related transactions in the U.S. financial system; and (4) extra costs and procedures caused by the inability to process Iran-related transactions through the U.S. financial system and\/or easily use dollars in Iran-related transactions. Those banks that did reenter the Iran market have, as a consequence of the U.S. exit from the JCPOA, stopped or limited their transactions with Iran. Shipping Insurance . Iran was able after 2016 to obtain shipping insurance as a result of U.S. waivers given to numerous insurers, as discussed above. However, as of August 7, 2018, U.S.-based shipping reinsurers no longer have active U.S. waivers, and Iran has been compelled to self-insure most of its shipments. Hard Currency A ccessib ility . The 2011-2016 sanctions regime prevented Iran from accessing the hard currency it was being paid for its oil. By January 2016, Iran's hard currency reserves held in foreign banks stood at about $115 billion. Iranian officials stated in February 2016 that sanctions relief had allowed them to access the funds, and it could move the funds via renewed access to the SWIFT electronic payments system. Of this amount, about $60 billion was due to creditors such as China ($20 billion) or to repay nonperforming loans extended to Iranian energy companies working in the Caspian and other areas in Iran's immediate neighborhood. After 2016, Iran kept most of its reserves abroad for cash management and to pay for imports, but Iran's foreign reserves are again restricted by reimposed U.S. sanctions. Currency Decline . Sanctions caused the value of the rial on unofficial markets to decline about 60% from January 2012 until the 2013, when the election of Rouhani stabilized the rial at about 35,000 to the dollar. The reimposition of U.S. sanctions in 2018 caused the rial 's value to plummet to 150,000 to the dollar by the November 5, 2018. The value later recovered somewhat to about 100,000 to one at the beginning of 2019. The downturn has made it difficult for Iranian merchants to import goods or properly price merchandise, and the government has banned the importation of 1,400 goods to preserve hard currency. Inflation . The drop in value of the currency caused inflation to accelerate during 2011-2013 to a rate of about 60%\u2014a higher figure than that acknowledged by Iran's Central Bank. As sanctions were eased, inflation slowed to the single digits by June 2016, meeting the Central Bank's stated goal. However, in 2017, the inflation rate reportedly increased back to double digits, and turmoil surrounding the possible U.S. exit from the JCPOA caused inflation to increase to about 15% by late June 2018. It increased significantly, to nearly 40%, by the end of 2018. Industrial\/Auto Production and Sales . Iran's light-medium manufacturing sector was expanding prior to 2011, but its dependence on imported parts left the sector vulnerable to sanctions that reduced the availability of import financing. Iran's vehicle production fell by about 60% from 2011 to 2013. Press reports say that the auto sector, and manufacturing overall, rebounded since sanctions were lifted, but is declining again in light of the announced divestments by auto makers following the U.S. exit from the JCPOA. Researchers at Iran's parliament estimated in September 2018 that auto production would decline 45% by March 2019, and other industrial production would drop by 5%. U.S.-Iran Trade. U.S.-Iran trade remains negligible. In 2015, the last full year before JCPOA implementation, the United States sold $281 million in goods to Iran and imported $10 million worth of Iranian products. The slight relaxation of the U.S. import ban stemming from the JCPOA likely accounts for the significant increase in imports from Iran in 2016 to $86 million. U.S. imports from Iran were about $63 million in 2017 and about that same amount in 2018. U.S. exports to Iran remained low for all of 2016 and 2017 ($172 million and $137 million, respectively) but spiked to $440 million for 2018. \n\n\t\t\tIran's Economic Coping Strategies\n\nIran had some success mitigating the economic effect of sanctions. These strategies will likely be used to try to cope with reimposed U.S. sanctions. \nExport Diversification . Over the past 10 years, Iran has promoted sales of nonoil products such as minerals, cement, urea fertilizer, and other agricultural and basic industrial goods. Such \"nonoil\" exports now generate much of the revenue that funds Iran's imports. This diversification might have been a factor in the Trump Administration decision in May 2019 to sanction Iran's mineral and metals sector (see above). Even in the energy sector, Iran has promoted the sale of oil products such as petrochemicals and condensates, earning about $4.7 billion in revenue from that source by 2016. \nReallocation of Investment Funds and Import Substitution . Sanctions compelled some Iranian manufacturers to increase domestic production of some goods as substitutes for imports. This trend has been hailed by Iranian economists and Supreme Leader Khamene'i, who supports building a \"resistance economy\" that is less dependent on imports and foreign investment. \nPartial Privatization\/IRGC in the Economy . Over the past few years, portions of Iran's state-owned enterprises have been transferred to the control of quasi-governmental or partially private entities. Some of them are incorporated as holding companies, foundations, or investment groups. Based on data from the Iranian Privatization Organization, there are about 120 such entities that account for a significant proportion of Iran's GDP. Rouhani has sought to push the IRGC out of Iran's economy through divestment, to the extent possible. However, a substantial part of the economy remains controlled by government-linked conglomerates, including the IRGC. Although estimates vary widely, the IRGC's corporate affiliates are commonly assessed as controlling at least 20% of Iran's economy, although there is little available information on the degree of IRGC-affiliated ownership stakes.\nSubsidy Reductions . In 2007, the Ahmadinejad government began trying to wean the population off of generous subsidies by compensating families with cash payments of about $40 per month. Gasoline prices were raised to levels similar to those in other regional countries, and far above the subsidized price of 40 cents per gallon. Rouhani has continued to reduce subsidies, including by raising gasoline and staple food prices further and limiting the cash payments to only those families who could claim financial hardship. Rouhani also has improved collections of taxes and of price increases for electricity and natural gas utilities.\nImport Restrictions \/Currency Controls . To conserve hard currency, Iran has at times reduced the supply of hard currency to importers of luxury goods, such as cars or cellphones, in order to maintain hard currency supplies to importers of essential goods. These restrictions eased after sanctions were lifted in 2016 but were reimposed in 2018 to deal with economic unrest and the falling value of the rial . \n\n\t\tEffect on Energy Sector Development\n\nThe Iran Sanctions Act (ISA) was enacted in large part to reduce Iran's oil and gas production capacity over the longer term by denying Iran the outside technology and investment to maintain or increase production. U.S. officials estimated in 2011 that Iran had lost $60 billion in investment in the sector as numerous major firms pulled out of Iran. Iran says it needs $130 billion-$145 billion in new investment by 2020 to keep oil production capacity from falling. Further development of the large South Pars gas field alone requires $100 billion. Table B-1 at the end of this report discusses various Iranian oil and gas fields and the fate of post-1999 investments in them. \nDuring 2012-2016, there was little development activity at Iran's various oil and gas development sites, as energy firms sought to avoid sanctions. Some foreign investors resold their equity stakes to Iranian companies. However, the Iranian firms are not as technically capable as the international firms that have withdrawn. The lifting of sanctions in 2016 lured at least some foreign investors back into the sector, encouraged by Iran's more generous investment terms under a concept called the \"Iran Petroleum Contract.\" That contract gives investing companies the rights to a set percentage of Iran's oil reserves for 20-25 years. Iran signed a number of new agreements with international energy firms since mid-2016 but, as noted in the tables and other information above, major energy firms have begun to divest in response to the U.S. exit from the JCPOA. \nSanctions relief also opened opportunities for Iran to resume developing its gas sector. Iran has used its gas development primarily to reinject into its oil fields rather than to export. Iran exports about 3.6 trillion cubic feet of gas, primarily to Turkey and Armenia. Sanctions have rendered Iran unable to develop a liquefied natural gas (LNG) export business. However, it was reported in March 2017 that the Philippine National Oil Company is seeking to build a 2-million-ton LNG plant in Iran, suggesting that patent issues do not necessarily preclude Iran from pursuing LNG. \nWith respect to gasoline, the enactment of the CISADA law targeting sales of gasoline to Iran had a measurable effect. Several suppliers stopped selling gasoline to Iran once enactment appeared likely, and others ceased supplying Iran after enactment. Gasoline deliveries to Iran fell from about 120,000 barrels per day before CISADA to about 30,000 barrels per day immediately thereafter, although importation later increased to about 50,000 barrels per day. As a result, Iran expanded several of its refineries and, in 2017, Iranian officials said Iran had become largely self-sufficient in gasoline production. \n\n\t\tHuman Rights-Related Effects\n\nIt is difficult to draw any direct relationship between sanctions and Iran's human rights practices. Recent human rights reports by the State Department and the U.N. Special Rapporteur on Iran's human rights practices assess that there was only modest improvement in some of Iran's practices in recent years, particularly relaxation of enforcement of the public dress code for women. The altered policies cannot necessarily be attributed to sanctions pressure or sanctions relief, although some might argue that sanctions-induced economic dissatisfaction emboldened Iranians to protest and to compel the government to relax some restrictions. \nSince at least 2012, foreign firms have generally refrained from selling the Iranian government equipment to monitor or censor social media use. Such firms include German telecommunications firm Siemens, Chinese internet infrastructure firm Huawei, and South African firm MTN Group. In October 2012, Eutelsat, a significant provider of satellite service to Iran's state broadcasting establishment, ended that relationship after the EU sanctioned the then head of the Islamic Republic of Iran Broadcasting (IRIB), Ezzatollah Zarghami. However, the regime retains the ability to monitor and censor social media use.\n\n\t\tHumanitarian Effects\n\nDuring 2012-2016, sanctions produced significant humanitarian-related effects, particularly in limiting the population's ability to obtain expensive Western-made medicines, such as chemotherapy drugs. Some of the scarcity was caused by banks' refusal to finance such sales, even though doing so was not subject to any sanctions. Some observers say the Iranian government exaggerated reports of medicine shortages to generate opposition to the sanctions. Other accounts say that Iranians, particularly those with connections to the government, took advantage of medicine shortages by cornering the import market for key medicines. These shortages resurfaced in 2018 following the reimposition of sanctions by the Trump Administration. For example, reports indicate that the reimposition of U.S. sanctions may be inhibiting the flow of humanitarian goods to the Iranian people and reportedly contributing to shortages in medicine to treat ailments such as multiple sclerosis and cancer. Other reports indicate that Cargill, Bunge, and other global food traders have halted supplying Iran because of the absence of trade financing. And, Iranian officials and some international relief groups have complained that U.S. sanctions inhibited the ability to provide relief to flooding victims in southwestern Iran in March-April 2019. \nEU officials have called on the United States to produce a \"white list\" that would \"give clear guidelines about what channels European banks and companies should follow to conduct legitimate [humanitarian] transactions with Iran without fear of future penalties.\" Iranian officials have also accused U.S. sanctions of hampering international relief efforts for victims of vast areas of flooding in southwestern Iran in the spring of 2019. \nOther reports say that pollution in Tehran and other big cities is made worse by sanctions because Iran produces gasoline itself with methods that cause more impurities than imported gasoline. As noted above, Iran's efforts to deal with environmental hazards and problems might be hindered by denial of World Bank lending for that purpose. \nIn the aviation sector, some Iranian pilots complained publicly that U.S. sanctions caused Iran's passenger airline fleet to deteriorate to the point of jeopardizing safety. Since the U.S. trade ban was imposed in 1995, 1,700 passengers and crew of Iranian aircraft have been killed in air accidents, although it is not clear how many of the crashes, if any, were due to difficultly in acquiring U.S. spare parts. \n\n\t\t\tAir Safety\n\nSanctions relief ameliorated at least some of the humanitarian difficulties discussed above. In the aviation sector, several sales of passenger aircraft have been announced, and licensed by the Department of the Treasury, since Implementation Day. However, as noted, the licenses are being revoked and deliveries will not proceed beyond November 2018. \nIn February 2016, Iran Air\u2014which was delisted from U.S. sanctions as of Implementation Day\u2014announced it would purchase 118 Airbus commercial aircraft at an estimated value of $27 billion. Airbus received an OFAC license and three of the aircraft have been delivered. Airbus has said it will not deliver any more aircraft to Iran because its U.S. Treasury Department license is revoked. In December 2016, Boeing and Iran Air finalized an agreement for Boeing to sell the airline 80 passenger aircraft and lease 29 others. Boeing received a specific license for the transaction. The deal has a total estimated value of about $17 billion, with deliveries scheduled to start later in 2018. The Boeing sale is to include 30 of the 777 model. None were delivered, and Boeing cancelled planned deliveries to Iran after its export licenses were revoked. In April 2017, Iran's Aseman Airlines signed a tentative agreement to buy at least 30 Boeing MAX passenger aircraft. No U.S. license for this sale was announced prior to the U.S. exit from the JCPOA. The airline is owned by Iran's civil service pension fund but managed as a private company. In June 2017, Airbus agreed to tentative sales of 45 A320 aircraft to Iran's Airtour Airline, and of 28 A320 and A330 aircraft to Iran's Zagros Airlines. No U.S. license for the sale was announced prior to the U.S. exit from the JCPOA. ATR, owned by Airbus and Italy's Leonardo, sold 20 aircraft to Iran Air. It delivered eight aircraft by the time of the U.S. JCPOA exit. It reportedly has been given temporary U.S. Treasury Department licenses to deliver another five after the August 6, 2018, initial sanctions reimposition in which its U.S. export licenses were to be revoked. \n\n\tPost-JCPOA Sanctions Legislation\n\nJCPOA oversight and implications, and broader issues of Iran's behavior have been the subject of legislation. \n\n\t\tKey Legislation in the 114th Congress\n\nThe JCPOA states that as long as Iran fully complies with the JCPOA, the sanctions that were suspended or lifted shall not be reimposed on other bases (such as terrorism or human rights). The Obama Administration stated that it would adhere to that provision but that some new sanctions that seek to limit Iran's military power, its human rights abuses, or its support for militant groups might not necessarily violate the JCPOA.\n\n\t\t\tIran Nuclear Agreement Review Act (P.L. 114-17)\n\nThe Iran Nuclear Agreement Review Act of 2015 (INARA, P.L. 114-17 ) provided for a 30- or 60-day congressional review period after which Congress could pass legislation to approve or to disapprove of the JCPOA, or do nothing. No such legislation of disapproval was enacted. \nThere are several certification and reporting requirements under INARA, although most of them clearly no longer apply as a result of the Trump Administration withdrawal: \nMaterial Breach Report . The President must report a potentially significant Iranian breach of the agreement within 10 days of acquiring credible information of such. Within another 30 days, the President must determine whether this is a material breach and whether Iran has cured the breach. Certification Report . The President is required to certify, every 90 days, that Iran is \"transparently, verifiably, and fully implementing\" the agreement, and that Iran has not taken any action to advance a nuclear weapons program. The latest certification was submitted on July 17, 2017, and another one was due on October 15, 2017. On October 13, 2017, the Administration declined to make that certification, on the grounds that continued sanctions relief is not appropriate and proportionate to Iran's measures to terminate its illicit nuclear program (Section (d)(6)(iv)(I) of INARA). If a breach is reported, or if the President does not certify compliance, Congress may initiate within 60 days \"expedited consideration\" of legislation that would reimpose any Iran sanctions that the President had suspended through use of waiver or other authority. That 60-day period is to expire on December 12, 2017. Semiannual Report. INARA also requires an Administration report every 180 days on Iran's nuclear program, including not only Iran's compliance with its nuclear commitments but also whether Iranian banks are involved in terrorism financing; Iran's ballistic missile advances; and whether Iran continues to support terrorism. \n\n\t\t\tVisa Restriction\n\nThe FY2016 Consolidated Appropriation ( P.L. 114-113 ) contained a provision amending the Visa Waiver Program to require a visa to visit the United States for any person who has visited Iraq, Syria, or any terrorism list country (Iran and Sudan are the two aside from Syria still listed) in the previous five years. Iran argued that the provision represented a violation of at least the spirit of the JCPOA by potentially deterring European businessmen from visiting Iran. The Obama Administration issued a letter to Iran stating it would implement the provision in such a way as not to not impinge on sanctions relief, and allowances for Iranian students studying in the United States were made in the implementing regulations. Another provision of that law requires an Administration report to Congress on how Iran has used the benefits of sanctions relief. \nPresident Trump has issued and amended executive orders that, in general, prohibit Iranian citizens (as well as citizens from several other countries) from entering the United States. This marked a significant additional restriction beyond the FY2016 Consolidated Appropriation. \n\n\t\t\tIran Sanctions Act Extension\n\nThe 114 th Congress acted to prevent ISA from expiring in its entirety on December 31, 2016. The Iran Sanctions Extension Act ( H.R. 6297 ), which extended ISA until December 31, 2026, without any other changes, passed the House on November 15 by a vote of 419-1 and then passed the Senate by 99-0. President Obama allowed the bill to become law without signing it ( P.L. 114-277 ), even though the Administration considered it unnecessary because the President retains ample authority to reimpose sanctions on Iran. Iranian leaders called the extension a breach of the JCPOA, but the JCPOA's \"Joint Commission\" did not determine it breached the JCPOA. \n\n\t\t\tReporting Requirement on Iran Missile Launches\n\nThe conference report on the FY2017 National Defense Authorization Act ( P.L. 114-328 ) contained a provision (Section 1226) requiring a quarterly report to Congress on Iran's missile launches the imposition of U.S. sanctions with respect to Iran's ballistic missile launches until December 31, 2019. The conference report on the FY2018 NDAA ( P.L. 115-91 ) extended that reporting requirement until December 31, 2022. The report is to include efforts to sanction entities or individuals that assist those missile launches.\n\n\t\t\t114th Congress Legislation Not Enacted\n\nThe Iran Policy Oversight Act ( S. 2119 ) and the Iran Terror Finance Transparency Act ( H.R. 3662 ) contained a provision that would have added certification requirements for the Administration to remove designations of Iranian entities sanctioned. The House passed the latter bill but then vacated its vote. The IRGC Terrorist Designation Act ( H.R. 3646 \/ S. 2094 ) would have required a report on whether the IRGC meets the criteria for designation as a Foreign Terrorist Organization (FTO). The Obama Administration argued that the law that set up the FTO designations (Section 219 of the Immigration and Nationality Act [8 U.S.C. 1189]) applies such designations only to groups, rather than armed forces of a nation-state (which the IRGC is). The Prohibiting Assistance to Nuclear Iran Act ( H.R. 3273 ) would have prohibited the use of U.S. funds to provide technical assistance to Iran's nuclear program. The provision appeared to conflict with the provision of the JCPOA that calls on the P5+1 to engage in peaceful nuclear cooperation with Iran (Paragraph 32). The Justice for Victims of Iranian Terrorism Act ( H.R. 3457 \/ S. 2086 ) would have prohibited the President from waiving U.S. sanctions until Iran completed paying judgments issued for victims of Iranian or Iran-backed acts of terrorism. The House passed it on October 1, 2015, by a vote of 251-173, despite Obama Administration assertions that the bill would contradict the JCPOA. H.R. 3728 would have amended ITRSHRA to make mandatory (rather than voluntary) sanctions against electronic payments systems such as SWIFT if they were allowed to be used by Iran. The IRGC Sanctions Act ( H.R. 4257 ) would have required congressional action to approve an Administration request to remove a country from the terrorism list and would have required certification that any entity to be \"delisted\" from sanctions is not a member, agent, affiliate, or owned by the IRGC. The Iran Ballistic Missile Sanctions Act of 2016 ( S. 2725 ) would have required that specified sectors of Iran's economy (automotive, chemical, computer science, construction, electronic, energy metallurgy, mining, petrochemical, research, and telecommunications) be subject to U.S. sanctions, if those sectors were determined to provide support for Iran's ballistic missile program. A similar bill, H.R. 5631 , the Iran Accountability Act, which passed the House on July 14, 2016, by a vote of 246-179, would have removed some waiver authority for certain provisions of several Iran sanctions laws and required sanctions on sectors of Iran's civilian economy determined to have supported Iran's ballistic missile program. The latter provision, as did S.2725, appeared to contradict the JCPOA. In the 115 th Congress, S. 15 and key sections of S. 227 and H.R. 808 (Iran Nonnuclear Sanctions Act of 2017) mirror S. 2725 . H.R. 4992 , which passed the House on July 14, 2016, by a vote of 246-181, and the related Countering Iranian Threats Act of 2016 ( S. 3267 ), would have, among their central provisions, required foreign banks and dollar clearinghouses to receive a U.S. license for any dollar transactions involving Iran. The Obama Administration opposed the bill as a violation of the JCPOA. H.R. 5119 , which passed the House by a vote of 249-176, would have prohibited the U.S. government from buying additional heavy water from Iran and appeared intended to block additional U.S. purchases similar to one in April 2016 in which the United States bought 32 metric tons from Iran at a cost of about $8.6 million. Several bills and amendments in the 114 th Congress sought to block or impede the sale of the Boeing aircraft to Iran by preventing the licensing, financing, or Ex-Im Bank loan guarantees for the sale. These included H.R. 5715 , H.R. 5711 , and several amendments to the House version of the FY2017 Financial Services and General Government Appropriations Act ( H.R. 5485 ). That act passed the House on July 7, 2016, by a vote of 239-185, and H.R. 5711 passed by the House on November 17, 2016, by a vote of 243-174. The Obama Administration opposed the measures as JCPOA violations. \n\n\t\tThe Trump Administration and Major Iran Sanctions Legislation\n\nEven before the Trump Administration pulled the United States out of the JCPOA, Congress acted on or considered additional Iran sanctions legislation. The following Iran sanctions legislation was enacted or considered in the 115 th Congress.\n\n\t\t\tThe Countering America's Adversaries through Sanctions Act of 2017 (CAATSA, P.L. 115-44)\n\nA bill, S. 722 , which initially contained only Iran-related sanctions, was reported out by the Senate Foreign Relations Committee on May 25, 2017. After incorporating an amendment adding sanctions on Russia, the bill was passed by the Senate on June 15, 2017, by a vote of 98-2. A companion measure, H.R. 3203 , was introduced in the House subsequent to the Senate passage of S. 722 , and contained Iran-related provisions virtually identical to the engrossed Senate version of S. 722 . Following a reported agreement among House and Senate leaders, H.R. 3364 , with additional sanctions provisions related to North Korea (and provisions on Iran remaining virtually unchanged from those of the engrossed S. 722 ), was introduced and passed both chambers by overwhelming margins. President Trump signed it into law on August 2, 2017 ( P.L. 115-44 ), accompanied by a signing statement expressing reservations about the degree to which provisions pertaining to Russia might conflict with the President's constitutional authority. \nCAATSA's Iran-related provisions are analyzed above. Overall, CAATSA does not appear to conflict with the JCPOA insofar as it does not reimpose U.S. secondary sanctions on Iran's civilian economic sectors. The JCPOA did not require the United States to refrain from imposing additional sanctions\u2014as CAATSA does\u2014on Iranian proliferation, human rights abuses, terrorism, or the IRGC. Section 108 of CAATSA requires an Administration review of all designated entities to assess whether such entities are contributing to Iran's ballistic missile program or contributing to Iranian support for international terrorism. \n\n\t\t\tLegislation in the 115th Congress Not Enacted\n\nH.R. 1698 . The Iran Ballistic Missiles and International Sanctions Enforcement Act, passed the House on October 26, 2017, by a vote of 423-2. It would have amended the remaining active (not waived) section of ISA (Section 5b) to clarify that assistance to Iran's ballistic missile program is included as subject to sanctions. The provision would have applied the sanctions to foreign governments determined to be assisting Iran's missile programs, and would have applied several ISA sanctions to foreign entities, including foreign governments, that sell to or import from Iran the major combat systems banned for sale to Iran in Security Council Resolution 2231. This represents a more specific list of banned items than the \"destabilizing numbers and types\" of weaponry the sale to Iran of which can be sanctioned under ISA and several other U.S. laws discussed above. H.R. 1638 . On November 14, 2017, the House Financial Services Committee ordered reported H.R. 1638 , the Iranian Leadership Asset Transparency Act, which would have required the Treasury Secretary to report to Congress on the assets and equity interests held by named Iranian persons, including the Supreme Leader, the President, various IRGC and other security commanders, and members of various leadership bodies. H.R. 4324 . The House Financial Services Committee also ordered reported on November 14, 2017, the Strengthening Oversight of Iran's Access to Finance Act. The bill would have required Administration reports on whether financing of Iranian commercial passenger aircraft purchases posed money-laundering or terrorism risks or benefited Iranian persons involved in Iranian proliferation or terrorism. Some argued that the bill might affect the willingness of the Treasury Department to license aircraft sales to Iran, and in so doing potentially breach the U.S. JCPOA commitment to sell such aircraft to Iran. Following President Trump's October 13, 2017, statement on Iran, then-Senate Foreign Relations Committee Chairman Bob Corker and Senator Tom Cotton released an outline of legislation that would reimpose waived U.S. sanctions if, at any time\u2014including after JCPOA restrictions expire\u2014Iran breaches JCPOA-stipulated restrictions. The bill draft, which was not introduced, included sanctions triggers based on Iranian missile developments. H.R. 5132 . The Iranian Revolutionary Guard Corps Economic Exclusion Act. This bill mandated Administration reports on whether specified categories of entities are owned or controlled by the IRGC, or conduct significant transactions with the IRGC. The bill defined an entity as owned or controlled by the IRGC even if the IRGC's ownership interest is less than 50%\u2014a lower standard than the usual practice in which ownership is defined as at least 50%. The bill would have required Administration investigation of several specified entities as potentially owned or controlled by the IRGC, including several telecommunications, mining, and machinery companies, and required a report on whether the Iran Airports Company violates E.O. 13224 by facilitating flight operations by Mahan Air, which is a designated SDN under E.O. 13224. Whereas the bill's provisions did not mandate any sanctions on entities characterized within, the bill appeared to establish a process under which the Administration could name as SDNs entities in Iran's civilian economic sectors, including civil aviation. H.R. 6751 . The Banking Transparency for Sanctioned Persons Act of 2018, would have required reporting to Congress on any license given to a bank to provide financial services to a state sponsor of terrorism. H.R. 4591 , S. 3431 , and H.R. 4238 . Several bills would have essentially codified Executive Order 13438 by requiring the blocking of U.S.-based property and preventing U.S. visas for persons determined to be threatening the stability of Iraq\u2014legislation apparently directed at Iran's Shiite militia allies in Iraq. The latter two bills specifically mentioned the Iraqi groups As'aib Ahl Al Haq and Harakat Hizballah Al Nujabi as entities that the Administration should so sanction. H.R. 4591 passed the House on November 27, 2018. \n\n\t\t\t116th Congress\n\nBecause the Trump Administration has exited the JCPOA, there is increased potential for the 116 th Congress to consider legislation that sanctions those Iranian economic sectors that could not be sanctioned under the JCPOA. As the 116 th Congress began work in 2019, press reports indicated that several Senators and at least one House Member planned to introduce legislation to greatly expand U.S. secondary sanctions on Iran's financial sector. Among the reported provisions were (1) mandatory imposition of sanctions on the SWIFT electronic payments system if it does not expel sanctioned Iranian banks from its network; (2) amending IFCA to sanction any significant transactions with Iran's financial sector (in addition to energy, shipping, and shipbuilding sectors in the current law); (3) requiring the Treasury Department to issue a final rule that would sanction any international transaction with Iran's Central Bank; and (4) sanctioning foreign persons that supply or provide other help to Iran's efforts to establish a digital currency. The following have been introduced:\nSeveral bills similar or virtually identical to those introduced previously have been introduced, imposing sanctions on Iranian proxies in Iraq and elsewhere. These bills include H.R. 361 , the Iranian Proxies Terrorist Sanctions Act of 2019, and H.R. 571 , the Preventing Destabilization of Iraq Act of 2019. The Iranian Revolutionary Guard Corps Exclusion Act ( S. 925 ), similar to H.R. 5132 in the 115 th Congress, has been introduced in the Senate. The Iran Ballistic Missiles and International Sanctions Enforcement Act ( H.R. 2118 ). The bill includes provisions similar to H.R. 1698 in the 115 th Congress (see above).\n\n\t\tOther Possible U.S. and International Sanctions123\n\nThere are a number of other possible sanctions that might receive consideration\u2014either in a global or multilateral framework. These possibilities are analyzed in CRS In Focus IF10801, Possible Additional Sanctions on Iran , by Kenneth Katzman. \nAppendix A. Comparison Between U.S., U.N., and EU and Allied Country Sanctions (Prior to Implementation Day)\nAppendix B. Post-1999 Major Investments in\u00a0Iran's\u00a0Energy\u00a0Sector\nAppendix C. Entities Sanctioned Under U.N. Resolutions and EU Decisions\nAppendix D. Entities Sanctions Under U.S. Laws and Executive Orders","output":null}
{"id":"crs_R46319","pid":"crs_R46319_0","input":"\tIntroduction\n\nIn December 2019, a new disease, later called COVID-19, emerged in China and quickly spread around the world. The disease presents major consequences for global health, foreign relations, the global economy, and global security. International institutions and country governments are taking a variety of responses to address these challenges. In the 116 th Congress, Members have introduced legislation to respond to COVID-19 in particular and to address global pandemic preparedness in general that are now occurring on a global scale. This report focuses on global implications of and responses to the COVID-19 pandemic, and is organized into four broad parts that answer common questions regarding: (1) the disease and its global prevalence, (2) country and regional responses, (3) global economic and trade implications, and (4) issues that Congress might consider. For information on domestic COVID-19 cases and related responses, see CRS Insight IN11253, Domestic Public Health Response to COVID-19: Current Status and Resources Guide , by Kavya Sekar and Ada S. Cornell.\n\n\t\tWhat are coronaviruses and what is COVID-19?1\n\nCoronaviruses that typically infect humans are common pathogens, which can cause mild illnesses with symptoms similar to the common cold, or severe illness, potentially resulting in death of the victim. Prior to COVID-19, two \"novel\" coronaviruses (i.e., coronaviruses newly recognized to infect humans) have caused serious illness and death in large populations, namely severe acute respiratory syndrome (SARS) in 2002-2003 and Middle East Respiratory Syndrome (MERS), which was first identified in 2012 and continues to have sporadic transmission from animals to people with limited human-to-human spread. \nThe origin of COVID-19 is unknown, although genetic analysis suggests an animal source. The World Health Organization (WHO) first learned of pneumonia cases from unknown causes in Wuhan, China, on December 31, 2019. In the first days of January 2020, Chinese scientists isolated a previously unknown coronavirus in the patients, and on January 11, Chinese scientists shared its genetic sequence with the international community. (See CRS Report R46354, COVID-19 and China: A Chronology of Events (December 2019-January 2020) , by Susan V. Lawrence.) The virus is now present in most countries ( Figure 1 ). For the purposes of this report, CRS refers to COVID-19 as the virus and the syndrome people often develop when infected.\n\n\t\tHow is COVID-19 transmitted?5\n\nHealth officials and researchers are still learning about COVID-19. According to the U.S. Centers for Disease Control and Prevention (CDC), the virus is thought to spread mainly from person-to-person between individuals who are in close contact with each other (less than six feet), through respiratory droplets produced when an infected person coughs or sneezes. Health officials and researchers are still determining the virus's incubation period, or time between infection and onset of symptoms. CDC is using 14 days as the outer bound for the incubation period, meaning that the agency expects someone who has been infected to show symptoms within that period. \nThe CDC has confirmed that asymptomatic cases (infected individuals who do not have symptoms) can transmit the virus, though \"their role in transmission is not yet known.\" A study of the 3,711 passengers on the Diamond Princess cruise ship found that 712 people (19.2% of the cruise ship passengers) tested positive for COVID-19. Almost half (331) of the positive cases were asymptomatic at the time of testing. \n\n\t\tWhat are global COVID-19 case fatality and hospitalization rates?9\n\nThe COVID-19 case fatality rate is difficult to determine; milder cases are not being diagnosed, death is delayed, and wide disparities exist in case detection worldwide. In addition, the case fatality rate in any given context may depend on a number of factors including the demographics of the population, density of the area, and the quality and availability of health care services. Scientists are using different methods to estimate case fatality and estimates range. One study of those diagnosed with COVID-19 estimated case fatality rates for Wuhan, China and other parts of China at 1.4% and 0.85%, respectively. Another estimated 3.6% within China and 1.5% outside the country, with a third recommending using a range of 0.2%-3.0%. \nCurrent data suggest the elderly and those with preexisting medical conditions (including asthma, high blood pressure, heart disease, cancer, and diabetes) are more likely to become severely sickened by COVID-19. One study in China showed that 80% of those killed by the virus were older than 60 years and 81% of surveyed COVID-19 cases were mild. Another study showed that 87% of all hospitalized COVID-19 patients in China were aged between 30 and 79 years, though the study did not further disaggregate the data by age. Whereas the CDC found that the elderly had higher death rates, more than half (55%) of reported COVID-19 hospitalizations between February 12 and March 16, 2020, were of individuals younger than 65 years ( Figure 2 ).\n\n\t\tWhere are COVID-19 cases concentrated?16\n\nAs of May 13, 2020, national governments reported to the WHO more than 4 million cases of COVID-19 and almost 300,000 related deaths worldwide. Ten countries accounted for over 70% of all reported cases and almost 80% of all reported deaths ( Table 1 ). The pandemic epicenter has shifted from China and Asia to the United States and Europe. China and Belgium are no longer among the 10 countries with the highest number of deaths, and Russia and Brazil joined the ranks. Almost 90% of all reported cases were identified in the WHO Americas and Europe regions ( Table 2 ). Cases are continuing to rise in the Americas, where 88% of all cases were found in the United States (74%), Brazil (9%), and Canada (4%). In Europe, the cases are more widely distributed, and seven countries comprise 77% of all cases: Russia (14%), Spain (13%), United Kingdom (13%), Italy (12%), Germany (10%), Turkey (8%) and France (8%). \n\n\tCOVID-19 Responses of International Institutions\n\nIndividual countries carry out both domestic and international efforts to control the COVID-19 pandemic, with the WHO issuing guidance, coordinating some international research and related findings, and coordinating health aid in low-resource settings. Countries follow (to varying degrees) WHO policy guidance on COVID-19 response and leverage information shared by WHO to refine national COVID-19 plans. The United Nations (U.N.) Office for the Coordination of Humanitarian Affairs (UNOCHA) is requesting $6.7 billion to support COVID-19 efforts by several U.N. entities (see \" Multilateral Technical Assistance \" section). \n\n\t\tInternational Health Regulations19\n\n\t\t\tWhat rules guide COVID-19 responses worldwide?\n\nWHO is the U.N. agency responsible for setting norms and rules on global health matters, including on pandemic response. The organization also develops and provides tools, guidance and training protocols. In 1969, the World Health Assembly (WHA)\u00e2\u0080\u0094the governing body of WHO\u00e2\u0080\u0094adopted the International Health Regulations (IHR) to stop the spread of six diseases through quarantine and other infectious disease control measures. The WHA has amended the IHR several times, most recently in 2005. The 2005 edition, known as IHR (2005), provided expanded means for controlling infectious disease outbreaks beyond quarantine. The regulations include a code of conduct for notification of and responses to disease outbreaks with pandemic potential, and carry the expectation that countries (and their territories) will build the capacity, where lacking, to comply with IHR (2005). The regulations mandate that WHO Member States\nbuild and maintain public health capacities for disease surveillance and response; provide or facilitate technical assistance to help low-resource countries develop and maintain public health capacities; notify WHO of any event that may constitute a Public Health Emergency of International Concern (PHEIC) and respond to requests for verification of information regarding such event; and follow WHO recommendations concerning public health responses to the relevant PHEIC.\nPer reporting requirements of the IHR (2005), China and other countries are monitoring and reporting COVID-19 cases to WHO. Observers are debating the extent to which China is fully complying with IHR (2005) reporting rules (see \" Asia \" and the Appendix ).\n\n\t\t\tHow does WHO respond to countries that do not comply with IHR (2005)?\n\nIHR (2005) does not have an enforcement mechanism. WHO asserts that \"peer pressure and public knowledge\" are the \"best incentives for compliance.\" Consequences that WHO purports non-compliant countries might face include a tarnished international image, increased morbidity and mortality of affected populations, travel and trade restrictions imposed by other countries, economic and social disruption, and public outrage. \nChina's response to the COVID-19 outbreak may deepen debates about the need for an IHR enforcement mechanism. On one hand, questions about the timeliness of China's reporting of the COVID-19 outbreak and questions about China's transparency thereafter might bolster arguments in favor of an enforcement mechanism. On the other hand, some have questioned whether the WHA would vote to abdicate some of its sovereignty to provide WHO enforcement authority.\n\n\t\t\tHow does the Global Health Security Agenda (GHSA) relate to IHR (2005) and pandemic preparedness?\n\nIHR (2005) came into force in 2007, with signatory countries committing to comply by 2012. In 2012, only 20% of countries reported to the WHO that they had developed IHR (2005) core capacities, and many observers asserted the regulations needed a funding mechanism to help resource-constrained countries with compliance. In 2014, the WHO launched the Global Health Security Agenda (GHSA) as a five-year (2014-2018) multilateral effort to accelerate IHR (2005) implementation, particularly in resource-poor countries lacking the capacity to adhere to the regulations. The GHSA appeared to advance global pandemic preparedness capacity; more than 70% of surveyed countries reported in 2017 being prepared to address a global pandemic. Regional disparities persisted, however; about 55% of surveyed countries in the WHO Africa region reported being prepared for a pandemic, compared to almost 90% of countries surveyed in the WHO Western Pacific region. In 2017, participating countries agreed to extend the GHSA through 2024. For more information on the GHSA, see CRS In Focus IF11461, The Global Health Security Agenda (GHSA): 2020-2024 , by Tiaji Salaam-Blyther.\n\n\t\tMultilateral Technical Assistance\n\n\t\t\tWhat is WHO doing to respond to the COVID-19 pandemic?23\n\nIn February 2020, WHO released a $675 million Strategic Preparedness and Response Plan for February through April 2020. WHO aims to provide international coordination and operational support, bolster country readiness and response capacity\u00e2\u0080\u0094particularly in low-resource countries\u00e2\u0080\u0094and accelerate research and innovation. As of May 8, private donors and 26 countries have contributed $536.5 million towards the plan, including $30.3 million from the United States. Countries have pledged an additional $198.5 million towards the plan. As of April 22, WHO has used the funds to \npurchase and ship personal protective equipment (PPE) to 133 countries, including 2,566,880 surgical masks and masks, 1,641,900 boxes of gloves, 184,478 gowns, 29,873 goggles, and 79,426 face shields; supply 1,500,000 diagnostic kits to 126 countries; develop online COVID-19 training courses in 13 languages; and enroll more than 100 countries in WHO-coordinated trials to accelerate identification of an effective vaccine and treatment, which include 1,200 patients, 144 studies, and 6 candidate vaccines in clinical evaluation and 77 in preclinical evaluation.\nIn April 2020, the WHO issued an updated plan that provided guidance for countries preparing for a phased transition from widespread transmission to a steady state of low-level or no transmission, among other things. The update did not include a request for additional funds. \nAlso in April 2020, the WHO hosted a virtual event with the President of France, the President of the European Commission, and the Bill & Melinda Gates Foundation where heads of state, the G20 President, the African Union Commission Chairperson, the U.N. Secretary General and leaders from a variety of nongovernmental organizations, including Gavi, the Vaccine Alliance, and the Coalition for Epidemic Preparedness and Innovation (CEPI), pledged their commitment to the Access to COVID-19 Tools (ACT Accelerator). The participants, and other partners who have since joined the effort, committed to \"work towards equitable global access\" to COVID-19 countermeasures (including vaccines and therapies). A pledging conference, hosted by the European Union (EU), took place on May 4 to support the effort. As of May 6, donors have pledged $7.4 billion for the ACT Accelerator and other global COVID-19 responses. The United States neither participated in the launch nor provided funding for the ACT Accelerator. \nDebates about whether health commodities are a public good are long-standing and have intensified in recent years. For decades, countries have willingly donated virus samples to the WHO for international research. During a 2005-2007 H5N1 avian flu outbreak, however, Indonesia refused to share samples of the virus, asserting that companies were selling patented vaccines created from the donated samples at a price Indonesians could not afford. The WHO and its Member States, through the WHA, have not yet developed an agreement that satisfies poor countries concerned about affordability and wealthier countries (where most global pharmaceutical companies are based) concerned about recapturing research and development costs. The WHO has sought to negotiate prepurchasing agreement during each major outbreak since the H5N1 debacle. French officials, for example, have characterized any COVID-19 commodity that might be developed as a \"public good,\" and they have criticized statements by a French pharmaceutical company on committing to provide the U.S. government first access to a COVID-19 vaccine that the company produces. The WHO has established the Solidarity Trial to coordinate international COVID-19-related research and development. Participating parties, including countries, pharmaceutical companies, and nongovernmental organizations, agree to openly share virus information and commodities developed with donated specimens. The EU and its Member States, and nine other countries, have drafted a resolution to be considered at the upcoming World Health Assembly on a unified international COVID-19 response, including on \"the need for all countries to have unhindered timely access to quality, safe, efficacious and affordable diagnostics, therapeutics, medicines and vaccines ... for the COVID-19 response.\" \n\n\t\t\tHow are international financial institutions responding to COVID-19?32\n\nThe international financial institutions (IFIs), including the International Monetary Fund (IMF), the World Bank, and specialized multilateral development banks (MDBs), are mobilizing unprecedented levels of financial resources to support countries grappling with the health and economic effects of the COVID-19 pandemic. About 100 countries\u00e2\u0080\u0094more than half of the IMF's membership\u00e2\u0080\u0094have requested IMF loans, and the IMF has announced it is ready to tap its total lending capacity, about $1 trillion, to support governments responding to COVID-19. In April 2020, the World Bank pledged to mobilize about $160 billion through 2021, and other multilateral development banks committed about $80 billion over the same time period. MDB support is expected to cover a wide range of activities, including strengthening health services and primary health care, bolstering disease monitoring and reporting, training front-line health workers, encouraging community engagement to maintain public trust, and improving access to treatment for the poorest patients. In addition, at the urging of the IMF and the World Bank, the G-20 countries in coordination with private creditors have agreed to suspend debt payments for low-income countries through the end of 2020. \nPolicymakers are discussing a number of policy actions to further bolster the IFI response to the COVID-19 pandemic. Examples include changing IFI policies to allow more flexibility in providing financial assistance, pursuing policies at the IMF to increase member states' foreign reserves, and providing debt relief to low-income countries. Some of these policy proposals would require congressional legislation. Through the stimulus legislation ( P.L. 116-136 ), Congress accelerated authorizations requested by the Administration in the FY2021 budget for the IMF, two lending facilities at the World Bank, and two lending facilities at the African Development Bank.\n\n\t\t\tWhat is the U.N. humanitarian response to the COVID-19 pandemic?36\n\nOutside of the WHO, other U.N. entities and their implementing partners are considering how to maintain ongoing humanitarian operations while preparing for COVID-19 cases should they arise. On March 17, 2020, the International Organization for Migration (IOM) and the U.N. High Commissioner for Refugees (UNHCR) announced they were suspending global resettlement travel for refugees due to the COVID-19 travel bans. Cessation of resettlement may reinforce population density in refugee camps and other settlements, which might further complicate efforts to address COVID-19 outbreaks in such settings. \nMany experts agree that even prior to the COVID-19 pandemic, the scope of current global humanitarian crises was unprecedented. The U.N. Office for the Coordination of Humanitarian Affairs (UNOCHA) estimated that in 2020, nearly 168 million people in 53 countries would require humanitarian assistance and protection due to armed conflict, widespread or indiscriminate violence, and\/or human rights violations. The 2020 U.N. global humanitarian annual appeal totaled an all-time high of more than $28.8 billion, excluding COVID-19 responses. The appeal also focused on the needs of displaced populations, which numbered more than 70 million people, including 25.9 million refugees, 41.3 million internally displaced persons (IDPs) and 3.5 million asylum seekers. In addition, natural disasters are also key drivers of displacement each year. \nHumanitarian experts agree that the conditions in which vulnerable, displaced populations live make them particularly susceptible to COVID-19 spread and present significant challenges to response and containment. Overcrowded living spaces and insufficient hygiene and sanitation facilities make conditions conducive to contagion. In many situations, disease control recommendations are not practical. Space is not available to create isolation and \"social-distancing,\" for example, and limited access to clean water and sanitation make regular and sustained handwashing difficult. In addition, low or middle-income countries that are likely to struggle to respond effectively to the pandemic host 85% of refugees worldwide. So far, relatively few COVID-19 cases have been reported among the displaced and those affected by conflict or natural disasters, although there is a widespread lack of testing.\nOn March 25, 2020, the United Nations launched a $2.01 billion global appeal for the COVID-19 pandemic response to \"fight the virus in the world's poorest countries, and address the needs of the most vulnerable people\" through the end of the year. According to the United Nations, as of early May, donors had so far provided $923 million toward the initial appeal and contributed $608 million outside the plan. On May 7, 2020, the United Nations announced it had tripled the appeal to $6.7 million and expanded its coverage to 63 countries as it became clear that COVID-19's \"most devastating and destabilizing effects will be felt in the world's poorest countries.\" While the United Nations does not expect the pandemic to peak in the world's poorest countries for another three to six months, already there are reports of \"incomes plummeting and jobs disappearing, food supplies falling and prices soaring, and children missing vaccinations and meals.\" The updated plan brings together humanitarian appeals from other U.N. agencies in an effort to coordinate emergency health and humanitarian responses (see Table 3 ).\nUNOCHA will coordinate the U.N.-wide response, but most of the activities will be carried out by specific U.N. entities, non-governmental organizations, and other implementing partners. U.N. guidance for scaling up responses in refugee and IDP settings includes addressing mental health and psychological aspects, adjusting food distribution, and developing prevention and control mechanisms in schools. Some experts recommend incorporating COVID-19 responses within existing humanitarian programs to ensure continuity of operations and to protect aid personnel while facilitating their access in areas where travel has been restricted.\n\n\tU.S. Support for International Responses\n\nOn January 29, 2020, President Donald Trump announced the formation of the President's Coronavirus Task Force, led by the Department of Health and Human Services (HHS) and coordinated by the White House National Security Council (NSC). On February 27, the President appointed Vice President Michael Pence as the Administration's COVID-19 task force leader, and the Vice President subsequently appointed the head of the President's Emergency Plan for AIDS Relief (PEPFAR), Ambassador Deborah Birx, as the White House Coronavirus Response Coordinator. International COVID-19 response efforts carried out by U.S. federal government departments and agencies, including those in the Task Force, are described below.\n\n\t\tEmergency Appropriations for International Responses58\n\nOn March 6, 2020, the President signed into law P.L. 116-123 , Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 , which provides $8.3 billion for domestic and international COVID-19 response. The Act includes $300 million to continue the CDC's global health security programs and a total of $1.25 billion for the U.S. Agency for International Development (USAID) and Department of State. USAID- and Department of State-administered aid includes the following:\nGlobal Health Programs (GHP). $435 million for global health responses (see \" U.S. Agency for International Development (USAID) \"), including $200 million for USAID's Emergency Reserve Fund (ERF). International Disaster Assistance (IDA). $300 million for relief and recovery efforts in the wake of the COVID-19 pandemic. Economic Support Fund (ESF). $250 million to address COVID-19-related \"economic, security, and stabilization requirements.\" \nThe Act also provides $1 million to the USAID Office of Inspector General to support oversight of COVID-19-related aid programming. \nOn March 27, 2020, President Trump signed P.L. 116-136 , Coronavirus Aid, Relief, and Economic Security Act , which contains emergency funding for U.S. international COVID-19 responses, including the following:\nInternational Disaster Assistance (IDA). $258 million to \"prevent, prepare for, and respond\" to COVID-19. Migration and Refugee Assistance (MRA). $350 million to the State Department-administered MRA account to \"prevent, prepare for, and respond\" to COVID-19.\n\n\t\tU.S. Department of State61\n\n\t\t\tHow does the State Department help American citizens abroad?\n\nSection 43 of the State Department Basic Authorities Act of 1956 (P.L. 84-885; hereinafter, the Basic Authorities Act) requires the State Department to serve as a clearinghouse of information on any major disaster or incident that affects the health and safety of U.S. citizens abroad. The department implements this statutory responsibility through its Consular Information Program (CIP), which provides a range of products, including but not limited to country-specific information web pages, Travel Advisories, Alerts, and Worldwide Cautions. Travel Advisories range from Level 1 (Exercise Normal Precautions) to Level 4 (Do Not Travel). \nOn March 31, 2020, the State Department issued an updated Level 4 Global Health Advisory advising U.S. citizens to avoid all international travel due to the global impact of COVID-19. Level 4 Travel Advisories do not constitute a travel ban. Instead, they advise U.S. citizens not to travel because of life threatening risks and, in some cases, limited U.S. government capability to provide assistance to U.S. citizens. The State Department's Level 4 Global Health Advisory notes that because the State Department has authorized the departure of U.S. personnel abroad who are \"at higher risk of a poor outcome if exposed to COVID-19,\" U.S. embassies and consulates may have more limited capacity to provide services to U.S. citizens abroad.\nCIP products are posted online and disseminated to U.S. citizens who have registered to receive such communications through the Smart Traveler Enrollment Program (STEP). The Assistant Secretary for Consular Affairs is responsible for supervising and managing the CIP. State Department regulations provide that when health concerns rise to the level of posing a significant threat to U.S. citizens, the State Department will publish a web page describing the health-related threat and resources. The Bureau of Consular Affairs has developed such a web page for the COVID-19 pandemic. Additionally, the State Department has created a website providing COVID-19-related information and resources for every country in the world. Furthermore, on March 24, 2020, the State Department began publishing a daily COVID-19 newsletter, developed for Members of Congress and congressional staff, intended to \"dispel rumor, combat misinformation, and answer any outstanding questions regarding the Department's overseas crisis response efforts.\"\n\n\t\t\tWhat are the authorities and funding for the State Department to carry out overseas evacuations?\n\nThe Omnibus Diplomatic Security and Antiterrorism Act of 1986 ( P.L. 99-399 ) authorizes the Secretary of State to carry out overseas evacuations. Section 103 of this law requires the Secretary to \"develop and implement policies and programs to provide for the safe and efficient evacuation of United States Government personnel, dependents, and private United States citizens when their lives are endangered.\" In addition, the Basic Authorities Act authorizes the Secretary to make expenditures for overseas evacuations. Section 4 of this law authorizes both expenditures for the evacuation of \"United States Government employees and their dependents\" and \"private United States citizens or third-country nationals, on a reimbursable basis to the maximum extent practicable,\" leaving American citizens or third-country nationals generally responsible for the cost of evacuation, although emergency financial assistance may be available for destitute evacuees. Furthermore, the Basic Authorities Act limits the scope of repayment to \"a reasonable commercial air fare immediately prior to the events giving rise to the evacuation.\"\nIn practice, even when the State Department advises private U.S. citizens to leave a country, it will advise them to evacuate using existing commercial transportation options whenever possible. This is reflected in the State Department's current Level 4 Global Health Advisory, which states that \"[i]n countries where commercial departure options remain available, U.S. citizens who live in the United States should arrange for immediate return.\" In more rare circumstances, when the local transportation infrastructure is compromised, the State Department will arrange chartered or non-commercial transportation for U.S. citizens to evacuate to a safe location determined by the department. Following the outbreak of COVID-19, the State Department has made such arrangements for thousands of U.S. citizens throughout the world, initially those in Wuhan, China and, shortly thereafter, U.S. citizen passengers who were quarantined on the Diamond Princess cruise ship in Yokohama, Japan. As demand for repatriation surged, the State Department leveraged new options to evacuate U.S. citizens, including \"commercial rescue flights.\" To facilitate these flights, the department worked with the airline industry to help them secure the needed clearances to carry out evacuation flights in high-demand countries. The State Department said that these flights enabled it to focus its own resources to send chartered flights where \"airspace, border closures, and internal curfews have been the most severe.\" While evacuations are still ongoing, the department estimated in late April that around 40% of U.S. citizens who were evacuated for reasons related to COVID-19 returned to the United States on commercial rescue flights. \nCongress authorizes funding for the evacuation-related activities through the Emergencies in the Diplomatic and Consular Service (EDCS) account, which is part of the annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriation. For FY2020, Congress appropriated $7.9 million for this account. Congress typically funds this account through no-year appropriations, thereby authorizing the State Department to indefinitely retain funds. The State Department is able to further fund emergency evacuations using transfer authorities provided by Congress. In recent SFOPS appropriations, for example, Congress has authorized the State Department to transfer and merge funds appropriated to the Diplomatic Programs, Embassy Security, Construction, and Maintenance, and EDCS accounts for emergency P.L. 116-123 , evacuations. \u00c2\u00a0\nIn addition to the funds and transfer authorities provided in annual appropriations legislation, Congress appropriated an additional $588 million for State Department operations (including $264 million appropriated through P.L. 116-123 and $324 million appropriated through P.L. 116-136 ) to \"prevent, prepare for, and respond to coronavirus,\" including by carrying out evacuations. P.L. 116-123 also increased the amount of funding the State Department is authorized to transfer from the Diplomatic Programs account to the EDCS account for emergency evacuations during FY2020 from $10 million to $100 million.\n\n\t\t\tHow many evacuations have been carried out due to the COVID-19 pandemic?\n\nThe State Department began arranging evacuations of U.S. government personnel and private U.S. citizens in response to the COVID-19 pandemic on January 28, 2020, when the department started evacuating over 800 American citizens from Wuhan, China. An additional 300 American citizens who were passengers aboard the Diamond Princess cruise ship were subsequently evacuated in February. When COVID-19 continued to spread and was declared a global pandemic by WHO, the State Department accelerated its efforts to evacuate Americans amid actions by countries to close their borders and implement mandatory travel restrictions. On March 19, 2020, the State Department established a repatriation task force to coordinate and support these efforts. As of May 11, 2020, the State Department had coordinated the repatriation of more than 85,000 Americans on 886 flights. The State Department's current Level 4 Global Health Advisory warns that while the department is \"making every effort to assist U.S. citizens overseas who wish to return to the United States, funds \"may become more limited or even unavailable.\" Some Members of Congress have applauded the State Department's efforts to scale up consular assistance to U.S. citizens abroad during the COVID-19 pandemic. Other Members have expressed concern that as COVID-19 spread worldwide, the State Department was slow to communicate with and provide options to Americans abroad seeking repatriation.\n\n\t\tU.S. Agency for International Development (USAID)85\n\n\t\t\tWhere is USAID providing COVID-19 assistance?\n\nUSAID is providing assistance to more than 100 affected and at-risk developing countries facing the threat of COVID-19. USAID identified these countries through a combination of the following criteria: \ntrend of increasing confirmed cases of COVID-19, especially with evidence of local transmission; imported cases with high risk for local transmission due to connectivity to a hotspot; low scores on the Global Health Security Index classification of health systems and on the Global Health Security Agenda Joint External Evaluation, which measures compliance with IHR (2005); other vulnerabilities (unstable political situation, displaced populations); and the existence of other U.S. global health programs that could be leveraged. \nUSAID is also providing funding to multilateral organizations, including the WHO, UNICEF, and the International Federation of the Red Cross and Red Crescent Societies for COVID-19 assistance, and to facilitate coordination with other donors.\n\n\t\t\tWhat type of assistance does USAID provide for COVID-19 control?\n\nOn February 7, 2020, USAID committed $99 million from the Emergency Reserve Fund (ERF) for Contagious Infectious Diseases. USAID received $986 million from the first emergency supplemental appropriation and an additional $353 million from the second. Examples of activities to which USAID resources will be programed include \nassisting target countries to prepare their laboratories for COVID-19 testing, implementing a public-health emergency plan for points of entry, activating case-finding and event-based surveillance for influenza-like illnesses, training and equipping rapid-response teams, investigating cases and tracing the contacts of infected persons, and adapting health worker training materials for COVID-19. \nAs of May 1, 2020, USAID pledged to provide $653 million for international COVID-19 response, $215 million of which has been obligated. The pledged amounts include $99 million from the ERF, $100 million from the Global Health Programs (GHP) account, $300 million in humanitarian assistance from the International Disease Assistance (IDA) account, and $153 million from the Economic Support Fund (ESF). \n\n\t\t\tHow do USAID COVID-19 responses relate to regular pandemic preparedness activities?\n\nCongress appropriates funds for USAID global health security and pandemic preparedness activities through annual State, Foreign Operations, and Related Programs appropriations ( Table 4 ). From FY2009 through FY2019, the bulk of USAID's pandemic preparedness activities have been implemented through the Emerging Pandemic Threats (EPT) program. Those efforts comprised USAID's contribution towards advancing the Global Health Security Agenda (see \" International Health Regulations \") and are being leveraged for COVID-19 responses worldwide. Key related activities include\nstrengthening surveillance systems to detect and report disease transmission; upgrading veterinary and other national laboratories; strengthening programs to combat antimicrobial resistance (AMR) in the public health and animal-health sectors; training community health volunteers in epidemic control and designing community-preparedness plans; conducting simulation exercises to prepare for future outbreaks; and establishing or strengthening emergency supply-chain programs specially designed to deliver critically needed commodities (e.g., personal protective equipment) to affected communities during outbreaks.\nThe PREDICT project was a key part of the EPT program. According to USAID, the second phase of the project, PREDICT-2 (2015-2019), helped nearly 30 countries detect and discover viruses with pandemic potential. The project has\ndetected more than 1,100 unique viruses, 931 of which were novel viruses (such as Ebola and coronaviruses); sampled over 163,000 animals and people; and provided $207 million from 2009 through 2019.\nUSAID has responded to 42 outbreaks through PREDICT-2, which ended in March 2020 (following a three-month extension). In May 2020, USAID announced that it will use the lessons learned through PREDICT to inform its new STOP Spillover project. The STOP Spillover project is aimed at building capacity in partner countries to stop the spillover of zoonotic diseases into humans. USAID aims to \"award the STOP Spillover project by the end of September 2020, through a competitive process, as PREDICT sunsets as scheduled.\"\n\n\t\tU.S. Centers for Disease Control and Prevention (CDC)90\n\n\t\t\tWhat role is CDC playing in international COVID-19 responses?\n\nCDC has staff stationed in more than 60 countries who have been providing technical support, where relevant, and is receptive to bilateral requests for assistance or requests\u00c2\u00a0for assistance through the Global Outbreak Alert and Response Network (GOARN). CDC is working with WHO and other partners, including USAID and the Department of State, to assess needs and accelerate COVID-19 control, particularly by helping countries to implement WHO recommendations related to the diagnosis and care of patients, tracking the epidemic, and identifying people who might have COVID-19. \nThrough supplemental appropriations ( P.L. 116-123 ), Congress provided CDC $300 million for global disease detection and emergency response. CDC plans to obligate $150 million of the funds by the end of FY2020. Related efforts will focus on \ndisease surveillance, laboratory diagnostics, infection prevention and control, border health and community mitigation, and vaccine preparedness and disease prevention. \nCDC is reportedly working closely with USAID and Department of State to ensure a coordinated U.S. government approach to the COVID-19 pandemic. CDC is prioritizing countries based on \nthe current status of COVID-19 in country and future trajectory of its spread; the ability to effectively implement activities given CDC presence, capacity and partnerships in the country; and the capacity to provide support to other countries in the region.\nCDC staff are working with colleagues in partner countries to conduct investigations that will help inform COVID-19 response efforts. \n\n\t\t\tHow do CDC COVID-19 responses relate to regular pandemic preparedness activities?\n\nThrough the Global Health Protection line item of annual Labor-HHS appropriations, CDC works to enhance public health capacity abroad and improve global health security, particularly through GHSA ( Table 5 ). CDC works to bolster global health security and pandemic preparedness in 19 countries by focusing on enhancing the core foundations of what CDC views as strong public health systems\u00e2\u0080\u0094comprehensive disease surveillance and integrated laboratory systems, a strong public health workforce, and capable emergency management structures. \nPrograms within CDC's global health security portfolio include the following:\nThe Field Epidemiology Training Program (FETP) trains a global workforce of field epidemiologists to increase countries' ability to detect and respond to disease threats, address the global shortage of skilled epidemiologists, and deepen relationships between CDC and other countries. Over 70 countries have participated in FETP with more than 10,000 graduates. National Public Health Institutes (NPHI) help more than 26 partner countries carry out essential public health functions and ensure accountability for public health resources. The program focuses on improving the collection and use of public health data, as well as the development, implementation, and monitoring of public health programs. Global Rapid Response Team (GRRT) is a team of public health experts who remain ready to deploy for supporting emergency response and helping partner countries achieve core global health capabilities. The GRRT focuses on field-based logistics, communications, and management operations. Since the GRRT's inception, more than 500 CDC staff have provided over 30,000 person-days of response support. From January through March 2020, CDC staff has completed more than 100 deployments for COVID-19 response. Core and surge members support domestic deployments to quarantine stations and repatriation sites, international deployments, WHO and country office operations, and the Emergency Operations Center in Atlanta. The Public Health Emergency Management (PHEM) program trains public health professionals affiliated with international ministries of health on emergency management and exposes them to the CDC Public Health Emergency Operations Center. To date, the program has graduated 142 fellows from 37 countries (plus the African Union). \n\n\t\tU.S. Department of Defense (DOD)\n\n\t\t\tWhat is the DOD global COVID-19 response?91\n\nDOD is conducting medical surveillance for COVID-19 worldwide. Related activities entail daily monitoring of reported cases, including persons under investigation (PUI), confirmed cases, and locations of such individuals, as well as surveillance for COVID-19 at China's southern border. DOD is supporting the U.S. CDC with additional laboratory capabilities. The DOD Laboratory Network, which includes military facilities in the United States and in certain overseas locations, has made available to interagency network laboratories its \"detection and characterization capabilities \u00e2\u0080\u00a6 to support COVID-19-related activities across the globe.\" The Secretary of Defense also has directed geographic combatant commanders to \"execute their pandemic plans in response to the [COVID-19] outbreak.\" \n\n\t\t\tEmergency Appropriations for DOD Responses98\n\nThe Families First Coronavirus Response Act ( P.L. 116-127 ) became law on March 18, 2020. Title II of Division A of the act included $82 million for the Defense Health Program to waive all TRICARE cost-sharing requirements related to COVID-19. \nThe Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) became law on March 27, 2020. Title III of Division B of the act included $10.5 billion in emergency funding for DOD. Of the $10.5 billion, $4.9 billion (47%) is for the Defense Health Program (DHP), according to the bill text . The DHP funding included $1.8 billion for patient care and procurement of medical and protective equipment; $1.6 billion to increase capacity in military treatment facilities; $1.1 billion for private-sector care; and $415 million to develop vaccines and to procure diagnostic tests, according to a summary released by the Senate Appropriations Committee. H.R. 748 also provided\n$2.5 billion for the defense industrial base, including $1.5 billion in defense working capital funds and $1 billion in Defense Production Act purchases; $1.9 billion in operations and maintenance (O&M) funding for the Services, in part to support deployment of the hospital ships USNS COMFORT and USNS MERCY to ease civilian hospital demand by caring for non-COVID patients; and $1.2 billion in military personnel (MILPERS) funding for Army and Air National Guard personnel deployments.\nDOD has not detailed how much of the emergency funding may be used to support international activities related to COVID-19, though DOD has stated it is working with the Department of Health and Human Services and the Department of State to provide support in dealing with the pandemic. As part of missions that began in March, Air National Guard C-17 cargo aircraft have transported hundreds of thousands of coronavirus testing swabs from Italy to the United States. The swabs have been distributed to medical facilities around the country at the direction of the Department of Health and Human Services.\n\n\t\t\tTo what extent is COVID-19 affecting United States security personnel?104\n\nThe degree to which U.S. security operations around the world may be affected due to personnel becoming infected has yet to be determined. Numerous media reports suggest that various parts of the U.S. military have seen a significant number of servicemembers contract or die from COVID-19 related symptoms. Citing operational security concerns, on March 30, 2020 the Department of Defense (DOD) directed military service commanders not to share the number of personnel affected by the COVID-19. In justifying this policy the DOD stated, \"We will not report the aggregate number of individual service member cases at individual unit, base or Combatant Commands.\u00c2\u00a0We will continue to do our best to balance transparency in this crisis with operational security.\" Also, as of April 1, 2020, reportedly the Department of Homeland Security had nearly 9,000 employees whose exposure to COVID-19 that has taken them out of the workforce, and deployed U.S. Naval vessels, such as the USS Theodore Roosevelt, have had their operational effectiveness called into question.\n\n\tRegional Implications of and Responses to the COVID-19 Pandemic\n\n\t\tAsia\n\n\t\t\tWhat are the implications for U.S.-China relations?109\n\nU.S.-China relations were fraught well before the outbreak of COVID-19, with the two governments engaging in a bitter trade war, competing for influence around the globe, and clashing over such issues as their activities in the South China Sea, China's human rights record, and China's Belt and Road Initiative. The pandemic appears to have increased the acrimony. On February 3, when the COVID-19 outbreak was at its peak in China, a spokesperson for China's Foreign Ministry blasted the United States for its response to the crisis there. \"The U.S. government hasn't provided any substantive assistance to us, but it was the first to evacuate personnel from its consulate in Wuhan, the first to suggest partial withdrawal of its embassy staff, and the first to impose a travel ban on Chinese travelers,\" the spokesperson charged. \"What it has done could only create and spread fear.\" Days later, Secretary of State Michael R. Pompeo announced the United States would make available up to $100 million in existing funds \"to assist China and other impacted countries,\" and that the State Department had facilitated the delivery to China of 17.8 tons of personal protection equipment and medical supplies donated by the private sector.\nAs COVID-19 transmission has accelerated in the United States, the Trump Administration has stepped up criticism of China's early response to the outbreak. Secretary Pompeo told an interviewer on March 24, \"unfortunately, the Chinese Communist Party covered this up and delayed its response in a way that has truly put thousands of lives at risk.\" Spokespeople for the State Department and China's Foreign Ministry have traded COVID-19-related accusations on Twitter. On March 12, a Chinese spokesperson tweeted, \"It might be US army who brought the epidemic to Wuhan.\" Secretary Pompeo accused China of waging a disinformation campaign \"designed to shift responsibility,\" and President Trump for several days referred to COVID-19 as \"the Chinese virus.\" \nOn April 17, in announcing his decision to withhold U.S. funding from the World Health Organization, President Trump accused the multilateral institution of having \"pushed China's misinformation about the virus, saying it was not communicable and there was no need for travel bans.\" Administration officials have also repeatedly suggested that a Chinese research institution may have been the source of the virus. On April 30, 2020, when asked if he had seen anything \"that gives you a high degree of confidence that the Wuhan Institute of Virology was the origin of the virus,\" the President replied, \"Yes, I have.\" The same day, the Office of the Director of National Intelligence stated that the intelligence community would continue efforts \"to determine whether the outbreak began through contact with infected animals or if it was the result of an accident at a laboratory in Wuhan,\" indicating continuing uncertainties about the virus's origin. \nChina has pushed back against U.S. allegations, including in a \"Reality Check\" document tweeted by a Chinese Foreign Ministry spokesperson responding to 24 U.S. allegations, which the spokesperson calls \"lies.\" (The document argues, for example, that the Wuhan Institute of Virology \"does not have the capability to design and synthesize a new coronavirus, and there is no evidence of pathogen leaks or staff infections in the Institute.\") Chinese spokespeople have gone on the offensive in criticizing the U.S. response to COVID-19 and have doubled down on spreading a conspiracy theory that the virus could have originated in the United States. On May 8, a Chinese Foreign Ministry spokesperson tweeted, \"The #US keeps calling for transparency & investigation. Why not open up Fort Detrick & other bio-labs for international review? Why not invite #WHO & int'l experts to the U.S. to look into #COVID19 source & response?\"\nSome U.S.-based analysts have expressed alarm about the downward spiral in bilateral relations. Some see neither the United States nor China helping to coordinate a global response to the pandemic, and argue, \"U.S.-China strategic competition is giving way to a kind of 'managed enmity' that is disrupting the world and forestalling the prospect of transnational responses to transnational threats.\" Others suggest, \"There will be time later to assess the early mistakes of China and others in greater detail, but the virus is out there now and we should be tackling it together.\" Some have called for cooperation in vaccine development and distribution, and in addressing the economic crisis the virus is causing in the developing world.\" \nWriting in The Washington Post , China's Ambassador to the United States suggested on May 5 that China would still be open to cooperation. \"Blaming China will not end this pandemic,\" he wrote. \"On the contrary, the mind-set risks decoupling China and the United States and hurting our efforts to fight the disease, our coordination to reignite the global economy, our ability to conquer other challenges and our prospects of a better future.\" In a May 14, 2020, Fox News interview, President Trump said, however, that he had no desire to speak to China's leader Xi Jinping. He suggested that to punish China, \"we could cut off the whole relationship.\" Apparently referring to the U.S. trade deficit with China, which was $378.6 billion in 2019, the President added, \"You'd save $500 billion if you cut off the whole relationship.\"\nSeveral Members of Congress have introduced legislation criticizing China's response to the COVID-19 pandemic (see Appendix ).\n\n\t\t\tWhat are the implications in Southeast Asia?125\n\nSoutheast Asia was one of the first regions to experience COVID-19 infections and the outbreak could have broad social, political, and economic implications in the months ahead and possibly years ahead. The region's countries are deeply tied together through trade and the movement of labor, links that could be reshaped if the outbreak leads to broad policy changes. Their economies have already been affected by disruptions to these links, and broad economic networks and supply chains could be reshaped if the outbreak leads to broad policy changes.\nAs an example, Malaysia banned overseas travel on March 18, affecting approximately 300,000 Malaysians who work in neighboring Singapore. Malaysia, however, changed tack on April 14 and allowed Malaysians in Singapore to return if they agreed to be tested and placed in quarantine. In Singapore, widespread outbreaks among migrant laborers, mostly from South Asia, who live in crowded dormitories, have led to the region's largest number of COVID-19 infections.\nOther regional issues include the following:\nIndonesia and the Philippines, the region's two most populous nations, appear to be experiencing widening outbreaks and may have a significantly larger COVID-19 case count than their public health systems are able to detect and address. Malaysia and Thailand, which have undergone substantial political turmoil in recent years, have relatively new governments that could face legitimacy questions based on their responses to the pandemic and as their economies begin the process of opening. Some nations, including the Philippines and Cambodia, have taken actions that raise concerns about human rights and freedoms. Philippine President Rodrigo Duterte has imposed strict lockdown measures that one U.N. official criticized as \"highly militarized,\" and these measures have resulted in more than 120,000 arrests, disproportionally affecting poor urban residents. Human rights groups have criticized a draft emergency order by Cambodia's government that would give it greater control over traditional and social media. Some of the region's poorest countries, including Burma and Laos, have reported relatively few COVID-19 cases, highlighting questions about transparency in nations that may be particularly vulnerable given their underdeveloped health systems.\nMuch of the Southeast Asian diplomatic calendar, which drives regional cooperation on a wide range of issues including trade and public health, has been cancelled or has moved to virtual meetings. The International Institute for Strategic Studies (IISS) has cancelled this year's iteration of its annual Shangri-la Dialogue, slated for June 5-7, after consultations with the government of Singapore.\n\n\t\t\tWhat are the implications in Central Asia?131\n\nIn Central Asia, the economic impacts of the pandemic may affect the roles of Russia and China in the region. Given disruptions to trade and cross-border movement, the pandemic could reverse recent progress on regional connectivity, a U.S. policy priority in Central Asia. The COVID-19 pandemic is placing significant economic pressure on Central Asian countries due to declines in domestic economic activity, economic disruptions in China and Russia, and the fall in hydrocarbon prices. China has cut the volume of natural gas imports from Central Asia due to falling demand, and analysts speculate that Chinese investment in the region may also shrink. Turkmenistan sends almost all of its gas exports to China and is particularly vulnerable, as the Turkmen government uses gas exports to service billions of dollars of Chinese loans. The economic impact of the pandemic will likely interrupt the flow of remittances from Russia, where millions of Kyrgyz, Tajik, and Uzbek citizens work as labor migrants, accounting for significant percentages of their countries' GDPs. \nSome measures implemented to combat the spread of COVID-19 could provide governments in the region with the means to suppress political and media freedoms. Human Rights Watch has stated that Central Asian governments are failing to uphold their human rights obligations by limiting access to information and arbitrarily enforcing pandemic-related restrictions. In Kazakhstan, authorities have detained government critics and journalists on suspicion of \"disseminating knowingly false information during a state of emergency,\" a charge that can be punished by up to seven years in prison. Kyrgyz authorities restricted the ability of independent media outlets to report for over a month using provisions in the country's state of emergency. The government of Tajikistan has been suppressing information on the pandemic, refusing to answer media questions and blocking a website that crowdsources information on COVID-19 fatalities in the country. \n\n\t\t\tWhat are the implications in South Asia?134\n\nThe seven countries of South Asia are home to about 1.8 billion people, nearly one-quarter of the world's population. In most South Asian countries, per capita spending on health care is relatively low and medical resources and capacities are limited. Dense populations and lack of hygiene are facilitating factors for pandemics, and with medical equipment needed to address the crisis in short supply, South Asia nations are likely to face serious risk. As of May 1, 2020, the United States had provided nearly $6 million in health assistance to help India slow the spread of COVID-19 and nearly $15 million to assist Pakistan's response.\nThe COVID-19 crisis has put a broad hold on activities related to U.S.-India and regional multilateral security cooperation, as well as delayed sensitive negotiations on U.S.-India trade disputes. The postponement of a planned March visit to New Delhi by Secretary of Defense Mark Esper had led to worries by some of inertia in bilateral defense relations. With India and Pakistan still engaged in a deep-rooted militarized rivalry, any generalized South Asian crisis, especially in the disputed region of Kashmir, could lead to societal breakdowns and\/or open interstate conflict between these two nuclear-armed countries.\nIndia. Several U.S. and Indian firms are cooperating on research for a coronavirus vaccine. India is home to several major vaccine manufacturers and is the world's leading producer of hydrocholoquine, an anti-malarial drug President Trump has touted as a potential treatment for COVID-19. In April, the U.S. President suggested that the United States might retaliate against India if New Delhi bans export of the drug and fails to fulfill an existing large-scale U.S. purchase order. India has agreed to allow limited exports.\nThe COVID-19 crisis has led to more acute questioning of the political leadership in India, where since last year Prime Minister Narendra Modi has faced mass protests over new citizenship laws and persecution of Muslims. Reports indicate that the health pandemic is fueling greater oppression and persecution of Indian Muslims, with that community coming under blame for the pandemic from some quarters. Accusations also have arisen that the New Delhi government is using the pandemic as a cover for increased efforts to limit press freedoms. India's Jammu and Kashmir territory\u00e2\u0080\u0094which came under a strict security lockdown in August 2019 and lost statehood in November\u00e2\u0080\u0094reportedly faces a \"double lockdown\" with the pandemic and resulting severe physical and psychological hardships. The New Delhi government may be using the pandemic as cover to further consolidate its grip on the disputed Kashmir Valley. \nIn Pakistan , Prime Minister Imran Khan was already dealing with widespread disaffection related to his government's performance and legitimacy. In late March, the powerful military \"stepped in and sidelined\" the civilian leadership after the Khan government's national pandemic response was criticized for perceived indecisiveness. By some accounts, the Pakistan government has also \"caved in to the demands of clerics\" regarding lockdown regulations. \nIn Bangladesh , social distancing is difficult for many living in densely populated areas. In addition, over 1 million displaced Rohingya reside in overcrowded and unsanitary camps along Bangladesh's border with Burma. Of these Rohingya, approximately 630,000 live in the Kutupalong camp, which may be the world's largest refugee camp. The population density in the camps\u00e2\u0080\u0094104,000 people per square mile in Kutupalong\u00e2\u0080\u0094poses challenges for social distancing, quarantine, and isolation. Any COVID-19 transmission in the camps would likely quickly overwhelm medical facilities and services, and because of the camps' porous perimeters, risk spreading into neighboring Bangladeshi towns and villages. Bangladesh reportedly quarantined a number of Rohingya on Bhansan Char island to prevent the spread of COVID-19.\n\n\t\t\tWhat are the implications in Australia and New Zealand?145\n\nIn both Australia and New Zealand, relations with China have been further strained by the COVID-19 pandemic. In April 2020, Australia expressed its support for an international investigation into the origins and spread of the pandemic, a call that raised sensitivities in the PRC. China's Ambassador Cheng Jingye in an Australian newspaper interview warned \"that pursuing an inquiry could spark a Chinese consumer boycott.\" Opposition Foreign Affairs spokesperson Penny Wong has signaled Labor's support of the government on the issue. In the view of one commentator, such attempts at \"intimidation\" and \"economic coercion\" make it \"now plain for all to see that the CCP is waging political war on Australia, using trade as a weapon. This is Australia's moment of clarity.\"\nIn May, China berated New Zealand for supporting Taiwan's participation at the World Health Organization. New Zealand Foreign Minister Winston Peters stated, \"[w] e have to stand up for ourselves\" when asked about China's response to New Zealand's position on Taiwan.\n\n\t\t\tWhat are the implications for U.S. withdrawal from Afghanistan?151\n\nThe presence and spread of COVID-19 in Afghanistan is adding new confusion to the Afghan peace process, already complicated by an extended political crisis in Kabul. The February 29, 2020 agreement signed by U.S. and Taliban negotiators commits the United States to withdraw about 3,500 of the 12,000 troops it has in Afghanistan by mid-June 2020 (with commensurate drawdowns of international forces). There have since been conflicting reports about how the COVID-19 pandemic is impacting that timeline. Most notably, the United States announced on March 18 that it is pausing the movement of personnel into and out of theater due to concerns about COVID-19. More recent reports indicate that the withdrawal is proceeding apace, if not ahead of schedule, and NBC News reported in April 2020 that President Trump has called for further accelerating the withdrawal of U.S. troops out of Afghanistan because of the pandemic. The U.S.-Taliban agreement also called for negotiations between the Taliban and Afghan government representatives to begin by March 10, but thus far no formal negotiations have taken place or been scheduled. Some limited engagements were held over Skype, due to the pandemic, but talks are chiefly held up by a disputed prisoner exchange.\nFurther spread of COVID-19 in Afghanistan could present opportunities for compromise and intra-Afghan cooperation. For example, Afghan government representatives have expressed support for Taliban efforts to combat the virus in areas they control. In addition, while the Taliban have reportedly targeted health workers in the past, a Taliban spokesman announced that the group \"assures all international health organizations and WHO of its readiness to cooperate and coordinate with them in combatting\" COVID-19, a commitment they appear to have upheld. At the same time, some observers dismiss the Taliban's response as a propagandistic attempt to undermine the legitimacy of the Afghan government, and charge that the Taliban's dramatic escalation of violence since February 2019 is the main factor impeding the country's response to the pandemic. Afghanistan may be at particularly high risk of a widespread COVID-19 outbreak, due in part to its weak public health infrastructure and its porous border with Iran, a regional epicenter of the pandemic where up to three million Afghan refugees live. More than 277,000 Afghans have returned to Afghanistan from Iran since January 1, 2020.\n\n\t\t\tWhat COVID-19 containment lessons could be learned from Asia?\n\nAsian governments outside mainland China were the first to deal with COVID-19. Five jurisdictions, in particular, have received wide praise for their COVID-19 control approaches: Taiwan, Hong Kong, South Korea, Australia, and New Zealand. Singapore was also praised for its initial actions to control the virus, although a large \"second wave\" of infections has pointed to vulnerabilities that even jurisdictions perceived as well-run still face. All of these jurisdictions have drawn on their experiences in addressing previous public health emergencies, including outbreaks caused by SARS, swine and avian flu, and MERS. Those experiences fostered bureaucratic and public attentiveness to public health challenges and prompted governments to develop active protocols for screening, testing, isolating infected individuals, and tracing their contacts. Prior experience may also have conditioned people in those places to follow standard infection control measures (frequent hand-washing, mask-wearing, and social distancing) and to more readily accept quarantines and movement restrictions. Some of these jurisdictions have begun the process of loosening restrictions related to COVID-19, which may provide lessons for the United States and others.\nTaiwan. Taiwan (which officially calls itself the Republic of China, or ROC), is located just 81 miles off the coast of mainland China. On December 31, 2019, the same day China notified the WHO China Office of pneumonia cases of unknown origin, Taiwan officials had begun to board planes arriving from Wuhan to evaluate passengers who had fever or pneumonia symptoms. Travel alerts, routine passenger screenings, and directives to self-quarantine soon followed, and by early February, Taiwan barred residents of mainland China from entry. Taiwan also extended indefinitely a suspension of cross-Strait flights from all but five airports in mainland China, previously set to expire at the end of April. On January 20, Taiwan both confirmed its first COVID-19 case and activated a Central Epidemic Command Center (CECC) to lead and coordinate the government's response to the COVID-19 crisis. The CECC is part of the National Health Command Center, a 24\/7 central command headquarters created in 2004 following the SARS outbreak. The government also integrated its national health insurance, customs, and immigration databases to facilitate case identification and tracking. The concentration of public health expertise among Taiwan's top leaders likely contributed to the government's attentive response. Taiwan's vice president, vice president-elect, vice premier, and minister of health are all public health experts. \nThe government has also issued strict and transparent guidance to contain the spread of the virus, which its citizens largely appear to have followed. Taiwan has tested widely for the virus, including mandatory tests for certain groups and tests for patients with respiratory illnesses that tested negative for the flu. Directives to conduct \"self-health management\" or self-quarantine have been enforced by harnessing cellphone location data and punishing violators with steep fines. The government's daily press conferences and frequent broadcasts of public service announcements have heightened public awareness and facilitated compliance with best practices. Taiwan also created informational apps, to help citizens track the spread of the virus and locate supplies of masks. In February and March, the government announced economic relief and stabilization measures, including approximately USD$2 billion to assist Taiwan industries affected by the outbreak, and payments totaling $465 to individuals who were quarantined or providing care for the quarantined. \nHong Kong. Initially, the government of Hong Kong, a Special Administrative Region (HKSAR) of the People's Republic of China, resisted taking aggressive measures to prevent a COVID-19 outbreak. Public criticism of what many considered an insufficient and inconsistent initial response appears to have contributed to the government's subsequent decision to act. A newly formed union of doctors and nurses working for the Hong Kong Hospital Authority held a strike on February 3, 2020, demanding the HKSAR government close the city's border with mainland China, for example. The HKSAR government closed all but two of the land crossings with mainland China the next day. The government implemented a mandatory 14-day quarantine for all arrivals to Hong Kong on March 17, 2020, which remains in effect. The HKSAR government has also indefinitely closed Hong Kong's borders to all non-resident arrivals (except people from Mainland China, Macau and Taiwan who have not been to another country in the previous 14 days). The government has also developed an extensive range of public service announcements, web pages, and other modes of informing the public about COVID-19. \nAlthough the HKSAR government may have hesitated, Hong Kong's public quickly adopted social distancing and anti-contamination behaviors developed during previous viral outbreaks. Similarly, medical professionals quickly implemented anti-viral protocols. \nAfter 14 days without a confirmed local case of contagion and only a few \"imported cases,\" on May 5, 2020, the HKSAR government began to selectively relax its restrictions, reopening government offices and selective businesses while maintaining the requirement to wear masks in public and prohibiting gatherings of more than eight people. The same day, it also announced that it would provide every Hong Kong resident with a free reusable face mask that complies with the American Society for Testing & Materials F2100 Level 1 Standard in terms of particle and bacterial filtration efficiency. The HKSAR government, however, also noted that restrictions may be reinstated if there is an increase in local cases.\nSingapore. Singapore, a Southeast Asian city-state of 5.7 million people, has offered lessons perceived as both positive and cautionary in its handling of the pandemic. Singapore was one of the first nations outside China to report COVID-19 cases, with its first infection reported on January 23. Public health experts have praised Singapore's rapid early actions, including extensive monitoring of cases and their contacts, temperature checks at building entrances, and clear public messaging. Singapore health officials conducted detailed interviews of affected individuals, requiring those who had come into contact with them to quarantine themselves. The Health Ministry developed the capacity to test more than 2,000 individuals a day. Individuals who come within two meters of an infected individual or spend 30 minutes with one are required to undergo testing and to quarantine or be placed under observation. Individuals found to have misled health officials are subject to criminal penalties including fines and the threat of imprisonment. The Health Ministry issues daily updates on individual cases and the numbers of people under care or protective quarantine, including details of where each individual who has tested positive lives.\nDespite its early successes curbing the spread, Singapore has experienced a significant \"second wave\" of cases, leading authorities to close schools and most businesses, steps that they had avoided earlier. Many of the new cases have come from crowded quarters where migrant workers live, and the expansion has left Singapore with Southeast Asia's largest number of COVID-19 infections, as of May 11.\nSouth Korea. After cases were confirmed in South Korea in late January, authorities pursued an aggressive testing regimen and public communication strategy. South Korea describes its strategy as the three \"T\"s: tracking, testing, and treatment. By early May, the number of new cases per day had fallen to 6.4. As of early May, nearly 660,000 citizens had been tested for the virus \u00e2\u0080\u0094the highest rate of testing per capita in the world\u00e2\u0080\u0094at over 600 sites, including pop-up facilities and drive-through sites. Results are generally provided within 24 hours. The case fatality ratio (1.64% as of March 30) has also been low, which health officials attribute to early detection and treatment, as well as universal health care. As of early May, South Korea has been able to stabilize the outbreak without lockdowns or wholesale travel bans, in part, experts argue, by being transparent and disseminating information about the virus' spread, including possible infections at the neighborhood level. President Moon Jae-in has stepped aside to allow national health officials to take the lead in delivering twice-daily messages to the public. After MERS killed 38 people in 2015, South Korea reformed its health policy by granting the government greater powers to monitor and track individual patients and to allow private companies to rapidly produce tests. Shortly after the COVID-19 outbreak hit, authorities were able to test 10,000 patients daily. Authorities can now test over 20,000 patients per day. \nAustralia . Observers believe that Australia's mitigation efforts (including self-isolation, movement restrictions, a two-week quarantine for those entering the country), the public's general adherence to rules, and widespread testing and tracing of contacts may be responsible for a relatively successful effort to contain the pandemic in Australia. Australia reportedly has one of the highest per capita testing rates in the world. In April 2020, the Australian government launched \"Covidsafe,\" an application that traces every person running it with other application users that have tested positive for COVID-19. Using Bluetooth, the app records others that have been within 1.5 meters for 15 minutes or more who also have the app. Within three days of its release, 3 million Australian had reportedly signed up for the app. \nNew Zealand . New Zealand confirmed its first case of coronavirus on February 28, 2020. The late date of the first outbreak, New Zealand's relative isolation, swift early response, and widespread testing all appear to have helped New Zealand to effectively deal with the virus. On March 14, with only six confirmed COVID-19 cases in the country, Prime Minister Jacinda Ardern announced that all entering New Zealand would have to self-isolate for two weeks and that the existing travel ban for those coming from China and Iran would remain in place. From March 19, the New Zealand border has been closed to almost all travelers, with only New Zealand citizens, residents, and their immediate families allowed to enter the country. This was a significant move for the country, which has an estimated 4 million international visitors a year, and where tourism accounted for approximately 5.8% of GDP for the year ending March 2019. Since April 9, arrivals have been placed in \"managed isolation facilities,\" and those deemed to be high risk have been placed in quarantine facilities. \nNew Zealand has moved from lockdown to an easing of restrictions in a relatively short period of time. Prime Minister Ardern announced on March 23 that New Zealand would enter a level 4 lockdown on March 25, when it had less than 150 cases. New Zealand then moved to alert level 3 on April 27. It subsequently moved to alert level 2 on May 13, under which most businesses will be open, tertiary education will open, travel between regions of the country, and gatherings up to 10 people will be allowed. Border controls and physical distancing requirements will remain, wide scale testing will continue, and those unwell or who have been in contact with the sick will be isolated. New Zealand and Australia have reached an agreement to lift travel restrictions between their two countries and establish a Trans-Tasman COVID Safe Zone, or travel bubble, as soon as it is safe to do so.\n\n\t\tEurope208\n\n\t\t\tHow are European governments and the European Union (EU) responding?\n\nOn March 13, 2020, WHO officials characterized Europe as the new global epicenter of the COVID-19 pandemic, noting that more cases were being reported each day in Europe than were reported in China at the height of its epidemic. As of May 15, about 1.2 million infections and nearly 155,000 deaths had been reported across the 27-member European Union (EU) and United Kingdom (UK). Italy, Spain, and the UK have been particularly hard hit, but infection rates grew across Europe throughout the month of March. Ukraine, Russia, and other parts of the former Soviet Union also reported a growing number of new COVID-19 cases. \nSince mid-April, a growing number of European governments have expressed cautious optimism that their countries have passed the peak of the crisis. Many European countries, including France, Germany, Italy, and Spain, have announced and begun to implement staged \"re-opening\" plans, slowly rolling back some of the \"lockdown\" measures implemented in March. Government officials caution, however, that reopening measures are strictly conditions-based and could be halted if infection rates grow.\nEuropean leaders have characterized the pandemic as Europe's biggest challenge since the Second World War, with potentially severe economic consequences and far-reaching social and political implications beyond the public health impact. European governments and the EU are enacting an array of policy responses. Authorities in most European countries initially imposed strict limitations on the movement of people and are undertaking significant fiscal and monetary measures. Key measures taken in Europe to combat the pandemic include the following:\nInitial \" l ock downs\" t ransitioning to c autious r eopening . On March 9, Italy became the first country to impose a nationwide quarantine, prohibiting \"non-essential\" movement within the country and closing all non-essential businesses; France, Germany, the United Kingdom, and others followed with similar restrictions. Almost all European countries closed schools and some types of businesses and have restricted public gatherings to varying degrees. Numerous European governments mobilized their military forces to assist response efforts, including constructing makeshift hospitals. In some countries, government authorities scaled back public transportation and introduced curfews. In mid-April, some European countries began announcing plans for a gradual reopening of their societies and economies in the coming months, but the pace of reopening measures vary across Europe, and leaders caution that such measures would be contingent on a clear reduction in infection rates. European governments have generally stressed the importance of a staged approach to reopening, allowing for regional differences depending on regional infection rates and hospital and testing capacity. They also have sought to implement widespread testing and contact tracing capacity. Economic stimulus . Many analysts predict that the COVID-19 pandemic could cause a financial crisis in Europe that might be several times worse than the 2008 global recession. European governments and the EU have announced an array of measures to mitigate a severe economic downturn. Measures include loan programs and credit guarantees for companies, income subsidies for affected workers, tax deferrals, and debt repayment deferments. On May 14, the Italian government announced a \u00e2\u0082\u00ac55 billion (about $60 billion) stimulus plan. In France, President Emmanuel Macron has pledged to provide unlimited budgetary support to companies and workers, which the government says could cost upward of \u00e2\u0082\u00ac45 billion ($48 billion). Germany has announced direct fiscal support of \u00e2\u0082\u00ac236 billion (about $256 billion) and a \u00e2\u0082\u00ac500 billion ($536 billion) loan program. Other countries have announced similar relief measures.\nOn March 18, the European Central Bank, which manages the EU's common currency (the euro), announced a Pandemic Emergency Purchase Program (PEPP) of about \u00e2\u0082\u00ac750 billion ($803 billion) aimed at calming markets and stemming a debt crisis in the Eurozone (the 19 EU member states that use the euro as their currency). On April 9, Eurozone leaders agreed to a new financial assistance package of at least \u00e2\u0082\u00ac540 billion (roughly $590 billion). This package includes access to credit lines through the European Stability Mechanism (ESM, the Eurozone's \"bail-out\" fund) worth approximately \u00e2\u0082\u00ac240 billion ($261 billion) for health-related costs, establishment of a European Investment Bank fund to back up to \u00e2\u0082\u00ac200 billion ($219 billion) in loans for businesses, and a \u00e2\u0082\u00ac100 billion ($110 billion) unemployment benefit support plan. Reaching consensus on this financial package was contentious and exposed divisions among EU member states. The package does not include establishing common EU debt instruments (or \"corona bonds\")\u00e2\u0080\u0094one of the most controversial proposals supported by hardest-hit countries such as Italy, Spain, and France\u00e2\u0080\u0094but EU leaders will likely continue to discuss this option and other potential economic measures. \nBorder closures . Numerous European governments have enacted national border controls and some have restricted entry only to national citizens. These measures have complicated efforts to maintain the free movement of goods, services, and people (key elements of the EU's single market) on which the EU's highly integrated economy depends. National border controls and closures within the EU's internal border-free Schengen Area \u00e2\u0080\u0094in which individuals may travel without passport checks among 22 EU member states and four non-EU countries\u00e2\u0080\u0094resulted in long delays at several borders. On March 16, 2020, EU leaders agreed to implement a temporary ban on \"non-essential travel\" into the EU and the Schengen Area for most foreign nationals from outside countries (including the United States), partly in an effort to preserve freedom of movement within the EU. This ban on nonessential travel into the EU and the Schengen Area is expected to remain in place until at least June 15. Many analysts contend that the disparate national reactions to the COVID-19 pandemic are endangering the EU's single market and Schengen system, with possible long-term implications for the EU's future.\n\n\t\t\tHow is the pandemic affecting U.S.-European relations?\n\nManaging the spread of COVID-19 has added new tensions to already strained U.S.-European relations. The EU\u00e2\u0080\u0094a frequent target of criticism from President Trump\u00e2\u0080\u0094expressed dismay with the announcement from the Trump Administration on March 11, 2020 of a travel ban on foreign nationals arriving in the United States from the Schengen Area. In a joint statement on March 12, EU leaders noted that COVID-19 was a global crisis that \"requires cooperation rather than unilateral action\" and expressed disapproval that the U.S. travel ban was imposed \"without consultation.\" U.S. officials countered that the travel ban decision had to be taken quickly and was based on the WHO's assessment of sustained transmission in the Schengen Area. The Trump Administration subsequently extended the travel ban beyond the Schengen Area to the UK and Ireland. Nevertheless, some analysts on both sides of the Atlantic asserted that the U.S. travel ban was scapegoating the EU, threatened future U.S.-EU relations, and imperiled broader U.S.-European political and security alliances. \nSome European leaders and EU officials also object to certain elements of the U.S. international response to the COVID-19 pandemic. Many European policymakers have criticized President Trump's decision to halt U.S. funding to the WHO pending a review of its role in allegedly mismanaging the pandemic response. EU officials have expressed concern that U.S. economic sanctions are blocking humanitarian supplies for hard-hit countries such as Iran and Venezuela. Some European officials, including in Germany and France, have complained about U.S. efforts to outbid them in the global marketplace for facemasks and other critical medical equipment. Some critics have also bemoaned the lack of coordinated U.S.-European leadership in mobilizing a global response to control the pandemic and address its wider societal and economic consequences. \n\n\t\tAfrica220\n\n\t\t\tHow are African governments responding?\n\nAs of May 12, 2020, all countries in sub-Saharan Africa (\"Africa\") except Lesotho had confirmed COVID-19-cases. South Africa had 11,000-plus cases, 25% of Africa's total. Most early cases were imported, notably from Europe, or linked to such cases. Africa's known COVID-19 caseloads have lagged those of more developed countries, and Africa's per capita incidence of COVID-19 remains very low in global comparison. Most countries in Africa, however, now have confirmed local COVID-19 transmission chains, and in some countries cases are surging. \nPrevention and mitigation strategies vary considerably in the region. Many governments have sought to increase COVID-19 testing capacity (though some have inadequate access to testing supplies), and to isolate confirmed and presumptive infected persons and trace their contacts. Many have improved their capacities in these areas since the start of the pandemic (see next section), in some cases building on lessons from past Ebola virus outbreak responses. Many African health systems, however, have limited capacities. Per capita ratios of doctors and health workers, rates of health spending, and hospital beds are some of the lowest globally, and supplies of healthcare goods (e.g., drugs, ventilators, and oxygen supplies) are low. Socioeconomic challenges also hinder prevention measures centering on hygiene (e.g., handwashing) and social distancing. Many Africans lack access to clean water or sanitation facilities, and live in high-density areas (e.g., informal urban settlements or displaced person camps). COVID-19 co-morbidity with other diseases widespread in the region (e.g., HIV and malaria) and\/or chronic health problems (e.g., diabetes and malnutrition ) may increase the risk from COVID-19 in Africa.\nMost countries have launched public outreach campaigns centered on personal hygiene promotion, the use of facial masks, and social or physical distancing. Residential lockdowns, business restrictions, prohibitions on large gatherings, and school and university closures have been common. Some countries, however, have implemented only some of these various responses, or implemented them in limited geographic areas. Governments in multiple countries have authorized restrictive measures under pandemic national states of disaster or emergency. In several countries, security forces enforcing lockdowns and other restrictions have violated human rights, at times in the face of social unrest over the effects of these restrictive measures. In some countries, observers fear that incumbent regimes may use their emergency authorities to extend their powers or time in office, or, as some have, to restrict press freedoms or opposition activity. \nGiven that many Africans make a precarious hand-to-mouth living in the informal sector, lockdowns have caused intense economic pain in the region, and governments have been eager to permit normal commercial activity to resume. A number of African governments began easing restrictive measures in late April, though in some countries, a spike in COVID-19 cases has accompanied or followed such actions. \nExperts are concerned that the pandemic's broader economic impacts could be particularly devastating in Africa, where many countries rely on tourism and\/or commodity exports, notably to China. Both tourism and exports have declined sharply due to COVID-19-linked interruptions and declines in world economic activity, trade, and travel. In food import-dependent countries, food insecurity may also increase, due to these factors as well as lock-down linked restrictions. Remittances from abroad also have dropped. Africa's heavy reliance on imports of consumer and industrial goods from China may also suffer, alongside business sectors tied to these imports (e.g., digital technology and local retail sectors). Exports of mined and energy commodities, which comprise roughly 75% of African exports by value, may be particularly hard-hit. Africa's oil export-dependent countries may face a double threat: a global oil price collapse initially driven by a now-ended price war among selected producers and an ongoing collapse in global oil demand. African airlines also are suffering steep losses. Multiple central banks have acted to increase economy-wide liquidity and many governments are making resource reallocations or are slated to receive international assistance to finance COVID-19 responses. \n\n\t\t\tHow is the Africa CDC responding?\n\nThe African Union (AU) Africa Centres for Disease Control and Prevention (Africa CDC), at times in partnership with the WHO and other international actors, is helping African governments to enhance the capacity of their public health systems to detect and respond to COVID-19. Africa CDC support has centered on training personnel on disease detection and surveillance at national laboratories and ports of entry, providing COVID-19 test kits and other health commodities (e.g., personal protection equipment or PPE), and other health response capacity-building. The Africa CDC has provided COVID-19 detection training to at least 40 country labs, almost all of which are now able to independently test for the disease. These labs are supported by a regional COVID-19 specimen referral and verification system comprising expert labs in Senegal and South Africa, with ten more planned region-wide. The Africa CDC also has created a regional COVID-19 task force under a regional response plan, has activated its Emergency Operations Center and Incident Management System, and is aiding information sharing among AU member states. The Africa CDC also has trained epidemiologists in disease event tracking and risk analysis, including through its Regional Collaborating Centres (RCCs), and is providing COVID-19 medical and technical advice and pandemic briefings to AU member states. \n\n\t\tMiddle East and North Africa235\n\n\t\t\tHow are Middle Eastern and North African governments responding?\n\nAs of May 2020, all 17 countries in the Middle East and North Africa region, in addition to the Palestinian territories, had confirmed local transmission of COVID-19. Iran was an early epicenter of the pandemic; as of May, Iranian cases represent roughly 40% of all confirmed cases in the region. The six Arab Gulf states also have emerged as a focal point; as of May these states (combined) also represent nearly 40% of the region's confirmed cases. Observers and U.S. government officials have expressed concern that some states have sought to downplay the extent of the spread of the virus in their countries. Many countries in the region also lack the capability to conduct comprehensive testing. \nStarting in March, many countries suspended international and domestic passenger flights, closed land and sea crossings with neighboring states, imposed curfews, and closed commercial, educational, and religious sites. Some governments also passed emergency legislation and expanded surveillance as part of their response to the pandemic. In some cases, observers argued that these measures may have been designed in part to suppress political opposition. \nIn Egypt, parliament expanded the country's emergency law; Human Rights Watch warned that most of the new authorities granted to the government are unrelated to public health issues. In Algeria, the government of recently elected President Abdelmadjid Tebboune banned all public gatherings of more than two people, including protest rallies, which had been held weekly for political reforms since February 2019. In Israel, the government approved temporary emergency regulations for security officials to monitor COVID-19 patients and potential victims via their mobile phones. \nEconomies in the region have been hard hit by the collapse in global energy prices and tourism. As in other regions, government efforts to contain the spread of the virus have also involved the suspension of most public commerce and trade, resulting in a severe blow to economic activity that is expected to generate increased unemployment. In April, the IMF projected that the region comprising the Middle East, North Africa, Afghanistan, and Pakistan would contract by 3.1% in 2020, with oil exporters in the region contracting by 4.2%. Rising unemployment, particularly concentrated among the youth, could have implications for political stability in the region. A prolonged global economic slowdown associated with COVID-19 also could dampen global demand for oil and natural gas resources exported from countries in the Middle East and North Africa for a prolonged period, with corresponding diminishing effects on export revenues and the fiscal health of some regional governments. \nStarting in late April, some countries began lifting some internal restrictions on movement and commercial activity\u00e2\u0080\u0094including Tunisia, where nationwide lockdown measures appeared to contribute to a drop in new confirmed cases\u00e2\u0080\u0094and Lebanon, where cases appeared to spike following the easing of restrictions. The WHO Eastern Mediterranean Regional (EMR) office warned, \"Without careful planning, and in the absence of scaled up public health and clinical care capacities, [a] premature lifting of physical distancing measures is likely to lead to an uncontrolled resurgence in COVID\u00e2\u0080\u009119 transmission and an amplified second wave of cases.\"\nThe WHO has highlighted the particular risks posed by the spread of the virus to states such as Syria, Libya, and Yemen, noting that years of conflict, natural disasters, and previous outbreaks\nhave left these countries with weakened health systems, shortages in health workers, and limited access to even the most basic medical care services. Millions of already vulnerable people in these countries are also more prone to infectious diseases due to overcrowded living conditions, weakened immunity due to years of food insecurity, and insufficient treatment for other underlying medical conditions. Many of these countries are also politically fragmented, resulting in limited humanitarian access to populations in some areas, and challenges in the sharing of information between controlling parties and WHO in a timely and transparent manner.\nIn addition, other areas of elevated risk in the region include the following:\nThe Gaza Strip . The Hamas-controlled Gaza Strip has reported 20 COVID-19 cases as of May 11, and officials from international organizations have voiced concerns about a possible outbreak given the acute humanitarian challenges in Gaza. The densely populated territory of nearly 2 million Palestinians has a weak health infrastructure and many other challenges related to sanitation and hygiene. On May 8, the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) updated an emergency flash appeal from $14 million to $93.4 million to prepare and respond to COVID-19-related needs for Palestinian refugees in Gaza, the West Bank, Jordan, Lebanon, and Syria through July 2020. The Trump Administration stopped U.S. contributions to UNRWA in 2018 and all bilateral aid to the West Bank and Gaza in 2019. For FY2020, Congress appropriated $75 million from the Economic Support Fund for humanitarian and development purposes in the West Bank and Gaza, and some Members of Congress have called for the Administration to obligate some of this assistance for Gaza. The Hajj (Saudi Arabia) . Each year, millions of Muslims travel to Saudi Arabia for a religious pilgrimage to Mecca. This journey, known as the Hajj , is a pillar of the Islamic faith. Saudi authorities have invested considerable attention and resources to averting infectious disease outbreaks during the Hajj , having faced 2009 H1N1 Pandemic, SARS, and MERS. In February 2020, Saudi leaders suspended umrah pilgrimage visits to the kingdom (which can be done at any time of year in contrast to the Hajj ) and limited access to holy sites in Mecca and Medina. In late March, Saudi officials asked Muslims to delay making Hajj travel plans until the effects of the pandemic were clearer. It remains to be seen whether the Hajj pilgrimage will go forward as scheduled in July and August 2020. U.S. Military Facilities . The United States maintains a significant military presence in the region, and has partnered closely with local forces. U.S. forces remain in Iraq and are consolidating base locations. U.S. training of Iraqi military personnel has been suspended due to COVID-19 risks, and U.S. officials stated in late March that future training would use \"fewer bases with fewer people.\"\n\n\t\t\tWhat are the implications for U.S.-Iran policy?\n\nThe spread of COVID-19 in Iran has raised questions about the possible effects of U.S. sanctions on Iran's response capacity. The Trump Administration's policy of \"maximum pressure\" on Iran imposes economic sanctions on every sector of Iran's economy. Iranian officials and some global health officials assert that the U.S. sanctions are weakening Iran's ability to contain the virus by reducing the availability of medical equipment. Sales to Iran of humanitarian items, including medicine and medical equipment, are generally exempt from U.S. sanctions. The reluctance of banks worldwide, however, to finance any transactions involving Iran, fearing penalties by the United States for sanctions violations, has reportedly affected Iran's ability to import all types of goods, including those that are exempt from sanctions. As the disease spread in Iran in February 2020, the United States has offered Iran an unspecified amount of assistance to help it deal with the outbreak, but Iran's government has refused the aid. In early March 2020, U.S. officials issued guidance indicating that transactions involving Iran's foreign exchange assets held abroad, when used to buy humanitarian items, would not face U.S. sanctions. However, the Administration opposes Iran's request for a $5 billion loan from the International Monetary Fund (IMF) that Iran says it needs to cope with the COVID-19 crisis; the Administration asserts that Iran has ample amounts of funds for medical imports and would use the loan proceeds to support pro-Iranian armed factions in various countries. Under the IMF's voting rules, the U.S. voting power is not sufficient to unilaterally veto specific IMF program requests, even though the United States has the largest share at the IMF and can veto major policy decisions at the IMF. Although over the past two decades Congress has supported increased sanctions on Iran, some Members of Congress have called on the Administration to relax sanctions on Iran, at least temporarily, to help Iran deal with the COVID-19 pandemic and thereby help curb the disease's broader spread.\n\n\t\tCanada, Latin America, and the Caribbean256\n\n\t\t\tHow is the Canadian government responding?\n\nCanada's federal, provincial, and territorial governments have worked closely together to manage the country's response to the COVID-19 pandemic. While the federal government has provided broad public health guidelines intended to slow the spread of the virus, provincial and territorial governments have implemented varying measures in accordance with local conditions. As of early May 2020, all of the provinces had developed phased reopening plans, and some had begun loosening restrictions on certain business, education, and recreational activities while maintaining physical distancing guidelines. \nThe federal, provincial, and territorial governments also have cooperated on efforts to secure personal protective equipment, testing materials, and other medical supplies. Nevertheless, provincial health services, which administer the Canadian health system, reportedly have experienced some shortages. Prime Minister Justin Trudeau has acknowledged that Canada's National Emergency Strategic Stockpile did not have sufficient supplies prior to the pandemic, but federal officials maintain that they have been able to fulfill every request for personal protective equipment received from the provinces.\nPrime Minister Trudeau has worked with the Canadian Parliament to enact a series of measures intended to mitigate the economic impact of the pandemic. As of late April 2020, their announced assistance measures amounted to an estimated C$146 billion ($104 billion)\u00e2\u0080\u0094equivalent to about 7% of Canada's projected gross domestic product (GDP) for 2020. These include a new Canada Emergency Response Benefit that provides C$2,000 ($1,424) every 4 weeks for up to 16 weeks for workers who have lost their incomes due to COVID-19, and a new Canada Emergency Wage Subsidy that covers 75% of employees' wages, up to C$847 ($603) per week, for up to 12 weeks. Prime Minister Trudeau has signaled his intention to extend such programs as necessary. To provide additional support to the economy and financial system, the Bank of Canada cut its benchmark interest rate from 1.75% to 0.25%, and launched its first-ever quantitative easing program to purchase government and commercial debt. Canada's Parliamentary Budget Officer forecasts that the country's real GDP will contract by 12% in 2020, but expects an economic recovery to begin in the second half of the year.\nThe Canadian and U.S. governments have coordinated decisions concerning their shared border. On March 21, they closed the border to all nonessential travel. Although the closure initially was to last 30 days, both governments agreed to extend it until May 21. The Canadian government reportedly has requested that the closure remain in place until June 21; several provincial governments are opposed to a quick reopening of the border given the scope of the COVID-19 outbreak in the United States. The Canadian and U.S. governments generally have prioritized keeping the border open to trade. In April 2020, however, the Trump Administration invoked the Defense Production Act of 1950 (50 U.S.C. \u00c2\u00a7\u00c2\u00a74501 et seq.) to restrict certain medical exports. Prime Minister Trudeau urged the United States not to interrupt the flow of essential goods and services, and the Administration ultimately exempted Canada from the export restrictions.\n\n\t\t\tHow are Latin American and Caribbean governments responding?\n\nThe ability of countries in Latin America and the Caribbean to mitigate a COVID-19 outbreak varies across the region, and responses have been diverse. The pandemic appears to have arrived in Latin American and the Caribbean later than many other regions and has yet to peak. A 2019 Global Health Security Index included Brazil, Argentina, Chile, and Mexico among countries most prepared for a pandemic, and considered Venezuela, Honduras, Jamaica, the Bahamas, Haiti, Guyana, Belize, and Guatemala to be among the least prepared. Although all countries in the region aspire to universal health coverage, many lack sufficient doctors, hospitals, medical supplies and other critical infrastructure, and face challenges of inequality and economic fragility as they grapple with the pandemic. \nThe patchwork of response efforts across 33 countries, including a cautious lifting of control measures in some countries in May 2020, has relied on incomplete data to guide policy since most countries have not conducted widespread testing. In Mexico, Brazil, and Nicaragua, where presidents have downplayed the threat of the pandemic, many analysts suggest the actual level of infection is essentially unknown, with some independent estimates suggesting it is a magnitude higher than what health authorities have reported. The information available suggests some countries are suffering severe outbreaks, while others, such as Paraguay, appear to have relatively few cases. \nAccording to several observers, the region's vulnerability is heightened by diminished health spending and low government capacity, following several years of economic stagnation. Venezuela is of particular concern since protracted political and economic crises had already weakened its health system. An estimated 4.8 million Venezuelans have fled the country, and new immigration controls by neighboring countries are unlikely to stop Venezuelans from crossing the region's porous borders.\nAs the most urbanized region in the world, Latin American and the Caribbean nations face challenges enforcing social distancing by quarantine and curfew. In some cities, such as Guayaquil, Ecuador, outbreaks have already overwhelmed medical systems. In rural areas, and urban slums, there is limited access to clean water and sewage treatment and minimal health infrastructure. Indigenous communities, Afro-descendants, migrants, refugees, and internally displaced persons often face formidable barriers to health care. Quarantine restrictions in some cases have created a dangerous rise in hunger and desperation since a large proportion of the population depends on daily earnings, often through informal employment, to make ends meet. \nMany governments have taken extraordinary measures to respond to the pandemic. Some have been accused of abuses of power and violations of human rights for arresting and imprisoning quarantine violators, harshly treating prison uprisings and jailed gang members (notably in El Salvador), and delaying elections. Many governments also have begun to implement far-reaching economic support measures, although their fiscal capacities to support businesses and bolster social safety nets varies considerably. The IMF estimates the region's economic growth will contract this year by 5.2%. \n\n\tInternational Economic and Supply Chain Issues274\n\n\t\tWhat are the implications of the pandemic in China's economy?\n\nCOVID-19 emerged amidst an economic downturn in China with officials navigating U.S.-China bilateral tariffs, working to curb consumer inflation (due in part to domestic pork shortages resulting from African swine fever), and moving to rein in government spending and shadow lending. COVID-19 containment measures significantly slowed economic activity in China, and halted production almost entirely in some areas of the country, particularly Hubei province. In early February, China's central bank pumped $57 billion into the banking system, capped banks' interest rates on loans for major firms, and extended deadlines for banks to curb shadow lending. China's central bank is seeking to stabilize China's currency and shore up liquidity in China's banking system, which remains the primary channel through which the government is providing business relief. Despite these measures, China experienced a 6.8% contraction in GDP growth in the first quarter of 2020, the first GDP contraction recorded in China since China's National Bureau of Statistics began releasing quarterly GDP figures in 1992. \nMany firms in China are still struggling to return to full capacity as some restrictions on travel and distribution of goods and workers remain and additional reported pockets of outbreaks continue in different parts of China. In addition, COVID-19's global spread has led to a sharp global economic downturn and reduced global demand for Chinese exports. China's recovery is also constrained by a contraction in global transportation and logistics and tourism and services trade.\nThe economic impact of COVID-19 has also raised questions about the capacity of the United States and China to implement the Phase One Trade Agreement signed in January 2020, which commits China to purchasing $200 billion in additional exports over the next two years. Recent analysis of both U.S. and Chinese first quarter trade data indicates that China is not on track to meet its purchase commitments\u00e2\u0080\u0094according to U.S. trade data, China's imports of agricultural products, a major component of the purchase agreements, grew by a modest 3.2%, while China's imports of U.S. manufactured goods and energy shrank. Reports in China's state media have suggested that some elements of China's leadership might be considering invalidating and renegotiating the phase one agreement.\n\n\t\tHow is COVID-19 affecting the global economy and financial markets?\n\nA growing list of economic indicators makes it clear that the viral outbreak is negatively affecting global economic growth on a scale that has not been experienced since at least the global financial crisis of 2008-2009. Global trade and GDP are forecast to decline sharply through at least the first half of 2020. The global pandemic is affecting a broad swath of international economic and trade activities, from services generally to tourism and medical supplies, global value chains, financial markets, and a range of social activities, to name a few. The health and economic crises could have a particularly negative impact on developing economies that are constrained by limited financial resources and where health systems could quickly become overloaded. \nThe economic situation remains highly fluid. Labeling the projected decline in global economic activity as the Great Lockdown, the IMF forecasted on April 14, 2020 that the global economy could decline by 3.0% in 2020, before growing by 5.8% in 2021, constituting the \"worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago.\" Estimates by the Organization for Economic Cooperation and Development (OECD) indicate the virus could trim global economic growth by as much as 2.0% per month if current conditions persist, or 24% on an annual basis. Global trade could also fall by 13% to 32%, depending on the depth and extent of the global economic downturn. Increasing rates of unemployment are raising the prospects of wide-spread social unrest and demonstrations in developed economies where lost incomes and health insurance are threatening living standards and in developing economies where populations reportedly are growing concerned over access to basic necessities and the prospects of rising levels of poverty.\nOver the seven-week period from mid-March to early May 2020, more than 33 million Americans filed for unemployment insurance. On May 8, 2020, the Bureau of Labor Statistics (BLS) reported that 20 million Americans lost their jobs in April 2020, pushing the total number of unemployed Americans to 23 million and raising the unemployment rate to 14.7%, the highest since the Great Depression of the 1930s. The report indicated that all major industry sectors experienced job losses, with the heaviest losses in the leisure and hospitality industries. Preliminary data indicate that U.S. GDP in the first quarter 2020 fell by 4.8% at an annual rate, the largest quarterly decline in GDP since the fourth quarter of 2008 during the global financial crisis. The U.S. economy is projected to contract by 5.9%, about twice the rate of decline experienced in 2009 during the financial crisis. The forecast assumes that the pandemic fades in the second half of 2020 and that the containment measures can be reversed. \nThe IMF also argues that recovery of the global economy could be weaker than projected as a result of lingering uncertainty about possible contagion, lack of investor and consumer confidence, and permanent closure of businesses and shifts in the behavior of firms and households. Global trade, measured by trade volumes, slowed in the last quarter of 2019 and was expected to decline further in 2020, as a result of weaker global economic activity associated with the pandemic. \nUncertainty about the length and depth of pandemic-related economic effects and the effectiveness of pandemic control measures are shaping perceptions of risk and volatility in financial markets and corporations. Financial markets worldwide, particularly in the United States, Asia, and Europe, are volatile as investors are concerned that the virus is creating a global crisis that could be prolonged and expansive. Similar to the 2008-2009 global financial crisis, central banks are rapidly becoming the lender of last resort and are attempting to address financial market volatility. Developments continue to evolve rapidly and the market dynamics have led some observers to question if these events mark the beginning of a full-scale global financial crisis.\nFinancial market dislocation can potentially increase liquidity constraints and credit market tightening, as firms hoard cash, with negative effects on economic growth. In some financial markets, fund managers have started selling government securities to increase their cash reserves, pushing down government bond prices. Financial markets are also responding to increased government bond issuances in the United States and Europe to fund COVID-19-related spending, further increasing government debt.\n\n\t\tHow is COVID-19 affecting U.S. medical supply chains? 287\n\nCOVID-19 has revealed U.S. and global supply chain vulnerabilities across a range of sectors, particularly PPE, which relies directly on China-based manufacturing. During the 2002-2003 SARS outbreak, China accounted for 8% of global manufacturing exports; in 2018, China was the source of approximately 19% of global manufacturing exports, including intermediate goods vital to global manufacturing supply chains. \nAn area of particular concern to Congress in the current environment is U.S. shortages of medical supplies\u00e2\u0080\u0094including personal protective equipment (PPE) and pharmaceuticals\u00e2\u0080\u0094as the United States steps up efforts to contain COVID-19 with limited domestic stockpiles and insufficient U.S. industrial capacity. Because of China's role as a global supplier of PPE, medical devices, antibiotics, and active pharmaceutical ingredients (API), reduced exports from China have led to shortages of critical medical supplies in the United States. According to China Customs data, in 2019 China exported $9.8 billion in medical supplies and $7.4 billion in organic chemicals\u00e2\u0080\u0094a figure that includes active pharmaceutical ingredients and antibiotics\u00e2\u0080\u0094to the United States. While there are no internationally agreed guidelines and standards for classifying these products, U.S. imports of pharmaceuticals, medical equipment and products, and related supplies are estimated to have been approximately $20.7 billion (or 9.2% of U.S. imports), according to CRS calculations using official U.S. data. \nIn early February 2020, the Chinese government nationalized control of the production and distribution of medical supplies in China, directing all production for domestic use. The Chinese government also directed the national bureaucracy, local governments, and Chinese industry to secure supplies from the global market. This effort likely exacerbated medical supply shortages in the United States and other countries, particularly in the absence of domestic emergency measures that might have locked in domestic contracts, facilitated an earlier start to alternative points of production, and restricted exports of key medical supplies. In addition to formal and informal PPE export restrictions that China reportedly has placed on domestic producers of PPE, several prominent U.S. companies with PPE production capacity located in China, including 3M, have indicated they do not have PRC government authorization to export. As China's manufacturing sector recovers while the United States and other countries are grappling with COVID-19, the Chinese government may selectively release some medical supplies for overseas delivery. Those decisions are likely to be driven, at least in part, by political calculations, as has been the case with many countries around the world. \n\n\tIssues for Congress295\n\nThe COVID-19 pandemic has raised questions about domestic and international preparedness and the appropriate responses to pandemic control. Although the United States has long-supported the delivery of PPE through its international pandemic preparedness programs, this practice has come into question while the numbers of COVID-19 cases and deaths climb in the United States. As of April 15, 2020, the United States had the highest number of COVID-19 cases and deaths worldwide, accounting for roughly 30% of all COVID-19 cases globally. In March, some Members of Congress began questioning the delivery of PPE by USAID to foreign countries while some governors and mayors reported shortages of the commodities. \nThe United States provides annual funding for foreign assistance, approximately $20 billion of which is administered by USAID each year. USAID programs operate in more than 120 countries worldwide and are intended to meet specific development objectives. In many of these countries, widespread poverty, weak public institutions, and diverse pre-existing governance challenges are likely to be exacerbated by the pandemic. To preserve these investments and past policy progress, protect U.S. foreign policy interests in the region, save lives, and help combat the negative socioeconomic effects of the pandemic in the region, Congress may seek to address additional help aid recipients might request to control the pandemic and its effects. \nCongress might also consider how the pandemic may affect partner governments' absorption capacities, and the manner and degree to which U.S. assistance may complement or coincide with nationally-determined pandemic responses. Congress may also wish to consider how responding to the challenges created by the pandemic may reshape pre-existing U.S. aid priorities\u00e2\u0080\u0094and how it may affect the ability of U.S. personnel to implement and oversee programs in the field. Relatedly, Congress may wish to ensure that U.S. responses are robustly coordinated with those of other donor governments and multilateral functional agencies\u00e2\u0080\u0094and to ensure that such efforts are transparent and cost-effective, and that donor assistance is complementary and non-duplicative.\nThe pandemic is also having other effects on foreign affairs that Congress might consider. Some have questioned, for example, how U.S. immigration policy might impact COVID-pandemic control efforts. Some Members of Congress and officials representing Latin American and Caribbean governments have expressed concern that COVID-19-related screening procedures for deportations are not sufficient to prevent the importation of COVID-19 cases from the United States and have asked the U.S. Immigration and Customs Enforcement (ICE) to suspend deportations. A number of people deported from the United States to Latin America have reportedly tested positive with COVID-19 or have reportedly been exposed to someone with COVID-19. Other Members of Congress continue to support the Administration's border policies, which the Administration maintains are conducted in a manner that accounts for the dangers of COVID-19.\nCongress continues to debate the extent to which the United States should contribute to multilateral organizations for COVID-19 control. Some Members, for example, are arguing for withholding contributions to the WHO, while others are urging the Administration to pay outstanding assessments to the organization and support ongoing WHO COVID-19 efforts. \n\n\t\tAppendix. Supplemental Information\n\nSelected Legislation Introduced or Enacted in the 116 th Congress Related to International COVID-19 Incidence or International Pandemic Preparedness\nH.Res. 962 , Expressing support for assisting East African countries afflicted by the plague of desert locusts . Referred to the House Committee on Foreign Affairs on May 8, 2020. \nS. 3669 , A bill to respond to the global COVID-19 pandemic, and for other purposes . Referred to the Senate Committee on Foreign Relations on May 7, 2020.\nS.Res. 567 , A resolution commending career professionals at the Department of State for their extensive efforts to repatriate United States citizens and legal permanent residents during the COVID-19 pandemic . Referred to the Senate Committee on Foreign Relations on May 7, 2020. \nS. 3600 , Li Wenliang Global Public Health Accountability Act of 2020 . Referred to the Senate Committee on Foreign Relations on May 5, 2020.\nS. 3598 , Repatriation Reimbursement Act . Referred to the Senate Committee on Commerce, Science, and Transportation on May 4, 2020.\nS. 3592 , Stop COVID Act of 2020 . Referred to the Senate Committee on the Judiciary on May 4, 2020.\nS. 3588 , Justice for Victims of Coronavirus Act . Referred to the Senate Committee on Foreign Relations on May 4, 2020.\nS.Res. 556 , A resolution designating May 1, 2020, as the \"United States Foreign Service Day\" in recognition of the men and women who have served, or are presently serving, in the Foreign Service of the United States, and honoring the members of the Foreign Service who have given their lives in the line of duty . Referred to the Senate Committee on the Judiciary on May 4, 2020.\nH.R. 6657 , WUHAN Rescissions Act . Referred to the House Committee on Appropriations on May 1, 2020.\nH.R. 6665 , To direct the Secretary of State, in consultation with the Secretary of Health and Human Services, to submit a report on the actions of the World Health Organization to address the spread of the virus responsible for COVID-19, and for other purposes . Referred to the House Committee on Foreign Affairs on May 1, 2020.\nH.Res. 944 , Expressing the sense of the House of Representatives that the People ' s Republic of China should be held accountable for its handling of COVID-19 . Referred to the House Committee on Foreign Affairs on April 28, 2020.\nH.R. 6610 , Director of Pandemic and Biodefense Preparedness and Response Act . Referred to the House Committee on Energy and Commerce, and in addition to the House Committees on Transportation and Infrastructure, Armed Services, Foreign Affairs, and Intelligence (Permanent Select), for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned on April 23, 2020. Referred to the Subcommittee on Economic Development, Public Buildings, and Emergency Management by the Committee on Transportation and Infrastructure on April 24, 2020.\nH.R. 6599 , COVID Research Act of 2020 . Referred to the Committee on Energy and Commerce, and in addition to the Committee on Science, Space, and Technology, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned on April 23, 2020.\nH.R. 6598 , SOS ACT Act . Referred to the Committee on Financial Services, and in addition to the Committee on Foreign Affairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned on April 23, 2020.\nH.Res. 940 , Recognizing the commencement of Ramadan, the Muslim holy month of fasting and spiritual renewal, and commending Muslims in the United States and throughout the world for their faith . Referred to the House Committee on Foreign Affairs on April 23, 2020.\nH.Res. 939 , Supporting the World Bank Group to lead a worldwide COVID-19 economic recovery effort . Referred to the House Committee on Financial Service on April 23, 2020.\nH.R. 6595 , Expanding Vital American Citizen Services Overseas (EVACS) Act of 2020 . Referred to the House Committee on Foreign Affairs on April 22, 2020.\nH.R. 6541 , PPE Act of 2020 . Referred to the Committee on Energy and Commerce, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned on April 17, 2020.\nH.R. 6531 , Medical Supplies for Pandemics Act of 2020 . Referred to the House Committee on Energy and Commerce on April 17, 2020.\nH.R. 6524 , Compensation for the Victims of State Misrepresentations to the World Health Organization Act of 2020 . Referred to the House Committee on the Judiciary on April 17, 2020.\nH.R. 6522 , PPP Expansion Act of 2020 . Referred to the House Committee on Small Business on April 17, 2020.\nH.R. 6519 , Holding the Chinese Communist Party Accountable for Infecting Americans Act of 2020 . Referred to the House Committee on the Judiciary on April 17, 2020.\nH.Con.Res. 97 , Establishing the Joint Select Committee on the Events and Activities Surrounding China ' s Handling of the 2019 Novel Coronavirus . Referred to the House Committee on Rules on April 17, 2020.\nH.R. 6504 , To direct the Secretary of Health and Human Services, acting through the Director of the Centers for Disease Control and Prevention, to develop a plan to improve surveillance with respect to diseases that are viral pandemic threats, and for other purposes . Referred to the House Committee on Energy and Commerce on April 14, 2020.\nH.Res. 922 , Expressing the sense of the House of Representatives that all nations should permanently close live wildlife markets and that the People ' s Republic of China should cease spreading disinformation regarding the origins of coronavirus . Referred to the House Committee on Foreign Affairs, and in addition to the House Committees on Natural Resources, Agriculture, and Energy and Commerce on April 14, 2020.\nH.R. 6500 , To reduce Federal spending and fund the acquisition of unexpired personal protective equipment (including face masks) for the strategic national stockpile by terminating taxpayer financing of Presidential election campaigns . Referred to the House Committee on Ways and Means, and in addition to the Committee on House Administration, on April 14, 2020. \nH.R. 6481 , To rescind the appropriation made for migration and refugee assistance in the Coronavirus Aid, Relief, and Economic Security Act and redirect the funds to U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement . Referred to the House Committee on Appropriations on April 10, 2020.\nH.R. 6480 , To require the President, after the World Health Organization declares a global pandemic, to report to the Congress on the status of Federal planning to respond to the pandemic . Referred to the House Committee on Energy and Commerce, and in addition to the Committee on Financial Services on April 10, 2020.\nH.Res. 919 , Condemning the United Nations ' decision to appoint China a seat on its Human Rights Council . Referred to the House Committee on Foreign Affairs on April 10, 2020. \nH.R. 2166 , Global Health Security Act of 2019 . Directs the President to create the Global Health Security Agenda Interagency Review Council to implement the Global Health Security Agenda, an initiative launched by nearly 30 nations to address global infectious disease threats. Ordered to be reported on March 4, 2020, and introduced in the House on April 9, 2020.\nH.Res. 917 , Expressing the sense of the House of Representatives that the United States should withhold the contribution of Federal funds to the World Health Organization until Director-General Tedros Ghebreyesus resigns and an international commission to investigate the World Health Organization is established . Referred to the House Committee on Foreign Affairs on April 7, 2020.\nH.R. 6471 , To posthumously award a Congressional Gold Medal to Dr. Li Wenliang, in recognition of his efforts to save lives by drawing awareness to COVID-19 and his call for transparency in China . Referred to the House Committee on Financial Services, and in addition to the Committee on House Administration on April 7, 2020. \nH.R. 6429 , To establish in the Legislative Branch a National Commission on the Coronavirus Disease 201 9 Pandemic in the United States . Referred to the House Subcommittee on Economic Development, Public Buildings, and Emergency Management on April 6, 2020. \nH.R. 6440 , To establish the National Commission on the COVID-19 Pandemic . Referred to the House Committee on Energy and Commerce on April 3, 2020. \nP.L. 116-136 , Coronavirus Aid, Relief, and Economic Security Act or the CARES Act . Enacted H.R. 748 on March 27, 2020.\nH.R. 6410 , To direct the President to use authority under the Defense Production Act of 1950 to ensure an adequate supply of equipment necessary for limiting the spread of COVID-19 . Referred to the House Committee on Financial Services on March 27, 2020. \nH.R. 6398 , To provide for the expedited procurement of equipment needed to combat COVID-19 under the Defense Production Act of 1950 . Referred to the House Subcommittee on Economic Development, Public Buildings, and Emergency Management on March 27, 2020. \nH.R. 6406 , To require personal protective equipment to be included in the strategic national stockpile, and to require the Federal Government to procure such equipment from United States sources, and for other purposes . Referred to the Subcommittee on Economic Development, Public Buildings, and Emergency Management on March 27, 2020. \nH.R. 6405 , To direct the President, in consultation with the Secretary of the Treasury, to develop and carry out a strategy to seek reimbursement from the People's Republic of China of funds made available by the United States Government to address the Coronavirus Disease 2019 (COVID-19) . Referred to the House Committee on Foreign Affairs on March 26, 2020. \nS. 3586 , Eliminating Leftover Expenses for Campaigns from Taxpayers (ELECT) Act of 2020 . Referred to the Senate Committee on Finance on March 25, 2020.\nH.R. 6390 , To require the President to use authorities under the Defense Production Act of 1950 to require emergency production of medical equipment to address the COVID-19 outbreak . Referred to the House Committee on Financial Services on March 25, 2020. \nH.R. 6393 , To require the Secretary of Defense to submit to Congress a report on the reliance by the Department of Defense on imports of certain pharmaceutical products made in part or in whole in certain countries, to establish postmarket reporting requirements for pharmaceuticals, and for other purposes . Referred to the House Committee on Ways and Means, and in addition to the House Committees on Armed Services, Oversight and Reform, and Energy and Commerce on March 25, 2020. As of April 15, 2020, no text of the bill was available. \nS.Res. 552 , A resolution supporting an international investigation into the handling by the Government of the People's Republic of China of COVID-19 and the impact of handling COVID-19 in that manner on the people of the United States and other nations . Referred to the Senate Committee on Foreign Relations on March 24, 2020.\nH.Res. 907 and S.Res. 553 , Expressing the sense of the House of Representatives that the Government of the People's Republic of China made multiple, serious mistakes in the early stages of the COVID-19 outbreak that heightened the severity and spread of the ongoing COVID-19 pandemic, which include the Chinese Government's intentional spread of misinformation to downplay the risks of the virus, a refusal to cooperate with international health authorities, internal censorship of doctors and journalists, and malicious disregard for the health of ethnic minorities . Referred to the House Committee on Foreign Affairs on March 24, 2020.\nS. 3573 , American-Made Protection for Healthcare Workers and First Responders Act . Referred to the Senate Committee on Health, Education, Labor, and Pensions on March 24, 2020. \nS. 3570 , A bill to provide for the expedited procurement of equipment needed to combat COVID-19 under the Defense Production Act of 1950 . Referred to the Senate Committee on Banking, Housing, and Urban Affairs on March 23, 2020.\nS. 3568 , Medical Supply Chain Emergency Act of 2020 . Referred to the Senate Committee on Banking, Housing, and Urban Affairs on March 23, 2020. \nH.R. 6379 , Take Responsibility for Workers and Families Act, Referred to the House Committee on Appropriations , and in addition to the House Committees on the Budget, and Ways and Means on March 23, 2020. \nH.R. 6373 , To increase the amount available under the Defense Production Act of 1950 to respond to the coronavirus epidemic, and for other purposes . Referred to the House Committee on Financial Services on March 23, 2020. \nH.R. 6371 , To amend the Securities Exchange Act of 1934 to require issuers to disclose risks related to global pandemics, and for other purposes . Referred to the House Committee on Financial Services on March 23, 2020. \nH.R. 6319 , To establish a Congressional COVID-19 Aid Oversight Panel, to authorize the Special Inspector General for the Troubled Asset Relief Program to coordinate audits and investigations in connection with the receipt of Federal aid related to COVID-19, and for other purposes . Referred to the House Committee on Financial Services on March 23, 2020. \nH.Res. 906 , Calling on the President to invoke the Defense Production Act to respond to COVID-19 . Referred to the House Committee on Financial Services on March 23, 2020. \nS. 3548 , Coronavirus Aid, Relief, and Economic Security Act or the CARES Act . Referred to the Senate Committee on Finance on March 21, 2020.\nH.R. 6310 , To require the Secretary of Defense to make testing for the coronavirus disease 19 available to all members of the Armed Forces deployed to an area in which the United States Central Command has responsibility . Referred to the House Committee on Armed Services, March 19, 2020.\nH.R. 6482 , A bill to require the Secretary of Health and Human Services to maintain a list of the country of origin of all drugs marketed in the United States, to ban the use of Federal funds for the purchase of drugs manufactured in China, and for other purposes . Referred to the Senate Committee on Finance on March 19, 2020.\nS. 3538 , Strengthening America ' s Supply Chain and National Security Act . Referred to the Senate Committee on Finance, March 19, 2020. \nS. 3537 , Protecting Our Pharmaceutical Supply Chain from China Act of 2020 . Referred to the Senate Committee on Finance, March 19, 2020.\nS.Res. 547 , A resolution encouraging the President to use authorities provided by the Defense Production Act of 1950 to scale up the national response to the coronavirus crisis . Referred to the Senate Committee on Banking, Housing, and Urban Affairs, March 18, 2020. \nS. 3530 , A bill to amend the National Security Act of 1947 to require the President to designate an employee of the National Security Council to be responsible for pandemic prevention and response, and for other purposes. Referred to the Senate Committee on Homeland Security and Governmental Affairs on March 18, 2020.\nS. 3507 , A bill to require the Secretary of Defense to make testing for the coronavirus disease 19 available to all members of the Armed Forces deployed to an area in which the United States Central Command has responsibility. Referred to the Senate Committee on Armed Services on March 17, 2020.\nS. 3510 , A bill to transfer all border wall funding to the Department of Health and Human Services and USAID to combat coronavirus. Referred to the Committee on Homeland Security and Government Affairs on March 17, 2020.\nH.R. 6288 , Responsibly Responding to Pandemics Act . Referred to the House Subcommittee on Economic Development, Public Buildings, and Emergency Management, March 16, 2016. \nH.R. 6205 , Assistance for Workers Harmed by COVID-19 Act . Amends the Trade Act of 1974 to provide adjustment assistance to certain workers adversely affected by disruptions in global supply chains from COVID\u00e2\u0080\u009319, and for other purposes. Referred to the House Committee on Ways and Means on March 11, 2020.\nP.L. 116-123 , Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. Provides $7.8 billion in supplemental appropriations to aid in domestic and global COVID-19 preparedness and response activities, including $6.5 billion for the Department of Health and Human Services (HHS), $0.02 billion for the Small Business Administration and $1.3 billion for foreign operations activities provided across several agencies and funding mechanisms. Parts of the HHS amounts are to be made available for international activities. Enacted H.R. 6074 on March 6, 2020. \nS.Amdt. 1506 , To rescind unobligated balances for certain international programs to offset the amounts appropriated in this bill to respond to the coronavirus outbreak. Motion to table the amendment was agreed to in the Senate on March 5, 2020. \nS.Res. 497 , A resolution commemorating the life of Dr. Li Wenliang and calling for transparency and cooperation from the Government of the People's Republic of China and the Communist Party . Agreed to in the Senate on March 3, 2020 without amendment and an amended preamble by unanimous consent.\nH.R. 6070 , Border Health Security Act of 2020 . To establish grant programs to improve the health of border area residents and for all hazards preparedness in the border area including bioterrorism, infectious disease, and noncommunicable emerging threats, and for other purposes. Referred to the House Committee on Energy and Commerce and Committee on Foreign Affairs on March 3, 2020.\nS.Res. 511 , A resolution supporting the role of the United States in helping save the lives of children and protecting the health of people in developing countries with vaccines and immunization through GAVI, the Vaccine Alliance . Referred to the Senate Committee on Foreign Relations, February 27, 2020. \nS.Res. 505 , A resolution expressing the sense of the Senate that the United States will continue to provide support to international partners to help prevent and stop the spread of coronavirus. Referred to the Senate Committee on Foreign Relations on February 13, 2020. \nH.R. 2166 and S. 3302 , Global Health Security Act of 2020 . Establishes a Special Advisor for Global Health Security within the Executive Office of the President to coordinate U.S. government global health security activities, convene and chair a Global Health Security Interagency Review Council, and submit a biannual report to Congress on related activities, among other things. Referred to the Senate Committee on Foreign Relations on February 13, 2020. \nH.R. 5730 , National Strategy for Pandemic Influenza Update Act . To direct the Homeland Security Council and the National Security Council, in consultation with Federal departments and agencies responsible for biodefense, to update the National Strategy for Pandemic Influenza, and for other purposes. Referred to the House Committees on Energy and Commerce, Armed Services, Foreign Affairs, Intelligence, and Agriculture on January 30, 2020. \nP.L. 116-22 , Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 . To advance research and development of innovative tools to improve pandemic preparedness, including directing the Secretary of Health and Human Services to submit a report to the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce on U.S. efforts to coordinate with other countries and international partners during recent public health emergencies with respect to the research and advanced research on, and development of, qualified pandemic or epidemic products. Enacted S. 1379 on June 24, 2019.\nH.R. 269 , Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 . Related to S. 1379, which became P.L. 116-22 . Placed on Senate Legislative Calendar under General Orders, January 10, 2019.","output":null}
{"id":"gao_GAO-19-693T","pid":"gao_GAO-19-693T_0","input":"\tBackground\n\nThe vast majority of the 42 railroads subject to the statutory mandate to  implement PTC\u2014including 30 commuter railroads, Amtrak, seven Class I  and four Class II and III freight railroads\u2014are implementing one of three  types of PTC systems. These systems include the Interoperable  Electronic Train Management System (I-ETMS), the Advanced Civil  Speed Enforcement System II (ACSES), and Enhanced Automated Train  Control (E-ATC). While these PTC systems are functionally similar, the  technologies they use differ. For example, to determine a train\u2019s location,  ACSES and E-ATC rely on equipment embedded on the track while I- ETMS uses Global Positioning System information. ACSES and E-ATC  both supplement existing train control systems to provide all required PTC  functionality, while I-ETMS was designed as a new system to provide this  functionality.\nAs noted above, testing is one of the many steps to achieving full  implementation. Through multiple stages of testing, which are  summarized below, railroads must demonstrate that the PTC system  meets functional requirements.\nLaboratory testing: locomotive and wayside equipment testing in a  lab environment to verify that individual components function as  designed.\nField testing: includes several different tests of individual  components and the overall system, such as testing 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.\nRevenue 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.\nUsing results from field and RSD testing, combined with other  information, host railroads must then submit a safety plan to FRA for  system certification and approval. We previously reported that these  safety plans have been up to 5,000 pages in length. Once FRA approves  a safety plan, the railroad receives 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.\nInteroperability is achieved when the locomotives of any host railroad and  tenant railroad operating over the same track segment can successfully  communicate with and respond to the other railroad\u2019s PTC system,  allowing uninterrupted movements over property boundaries. For  example, when a locomotive enters another railroad\u2019s territory as a  tenant, it immediately needs information about the upcoming track\u2014such  as any temporary speed restrictions in place due to track work (see fig.  1).\nTo achieve interoperability, railroads have to complete a series of steps  including (1) additional installation work (such as installing equipment on  a tenant railroad\u2019s locomotives) and scheduling (such as coordinating with  the relevant railroad to reach any needed agreements and identify dates  for testing), (2) laboratory testing, (3) field testing, and (4) RSD or  revenue service operations. Many railroads will complete much of the  implementation for their own PTC systems, such as starting RSD on  some or most of their track, before they begin to take steps to achieve  interoperability with other railroads. However, a railroad can take steps to  achieve interoperability with other railroads while simultaneously  completing field testing or other stages of testing on its own PTC system.\nFRA is responsible for overseeing railroads\u2019 implementation of PTC, and  the agency monitors progress and provides direct assistance to railroads  implementing PTC. For example, each railroad had to develop an FRA- approved PTC implementation plan that includes project schedules and  milestones for certain activities, and a railroad is required to report  quarterly and annually to FRA on its PTC implementation status relative  to its implementation plan. FRA also provides technical assistance to  railroads, addresses questions, and reviews and approves railroads\u2019  documentation, including test and safety plans. FRA has a national PTC  project manager, designated PTC specialists in the eight FRA regions,  and approximately a dozen engineers, test monitors, and other staff  responsible for overseeing technical aspects of implementation. FRA also  has oversight tools, which includes authority to impose civil penalties  when a railroad fails to meet certain statutory PTC requirements. Since  2017, FRA reports that it has assessed nearly $400,000 in civil penalties  against railroads that failed to comply with their implementation plan  milestones or reporting requirements.\n\n\tRailroads Continue to Make Progress Implementing PTC, but Significant Work Remains to Achieve Interoperability\n\n\t\tRailroads\u2019 Implementation of Their Own Systems Has Advanced, but Some Commuter and Smaller Freight Railroads Remain in the Early Stages of Testing\n\nSince the end of 2018, some railroads have reported making progress on  testing and implementation of their own PTC systems. Figure 2 shows the  42 railroads\u2019 reported progress by PTC implementation stage.\nSix railroads\u2014two Class Is and four commuters\u2014reported to FRA that  they had implemented PTC on all of their own territories but had not  completed interoperability as of March 31, 2019, and almost all these  railroads reported being in this stage at the end of 2018. In addition, as  of March 31, 2019, no additional railroads beyond the four that were  complete at the end of 2018 reported reaching full implementation. Nearly  all railroads still implementing PTC plan to reach full implementation in  the last quarter of 2020, based on our analysis of railroads\u2019 extension  requests.\nFew railroads reported moving into RSD during the first quarter of 2019,  and the extent of RSD testing being conducted by railroads in this stage  varied considerably. Of the 19 railroads that reported RSD testing on  some portion of their own track as of March 31, about half (9 of 19)  reported RSD testing on more than 75 percent of their total route miles,  while about a quarter (5 of 19) reported RSD testing on less than 25  percent of their total route miles. RSD testing also varied between Class I  railroads and commuter railroads. On average, the 5 Class I railroads in  this stage reported RSD on 86 percent of route miles, while commuter  railroads reported an average of 39 percent of route miles in RSD.\nMoreover, based on our analysis, 11 railroads\u20147 commuters and 4 Class  II and III railroads\u2014reported that they remained in field testing as of  March 31, 2019. Similar to railroads in RSD testing, the extent of field  testing reported by railroads varied. Of the 11 railroads in field testing,  most (7) reported field testing on the majority or all of their route miles,  whereas 4 railroads\u2014all commuters\u2014reported conducting field testing on  less than half of their route miles. Based on railroads\u2019 responses to our  questionnaire, railroads\u2019 PTC implementation status did not change  significantly as of May 31, 2019; two additional railroads\u2014both  commuters\u2014began RSD testing on some portion of their track, and one  commuter railroad began field testing.\n\n\t\tHost Railroads Have Achieved Interoperability with Less Than 20 Percent of Tenants, but Nearly All Railroads Have Started Interoperability Planning\n\nAs of March 31, 2019, 11 of the 31 host railroads that must have  interoperable PTC systems reported to FRA that they had achieved  interoperability with at least 1 of their tenant railroads. Collectively, of  the 227 unique host-tenant relationships that require interoperability, FRA  reported that railroads had achieved interoperability for 38 (17 percent) of  these relationships. The number of tenants each railroad must work to  achieve interoperability with ranges from 1 to 31 railroads, based on  railroad reports to FRA. For example, Class I railroads, as host railroads,  average about 18 tenants, while commuter railroads average about 3  tenants. A railroad does not generally start work to achieve  interoperability with all the railroads it interoperates with at once,  according to FRA; instead a railroad will prioritize its interoperability work.  For example, representatives from one Class I railroad we interviewed  said it prioritized achieving interoperability in the following sequence: first  with commuter-railroad tenants given the need to ensure passenger  safety; second with other Class I railroads given the high total miles of  track they share; and finally with smaller Class III railroads. In addition, a  railroad may be in multiple interoperability steps (e.g., installing, testing)  with different tenants at the same time.\nFRA counts a relationship as having achieved interoperability if the tenant  is operating PTC on all of the host\u2019s track miles. This binary measure for  interoperability\u2014that is, achieved or not\u2014does not describe the extent to  which railroads have started work on interoperability or, according to  representatives from two railroads we interviewed, reflect when  interoperability has been achieved along most but not all of its host\u2019s  track. Railroads reported to FRA that they had begun work on  interoperability for more than 90 percent of the remaining host-tenant  relationships that need to achieve interoperability. In particular, based on  their quarterly reports, railroads were installing for 82 host-tenant  relationships and testing for 89 host-tenant relationships as of March 31,  2019. Overall, the status of interoperability work did not vary much among  Class I, commuter, and Class II and III railroads.\nFRA officials and others we spoke with could not provide an estimate of  how long it takes on average for two railroads to complete the individual  steps to achieve interoperability. Representatives from industry  associations we interviewed said that it can vary. An FRA specialist we  interviewed agreed, explaining that interoperability field testing, for  example, varies based on track availability. One railroad might complete  testing in 4 days while another railroad might need weeks because it can  only test at specific times. In its quarterly reports, FRA asks host railroads  to provide the scheduled date for completing interoperability testing with  each tenant railroad. As of March 31, 2019, seven railroads reported that  they did not anticipate completing interoperability testing with at least one  tenant until the last quarter of 2020.\n\n\t\tRailroads Continue to Report Challenges with Vendors and Software, and Face New Interoperability Challenges\n\nIn responding to our May 2019 questionnaire, most railroads reported that  vendor and software issues remain major or moderate challenges for  PTC implementation. As part of our ongoing work related to PTC, we  have reported that railroads have faced challenges associated with the  limited number of vendors that design PTC systems, provide the software  and hardware, and conduct testing. However, as representatives of half  of the railroads we interviewed emphasized, vendor and software issues  are more acute now because as the 2020 deadline nears, less time  remains to address these issues and associated delays. Software and vendor issues can be interrelated as a small pool of vendors develop and  update the software that supports railroads\u2019 PTC systems.  Representatives from several railroads and FRA specialists we  interviewed said that software issues routinely arise in lab testing, field  testing, and RSD that require vendor revisions before a railroad\u2019s PTC  implementation can continue. For example, representatives from one  railroad said that existing software defects affecting its PTC system must  be addressed and a new version of the software is needed before they  can start RSD. They added that they had no control over this process, as  they must rely on the vendor to provide reliable software. Representatives  from this railroad also noted that resolving software issues is often not  entirely within a railroad\u2019s control due to the need for vendor support, in  contrast to some earlier challenges leading up to the 2018 deadline,  where, for example, the railroad itself had more control as it was installing  equipment and could more clearly track progress.\nMoreover, the limited supply of vendors and high demand for services as  railroads work simultaneously to implement PTC by the 2020 deadline  continue to pose problems. For example, representatives from one  railroad said their vendor has consistently had issues meeting milestones  and delivering on its commitments. Representatives from a small railroad  said they had limited internal resources to implement PTC, making the  railroad\u2019s progress heavily reliant on its vendor. Representatives from two  other railroads and FRA officials also highlighted implementation delays  caused by recalls for some locomotive equipment, which has caused  additional work for railroads as well as the vendor. Specifically, the  equipment had to be removed, sent in for repair, and then re-installed.\nMore than half of the railroads implementing PTC also responded to our  questionnaire that interoperability was a major or moderate challenge.  Railroads said that interoperability can be complicated by software issues  and coordinating host and tenant railroad schedules, when asked to  describe the biggest challenges to achieving interoperability. Fifteen railroads specifically mentioned software issues, and representatives from  several railroads noted that interoperability will require reliable software.  For example, one railroad reported that certain software functionality  remains to be developed, tested, and implemented to facilitate  interoperability and to address software reliability issues that have caused  system disruptions. Also, 14 railroads noted that scheduling time with  other railroads to begin interoperability testing can be cumbersome and  time consuming. For example, several railroads that we interviewed and  that responded to our questionnaire said that scheduling can be  complicated by whether other railroads have made enough progress on  their own PTC implementation to begin work on interoperability.\nAccording to FRA officials, interoperability challenges also differ across  PTC systems and geographic areas. Below, we use the Northeast  Corridor and the Chicago metropolitan area\u2014where most railroads are  implementing ACSES and I-ETMS, respectively\u2014to illustrate the  challenges faced in working to achieve interoperability. However,  railroads in other areas or implementing other PTC systems may face  some of these same challenges or face additional different challenges.\n\n\t\t\tNortheast Corridor and Surrounding Area\n\nOver a dozen railroads operating on the Northeast Corridor and in the  surrounding area are required to implement PTC. The Northeast Corridor  runs from Washington, D.C., to Boston, Massachusetts, and Amtrak  predominantly owns track on the corridor. Eight commuter railroads,  Amtrak, and most freight railroads are implementing a form of the ACSES  system on at least a portion of their equipment and track. In some cases,  railroads in the Northeast will be operating two different PTC systems  concurrently on the same track, which will add to the complexity of  interoperability, according to FRA. Examples of interoperability  challenges faced in the Northeast include:\nSoftware issues. PTC software presents particular challenges in the  Northeast because software is being supplied by multiple vendors and  has been developed to accommodate railroads\u2019 existing systems that  have different configurations. Therefore, according to FRA officials,  ACSES does not have a common set of requirements or  specifications. Also, even if two railroads use the same vendor for  their locomotive equipment or software, each railroad may use a  different version of software. In addition, representatives from two  railroads that operate in the Northeast told us they built different  software functionality into their PTC systems to accommodate their  own operations, so additional work is needed to resolve such  differences to achieve interoperability. In light of these software  issues, representatives from one industry association and one railroad  we interviewed said that Northeast Corridor railroads are discussing  creating a software management process to aid interoperability.\nBoundary issues. A train needs to seamlessly operate PTC when it  crosses the boundary between two railroads\u2019 territories, as previously  described. According to a rail industry association, as of June 2019,  there are about 20 boundaries on the Northeast Corridor where more  work is needed to ensure seamless operation. FRA officials and one  industry association said boundary issues are complex and time- consuming to resolve but not insurmountable. For example, FRA  officials said a railroad could install its own equipment such as  transponders and wayside devices across the boundary to create an  overlap between their system and that of the other railroad.\nSecuring PTC wireless communication. FRA requires that PTC  wireless railroad communications be encrypted. However, a solution  that aims to encrypt all PTC wireless communication and data  transmittal among railroads operating ACSES in the Northeast is  currently in lab development. In August 2016, Amtrak received a grant  from FRA to create this solution for ACSES. Amtrak originally planned  to implement this solution in December 2018, but Amtrak has  experienced delays and currently estimates that it will implement the  solution by January 2020. However, Amtrak has reported several risks  that it will need to overcome to meet this implementation deadline.  Further delays could affect railroads\u2019 ability to fully implement PTC in  the Northeast by the December 2020 deadline. FRA noted it will  continue to monitor and support the railroads as they implement  security measures in the Northeast.\n\n\t\t\tChicago Area\n\nTen I-ETMS railroads that operate in the greater Chicago metropolitan  area received extensions to implement PTC. Throughout PTC  implementation, FRA, industry associations, and railroads have identified  Chicago as a place where interoperability would be challenging due to the  dense freight, passenger, and commuter operations in the area.  Examples of such challenges include:\nSoftware issues. According to FRA and railroads we interviewed,  software issues have slowed interoperability work by railroads  implementing I-ETMS. The underlying problem is the memory  available on the locomotive equipment, which is needed to store its  railroad\u2019s track data, according to FRA and railroads we interviewed.  To be interoperable, the locomotive equipment also needs to store  and exchange multiple railroads\u2019 track data, causing the memory to fill  up very quickly. According to railroad representatives, memory  limitations for I-ETMS locomotive equipment prohibited railroads with  large track data files\u2014mainly the Class I freight railroads\u2014from being  able to interoperate. The vendor for this equipment has been working  on a software solution for this problem, and according to a few  railroads we interviewed, the vendor delivered an interim software  solution in March 2019 that allowed the four largest Class I railroads  to achieve interoperability. However, this software was delivered 7  months later than initially planned, and an additional software solution  is still needed to allow the locomotive equipment\u2019s memory to store  the data of all railroads operating I-ETMS, according to  representatives from two railroads and an industry association we  interviewed.\nOther technical issues. Railroads in the Chicago area conducted  modeling to help ensure that sufficient communications capacity (e.g.,  spectrum and radio capacity) would be available to support PTC  interoperability in the region. According to one industry association,  while actual PTC operations in the area are minimal right now relative  to full expected operations, railroads must continue to monitor the  communications capacity as more railroads progress with their own  PTC implementation and start to interoperate. For example, railroads  may have to re-engineer their radio networks, such as re-routing  certain communications through different radio towers and other  network connections, if issues are subsequently identified.\nScheduling interoperability work with other railroads. Within the  Chicago area, the total number of railroads and the number of  railroads that have to be interoperable on a single line complicates  interoperability. Chicago is the busiest rail hub in North America and  handles one-fourth of the nation\u2019s freight rail traffic. Nearly 500 freight  trains and over 700 passenger trains travel through the area on tracks  owned by several different railroads every day. For example, one  commuter railroad, for one of its lines, operates over track owned by  four host railroads that alternates with its own track. Achieving  interoperability for this line will involve sequencing and scheduling  with multiple railroads to activate PTC along the entire line, including  across the numerous boundaries between different railroads\u2019  territories, according to representatives from that railroad. According  to one FRA specialist, work to achieve interoperability in the Chicago  area will ramp up in late 2019 or early 2020. As a result, many  railroads will have to coordinate schedules to sequence  interoperability work across the dozens of host-tenant relationships in  the area.\n\n\tFRA Is Assisting Railroads with Testing and Interoperability while PTC Workload Challenges Persist\n\nFRA officials told us that the agency continues to provide assistance to  railroads on interoperability and to support railroads through the testing  process. In summer 2019, FRA began an effort to meet with all freight,  non-Class I tenant railroads that have to be interoperable with host  railroads required to implement PTC. FRA officials said they will use  meetings with these 72 individual tenant railroads to discuss PTC  requirements and review the railroads\u2019 plans for implementing PTC with  their host railroads. FRA officials said they have also continued to meet  regularly with railroads still in field testing or starting RSD on their own  PTC systems. For example, FRA officials said the agency meets weekly  or monthly with each railroad that has not yet initiated RSD to provide  targeted technical assistance to resolve any issues. FRA and  representatives from one railroad also told us that FRA has met with  vendors to discuss specific equipment or software issues and to stress  the importance of resolving these issues. FRA also participates in  meetings held by the railroad industry\u2019s PTC working groups, including  those focused on the Northeast Corridor and Chicago area, as needed.\nIn addition, FRA officials told us that they are working with industry to  improve the safety plan review process. Specifically, according to a June  FRA presentation, FRA is working with two railroads and an industry  association to create templates for streamlined, more consistent safety  plans for two types of PTC systems\u2014I-ETMS and E-ATC. The goal of the  template is to reduce the burden on both railroads and FRA by using a  shorter format and, where possible, relying on standardized system  documents. FRA officials anticipate that the templates will be ready for  other railroads to use in fall 2019. In addition, FRA has contracted for  help in reviewing safety plans. However, representatives from four  railroads and two industry associations we interviewed noted that they  remained concerned about the amount of time it has taken FRA to review  safety plans. FRA reported in February 2019 that it took on average 331  days to review a safety plan.\nWhile it is too early to determine the effect of FRA\u2019s efforts to improve the  safety plan review process, much work remains for FRA in the next 18  months. According to FRA, 23 railroads will be submitting safety plans in  the next 12 months. While FRA has conditionally certified 13 PTC  systems as of March 31, 2019, these railroads, too, are required to  continue to work with FRA to provide additional documents to respond to  FRA\u2019s conditions. Some of these railroads also plan to resubmit safety  plans for FRA to review, hoping to receive an unconditional certification  before the December 2020 deadline.\nIn March 2018, we reported that railroads had expressed a need for  additional clarification about applying for an extension and that FRA could  provide more consistent information to railroads. We recommended that  FRA identify and adopt a method for systematically communicating  extension-related information to railroads. In 2018, FRA held three  symposiums for railroads to consistently communicate information to help  railroads prepare to qualify for an extension and to understand what was  required to have a fully implemented PTC system. FRA held two similar  sessions in February and June 2019. Representatives from most of the  railroads we interviewed (six of eight) said they have been happy with the  communication with FRA, via these sessions as well as regular meetings  with FRA\u2019s PTC field specialists and other staff. For example,  representatives of two railroads said it was helpful to have the FRA  Administrator attend the sessions with railroads and talk directly to  railroad representatives. In addition, clarity of information from FRA was  the lowest rated challenge in response to our questionnaire, with 29  railroads reporting this as a minor challenge or not at all a challenge.\nWhile FRA has made improvements, the extended 2020 deadline for full  PTC implementation is less than 18 months away, and FRA and railroads  have substantial work to complete and challenges to address before that  deadline. Moreover, unlike the 2018 deadline, no additional extensions  are available beyond December 2020. In March 2018, we  recommended that FRA develop an approach to use the information it  gathers on railroads\u2019 PTC implementation progress to prioritize the  allocation of resources to address the greatest risk. FRA agreed with  this recommendation, and while FRA officials have described testing and  interoperability as areas of focus in 2018 and 2019, they have not  articulated or demonstrated how, within these broad areas, they are  monitoring risk and prioritizing resources. For instance, FRA plans to  meet with all 72 tenant railroads in over 30 meetings rather than use the  data it collects from host railroads to target this outreach. In addition,  while FRA will have to review dozens of new and resubmitted safety  plans in the coming months, FRA officials have not identified how they will  prioritize these reviews relative to other reviews (e.g., other  documentation that railroads submit as they continue testing on their own  systems and for interoperability).\nAccording to FRA, it has communicated to railroads in industry-wide  meetings that conditional certification for a PTC system is generally  sufficient to meet the statutory requirement for full implementation; FRA  noted this would only not be sufficient if a railroad\u2019s PTC system did not  otherwise meet the technical requirements in regulations and one or more  of the conditions related to such non-compliance. However,  representatives from two railroads we interviewed also said it was unclear  whether conditional certification would be enough for a railroad to comply  with the 2020 deadline, and uncertainty remains about which conditions  must be addressed to meet the statutory requirement for full  implementation.\nRelated to system certification, representatives from three railroads and  one industry association we interviewed also said FRA still needed to  clarify how it would handle situations where a host or tenant railroad is not  fully implemented by the 2020 deadline. Although the FRA Administrator  has publicly said he will enforce the implementation deadline (which is  December 31, 2020, for most railroads) and recommend assessing the  maximum civil penalty against a railroad that did not meet its deadline,  FRA has not clarified if this would apply in situations where a host or  tenant relationship affects another railroad\u2019s implementation. We continue  to see value in FRA developing a risk-based approach to allocating its  limited resources and will continue to monitor FRA\u2019s actions on this  recommendation.\nGoing forward, FRA will also need to transition to overseeing PTC as a  routine part of railroad operations after the 2020 deadline. Similarly,  railroads will need to transition from implementation\u2014largely done by  contractors\u2014to operating and maintaining their own PTC systems.  Several railroads, in response to our questionnaire, said that they  anticipate difficulties funding ongoing operations and maintenance as well  as managing software and other updates. Therefore, December 31, 2020,  represents not only the deadline for full PTC implementation but also a  point after which railroads and FRA will face a new operational and  oversight environment.\nChairman Wicker, Ranking Member Cantwell, 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.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf 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 Raymond;  Delwen Jones; Emily Larson; Joanie Lofgren; Shannin G. O\u2019Neill; Josh  Ormond; Madhav Panwar; Marcus Robinson; Maria Wallace; Crystal  Wesco; and Elizabeth Wood.\nThis 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.","output":null}
{"id":"gao_GAO-20-363","pid":"gao_GAO-20-363_0","input":"\tBackground\n\n\t\tEM\u2019s Strategy for Addressing Tank Waste at the Hanford Site\n\nFrom 1944 through 1988, the production of plutonium at Hanford  generated about 525 million gallons of radioactive and hazardous waste.  Some of the waste was dumped directly into the soil, some was encased  in drums or other containers and buried, and about 54 million gallons  were stored on-site in 177 underground tanks. Some of the waste stored  in the underground tanks is \u201chigh-level waste\u201d (HLW) mixed with  hazardous chemicals that is to be vitrified\u2014a process in which the waste  is immobilized in glass\u2014prior to disposal. \u201cLow-activity waste\u201d (LAW) is  EM\u2019s term for the portion of the tank waste with low levels of  radioactivity. EM estimates that LAW comprises more than 90 percent of  the volume in the tanks but contains less than 10 percent of the  radioactivity.\nEM currently plans to treat much of Hanford\u2019s tank waste in the WTP. The  WTP is the most technically complex and largest construction project  within EM. As figure 2 shows, the WTP consists of facilities that are  designed to separate waste into low-activity and high-level waste  streams. Once completed, the WTP is to treat the HLW and a portion of  the LAW in separate facilities using vitrification. The WTP consists of the  following facilities:\nPretreatment Facility. This facility is to receive the waste from the  tanks and separate it into HLW and LAW. Under the original WTP  design, all waste must first pass through this facility before it can be  treated. Tank waste to be sent to the pretreatment facility for  processing must meet specific physical and chemical characteristics,  known as waste acceptance criteria, and the waste must be certified  as having met these criteria before transfer from the tanks to the  pretreatment facility. For example, WTP waste acceptance criteria  may stipulate that waste meet certain requirements for chemical  composition, particle size, and density in order to be handled by the  pretreatment facility. Construction of this facility as originally designed  is about 40 percent complete.\nLAW Vitrification Facility. This facility is designed to receive the  LAW and immobilize it by vitrification. The canisters of vitrified waste  will be permanently disposed of at another facility on the Hanford Site.  Construction of this facility is nearing completion, and EM plans to  complete commissioning of the facility no later than December 31,  2023. As currently designed, this facility would only have capacity to  treat a third to half of the LAW currently in the waste tanks. EM is  analyzing alternatives for treating the remaining LAW, known as  supplemental LAW.\nHLW Vitrification Facility. This facility is designed to receive the  HLW and immobilize it by vitrification. The canisters of vitrified waste  will be stored on-site until a final repository is established.  Construction of this facility is about 40 percent complete.\nEffluent Management Facility. The Effluent Management Facility is  being built to evaporate much of the liquid waste produced during  LAW processing and vitrification at the LAW Facility. Design work on  this facility is nearly complete and construction is under way. EM  plans to complete construction of this facility in December 2021.\nAnalytical Laboratory. This facility will be used to analyze the waste  at various stages of treatment, such as testing samples of the vitrified  waste to ensure that it meets certain criteria and regulatory  requirements for disposal. Construction of this facility is complete and  EM has begun startup and commissioning activities.\nBalance 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 glass-forming materials. Construction of  these facilities is nearing completion, and EM has begun startup and  commissioning activities.\n\n\t\tPrior GAO Work on Technical Challenges Facing the WTP\n\nThe WTP has faced hundreds of technical challenges since the early  years of the project. These challenges ranged from effectively mixing the  waste prior to treatment to addressing potential erosion in the facility  piping. We have reported on these challenges in the past and have made  numerous related recommendations to EM. For example, in 2003 we  found that BNI and outside experts had concerns about the technology for  separating the waste\u2014including problems associated with mixing the  waste during separations and evaporating water from the waste\u2014and  they proposed more testing to resolve those challenges. We  recommended that EM consider further testing to resolve those  challenges before moving forward with construction of the pretreatment  facility. In early 2007, EM decided to build a pilot-scale facility for the  WTP to fully test pretreatment technologies before completing the full- scale design of the facility.\nSimilarly, in 2006 we found that the WTP continued to face numerous  technical challenges and that many of the technical challenges still had  not been addressed even though EM was moving forward with  construction on the pretreatment facility. We recommended that EM  resolve the technical challenges before moving forward. EM agreed and  took steps to ensure that the design of each WTP component was at least  90 percent complete before construction or installation.\nIn December 2012, we found that the WTP continued to face significant  technical challenges, even though construction was 55 percent complete,  and we recommended that EM not resume construction of the  pretreatment facility until the issues had been fully resolved. Because of  these ongoing challenges, in December 2012, EM\u2019s WTP Engineering  Division issued a memorandum that recommended that all activities  affecting design, construction, and installation of structures, systems, and  components be stopped. According to the memorandum, stopping work  would help ORP 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, namely, the pretreatment and HLW  facilities. As we discuss in this report, EM has not yet resumed  construction on the pretreatment and HLW facilities.\nIn 2015, we reported that because of ongoing problems hampering the  progress of the pretreatment facility at Hanford, EM was pursuing other  pretreatment alternatives (such as feeding the waste from the tanks  directly to the vitrification facilities) but had not properly defined the  mission need for the analysis or developed a reliable life-cycle cost  estimate for the alternatives being analyzed. We recommended that EM revise its analysis to consider a variety of alternatives without limiting  potential solutions and that EM further limit construction activities on the  pretreatment facility until aggressive risk mitigation strategies are  developed and employed to address the technical challenges. EM opted  to change the alternative pretreatment approach it had been pursuing and  in 2018 began design work on a different alternative pretreatment  approach.\nIn April 2018, we reported that seven of nine ORP quality assurance  experts expected rework would be needed for existing facilities, including  the pretreatment facility. In that report we noted that according to three  experts with knowledge about maintenance programs, BNI had not  established a fully effective WTP quality assurance program, particularly  for the pretreatment facility and HLW facility, and as a result, structures,  systems, and components at these facilities have deteriorated and been  damaged. We recommended that EM (1) determine the full extent to  which problems exist in all WTP structures, systems, and components,  (2) 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, and (3) revise ORP\u2019s organizational structure  so that the quality assurance function is independent of ORP upper  management. As of March 2020, EM had implemented one of our three  recommendations (revising ORP\u2019s organizational structure), but had not  yet fully implemented the other recommendations.\n\n\t\tRegulatory Framework Governing the Hanford Cleanup\n\nCleanup of the Hanford Site is governed by two main documents. The  1989 Hanford Federal Facility Agreement and Consent Order\u2014or Tri- Party Agreement (TPA)\u2014is an agreement among DOE, Ecology, and the  Environmental Protection Agency. The TPA lays out a series of legally  enforceable milestones for completing major activities in Hanford\u2019s waste  treatment and cleanup process. The 2010 Consent Decree, as  amended, resolves certain disputes between Ecology and DOE and  addresses a subset of cleanup activities, including completing the  construction and achieving initial operations of the WTP and retrieving  waste from specified single-shell tanks. Among other things, the  consent decree requires DOE to do the following:\nBegin treating LAW by 2023;\nSubstantially complete the construction of the pretreatment facility by\nStart WTP operations by 2036.\nThe TPA requires DOE to complete the treatment and vitrification of all  HLW and LAW in the Hanford tanks by 2047.\nIn addition to oversight by Ecology and the Environmental Protection  Agency, DNFSB is responsible for, among other things, reviewing the  design of new defense nuclear facilities at DOE\u2019s sites, including the  WTP. DNFSB, established in 1988, provides independent analysis,  advice, and recommendations to the Secretary of Energy\u2014in the  Secretary\u2019s role as operator and regulator of DOE\u2019s defense nuclear  facilities\u2014to ensure adequate protection of public health and safety at  these facilities. DNFSB is not authorized to issue regulations binding on  DOE apart from establishing reporting requirements. Instead, DNFSB  uses both informal interactions and formal communications with DOE to  help ensure that its concerns are addressed.\nDOE Order 413.3B establishes program and project management  requirements for the acquisition of capital assets with the purpose of  delivering projects within budget, on time, and capable of meeting mission  performance. EM is required to manage its cleanup projects in  accordance with this order. In particular, Order 413.3B requires EM to  conduct an AOA that is consistent with the 22 AOA best practices we  identified. DOE also has an AOA guide, which describes suggested  approaches for DOE and its contractors to be consistent with the 22 best practices for an AOA process. The 22 best practices compile common  AOA policies and guidance used by different government and private- sector entities and incorporate experts\u2019 comments. These best practices  include the following:\nDefine mission need,\nDevelop AOA time frame,\nEstablish AOA team,\nDefine selection criteria,\nWeight selection criteria,  Include baseline (or status quo) alternative, and\nDevelop a life-cycle cost estimate for each viable alternative.\n\n\tEM Spent About $752 Million on the Pretreatment Facility in Fiscal Years 2013 through 2018, but Construction of the Pretreatment Facility Remains on Hold\n\nFrom early fiscal year 2013 until the end of fiscal year 2018, EM spent  about $752 million to maintain the pretreatment facility and resolve  technical challenges. Over half of the $752 million went toward overhead,  oversight, and other costs to maintain the partially constructed facility.  The remaining costs went toward resolving technical challenges. Design  and construction of the pretreatment facility is on hold, and DOE\u2019s budget  request for fiscal year 2020 states that EM plans to continue \u201climited  activities\u201d on the pretreatment facility to keep the facility in a preservation  and maintenance mode. However, officials told us that EM does not have  a cost estimate for completing the pretreatment facility, and EM has no  plans to develop such an estimate in the near future.\n\n\t\tOver Half of the $752 Million Spent on the Pretreatment Facility in Fiscal Years 2013 through 2018 Went Toward Overhead, Oversight, and Other Costs to Maintain the Partially Completed Facility\n\nFrom early fiscal year 2013\u2014when work involving design and  construction of the pretreatment facility was suspended\u2014until the end of  fiscal year 2018, EM spent about $752 million on the pretreatment facility.  Among other things, EM used this funding for resolution of the technical  challenges that led to the suspension of the facility\u2019s construction,  overhead and project management, equipment purchase and  management, facility maintenance, BNI award and contract modification  fees, and EM oversight. (See fig. 3.)\nLess than half of the $752 million spent on the pretreatment facility in  fiscal years 2013 through 2018 went toward resolving technical  challenges associated with the facility. According to EVM system reports,  EM spent approximately $323 million\u2014or 43 percent of the $752 million in  total costs\u2014on costs incurred by BNI to resolve the technical  challenges. This includes activities such as identifying research tasks  needed to resolve the technical challenges and performing testing, as  well as the cost of subcontracts to assist BNI in resolving the technical  challenges.\nPretreatment Facility Lifetime Overhead  Costs  In fiscal year 2019, Bechtel National, Inc. (BNI),  the prime contractor for Hanford\u2019s Waste  Treatment and Immobilization Plant (WTP)\u2014 including the pretreatment facility\u2014allocated  $1.5 billion in overhead costs to the pretreatment  facility in its Earned Value Management system  (for fiscal years 2001 through 2014) that had  previously been recorded in non-facility specific  accounts. What we refer to as overhead BNI  refers to as project services allocation or shared  services, which according to officials at the Office  of River Protection includes both traditional  overhead costs (such as light and power), as  well as the cost of common activities for multiple  facilities and the management system used for  those facilities. Prior to fiscal year 2015,  overhead costs for the entire WTP were  recorded in non-facility specific accounts. In  fiscal year 2015, BNI changed the way that it  accounts for these costs by allocating overhead  costs to each individual facility; however, at the  time, this change was only made for future  overhead costs for the entire WTP. In June 2019,  BNI also applied this change to pre-2015 costs,  which brings BNI\u2019s total pretreatment facility  costs, from the beginning of the contract in  December 2000 through July 2019, to $3.4  billion\u2014$1.5 billion of which are overhead costs.  However, this allocation of cost to each facility  from the project level shared services accounts  did not change the overall cost of the WTP  project. because of design changes. According to ORP officials, EM did not  pay a termination fee for procurements that were terminated because  of the vendor going out of business; however, for other terminated  procurements, EM might have to pay additional costs if the vendor  submits a claim for compensation to BNI, for which BNI in turn seeks  reimbursement from EM. In either case, there may be additional costs  related, for example, to picking up and transporting items.\nFacility Maintenance. About $18.8 million\u2014or 2 percent of the total  $752 million\u2014went towards the costs of general facility maintenance.  According to ORP officials, facility maintenance includes activities  such as maintaining building access controls, maintaining installed  components, cleaning up waste from birds, removing snow and trash,  and conducting periodic walks of the facility to determine the condition  of materials in the building, among other things.\nAward fees are an amount of money added to a contract, which a contractor may earn in  whole or in part by meeting or exceeding subjective criteria stated in an award fee plan  typically related to areas within quality, technical ingenuity, cost-effective management,  program management, and other unquantifiable areas. Award fees in the context of this  report refer to money earned by BNI based on its performance in carrying out work on the  pretreatment facility. In this report, contract modification fees refer to money negotiated  between BNI and EM based on a change in the contract agreed to by both parties. $153 million\u2014the facility\u2019s highest costs from fiscal year 2013 through  fiscal year 2018. (See fig. 4.) Contributing to the fiscal year 2017 costs  was a one-time $60 million contract modification fee for both the  pretreatment facility and the high-level waste facility that was  negotiated between BNI and EM. According to EM officials, EM and  BNI negotiated this fee for work completed by BNI in previous years  for which it had not been paid a fee. This work included developing  facility designs, resolving technical issues, and conducting reviews  and research studies.\n\n\t\tDesign and Construction of the Pretreatment Facility Remain On Hold, and EM Does Not Have a Cost Estimate for Completing the Pretreatment Facility\n\nDesign and construction of the pretreatment facility have been on hold  since 2012. At the time construction was halted, BNI estimated that  construction of the facility was about 40 percent complete. In July 2018,  the U.S. Army Corps of Engineers reported that construction of the facility  was still about 40 percent complete. In a tour of the facility in May 2019,  we observed that construction remains on hold and that EM is instead  using the space inside the partially constructed building to conduct worker  training exercises. Additionally, DOE\u2019s budget request for fiscal year 2020  states that EM plans to continue \u201climited activities\u201d\u2014such as maintaining  the existing facility, storing uninstalled equipment, and maintaining  records for quality assurance\u2014on the pretreatment facility to keep the  facility in a preservation and maintenance mode. ORP officials told us in  September 2019 that EM does not plan to restart design and construction  activities on the pretreatment facility until alternatives for pretreating HLW  have been analyzed.\nAccording to EM officials, EM does not have an updated cost estimate for  completing the pretreatment facility, as required under DOE Order  413.3B. This order requires EM to develop, maintain, and document cost  estimates in a manner consistent with methods and best practices  identified in GAO\u2019s Cost Estimating and Assessment Guide, as well as  other documents, including the Office of Management and Budget\u2019s  Circular A-11, prior to DOE approving a performance baseline change.  EM\u2019s last independently verified approved cost estimate for completing  the entire WTP was completed in 2006. At that time, EM estimated that  completing the pretreatment facility would cost approximately $2.5  billion. However, the pretreatment facility has surpassed that amount.  Specifically, through fiscal year 2018, EM spent about $3.8 billion on the  facility, including approximately $3 billion spent prior to halting  construction in 2012 and $752 million spent in fiscal years 2013 through  2018. EM was in the process of updating the cost estimate in 2012  when construction of the pretreatment facility was suspended, and  therefore EM\u2019s update to the cost estimate was suspended as well.\nORP officials told us that they do not have plans to complete a cost  estimate for the pretreatment facility. According to these officials, they  cannot complete a cost estimate for the pretreatment facility until EM has  made a decision about the future of the facility and, if necessary, BNI  develops design changes to address technical challenges. The officials  explained that the development of design changes depends on the  prioritization of funding. They also explained that ORP\u2019s highest funding  priority is to begin vitrifying some LAW as soon as possible by bypassing  the pretreatment facility using alternative technologies and sending the  separated LAW directly to the WTP\u2019s LAW vitrification facility\u2014an  approach known as Direct-Feed Low-Activity Waste (DFLAW). Officials  told us that ORP\u2019s second highest funding priority is the completion of the  HLW facility and that the pretreatment facility will not be a priority until EM  has made a decision on which pretreatment methods to use going  forward and updated the design changes for the facility as needed.\n\n\tEM Reported that Technical Challenges on the Pretreatment Facility Have Been Resolved, but EM Has Not Yet Designed or Engineered the Solutions\n\nAfter EM halted construction on the pretreatment facility in 2012, EM  began working with BNI to address the longstanding technical challenges  associated with the design and construction of the pretreatment facility.  According to July 2019 correspondence between EM and BNI, both  parties consider these technical challenges to be resolved, and according  to ORP officials, pretreatment facility engineering and design followed by  its construction may now continue. However, based on our interviews with  EM and BNI officials, EM has not yet designed or engineered the  solutions. In addition, according to DNFSB officials, the DNFSB does not  consider the technical challenges to be resolved yet, though it continues  to review EM\u2019s efforts.\n\n\t\tSince 2012, EM and BNI Have Worked to Resolve Technical Challenges with the Pretreatment Facility, and EM Reported that the Challenges Have Been Resolved\n\nIn late 2012, EM halted construction of the pretreatment facility, and EM  and BNI began work to resolve technical issues. In November 2012, EM  formed a design completion team responsible for resolving the technical  challenges. In May 2014, EM asked BNI to submit a plan for resolving the  challenges and resuming construction of the pretreatment facility. EM  ultimately identified eight key categories of technical challenges to be  resolved before resuming construction of the pretreatment facility (see  table 1 for a list of the eight categories, and see app. III for a more  detailed description of each category of technical challenges). The  majority of these categories involved portions of the pretreatment facility  intended to manage the HLW. For example, one category EM identified  involves preventing hydrogen from building up in the facilities\u2019 piping and  vessels, which could cause an explosion. Another category involves  preventing corrosive waste from eroding treatment equipment, which  could cause a leak of radioactive materials.\nIn June 2014, BNI formed eight teams to address each category of  technical challenges. For example, to address the technical challenges  associated with mixing the waste in the pretreatment facility using a  technology known as pulse-jet mixing, the design completion team  developed a plan to standardize and test a new design to address pulse- jet mixing challenges. Similarly, to address concerns about the potential  weaknesses in equipment and piping located in rooms inaccessible to  humans once operations begin (known as black cells), EM formed a black  cell analysis team. BNI submitted interim updates to EM on the proposed  resolution of specific challenges as BNI addressed them. For example, in  December 2017, BNI informed EM of its resolution of the challenges  related to facility ventilation. Similarly, in September 2018, BNI informed  EM of its resolution of the challenges related to the black cells. BNI sent  similar correspondence on the other six categories of technical  challenges to EM throughout 2019. According to EM officials, EM and its  contractors provided DNFSB documentation and briefings on the  resolution of the technical challenges.\nIn June 2019, BNI informed EM that it considered all eight categories of  technical challenges to be resolved. In July 2019, EM subsequently  informed BNI that it agreed with BNI\u2019s conclusions that the technical  challenges were resolved. According to ORP officials, \u201cresolved\u201d means  that all the required studies, calculations, and testing have been  completed and demonstrated to independent experts and EM that (1) the  issue is fully understood so that no further research is needed and (2) a  solution is ready for detailed design.\n\n\t\tEM Has Not Yet Designed or Engineered the Solutions, and the DNFSB Does Not Consider the Technical Challenges to Be Resolved\n\nAlthough EM and BNI consider the technical challenges associated with  the pretreatment facility to be resolved, EM and BNI have not yet  designed or engineered the solutions. BNI acknowledged early in the  process that resolution of the technical challenges would involve not only  a conceptual solution, but also subsequent design, engineering, and, in  some cases, testing of the solutions before construction could resume on  the pretreatment facility. For example, in its June 2014 plan for  addressing the challenges, BNI noted that prior to making a decision to  proceed with construction of the facility, it would need to conduct a  number of additional steps, including updating the designs of the  pretreatment facility and assessing the nuclear safety basis and the  contract implications for the updated designs. In addition, ORP officials  told us that proposed revisions to the pretreatment facility would require  negotiation with Ecology. As of February 2020, EM and BNI had not yet  begun developing these required designs and engineering changes and  have no plans to do so until a decision is made on the future of the  facility. According to EM officials, ORP\u2019s current priorities are to begin  DFLAW operations and to conduct an analysis of alternatives related to  the treatment of the HLW.\nThese next steps could involve significant work and potential rework to  the facility. According to EM officials, resolving the technical challenges  likely will require BNI to change its designs for the pretreatment facility  and conduct significant rework in portions of the facility that have been  completed. ORP officials said that they expect this design work to be  significant and do not expect it to be complete enough to proceed with the  construction of the facility until at least 2022, depending on the availability  of funding to support the design work. BNI\u2019s plan going forward includes a  number of steps related to updating the pretreatment facility designs. As a  result of this significant engineering work still ahead, as we reported in  May 2015, EM likely will have to conduct rework of the existing facility  (which is 40 percent built), leading to further cost increases and schedule  delays. For example, BNI will need to redesign any existing components  and systems that have become obsolete since EM halted construction or  that need to be reworked to accommodate the technical solutions.\nIn addition, DNFSB officials have begun reviewing EM\u2019s proposed  solutions, but they said that they do not consider the technical challenges  to be resolved. Although EM does not require DNFSB approval to restart  construction of the pretreatment facility, ORP officials said that they  consider the next step in the process to be DNFSB review of their  solutions. DNFSB officials, on the other hand, said that the process used  to review issues is as follows: (1) DNFSB raises a concern; (2) EM comes  up with a conceptual solution, presents it to DNFSB, and receives  feedback; and (3) EM then comes up with a design solution, presents it to  the DNFSB, and receives feedback. According to DNFSB officials,  because they have not been able to review the updated engineering and  design plans, they are not in a position to approve the proposed solution.  Since 2012, DNFSB has been reviewing EM\u2019s proposed technical  solutions as part of its role to provide independent advice and  recommendations to DOE regarding the protection of public health and  safety at DOE facilities.\nAs of December 2019, DNFSB had officially commented on one of EM\u2019s  proposed solutions\u2014related to technical challenges surrounding the  pulse-jet mixers\u2014and noted simply that EM\u2019s and BNI\u2019s work  \u201cstrengthens the technical foundation\u201d for using the mixers and that  DNFSB would \u201ccontinue to follow the design process.\u201d With regard to  the remaining challenges, DNFSB officials said that for some, additional  deficiencies needed to be addressed. For others, DNFSB officials said  they were reviewing the details of EM\u2019s proposed solution or needed  additional information from EM. For two of the categories of technical  challenges, DNFSB officials said they considered them to be operational  rather than safety issues and therefore DNFSB would not review EM\u2019s  proposed solutions. (See table 2.)\n\n\tEM Has Not Yet Met Two Best Practices in Its Analysis of Alternatives to the Pretreatment Facility, and Regulators Have Concerns about EM\u2019s Engagement\n\nTo begin treating LAW by 2023 as required, EM began pursuing  pretreatment alternatives in 2013 and has spent about $428 million on  developing these alternatives for LAW pretreatment capabilities that were  originally planned for the pretreatment facility. We reported in May 2015  that in analyzing alternative LAW pretreatment approaches, EM did not  meet two key steps outlined in best practices and DOE internal  guidance\u2014define mission need and develop a life-cycle cost estimate for  its alternatives. We recommended that EM revise its mission need and its  cost estimates for the alternatives being reviewed. In April 2019, EM  began analyzing alternatives for treating HLW, and EM officials stated  that this analysis of HLW treatment alternatives would follow best  practices. However, as of February 2020, EM did not yet have a well- defined mission need statement for its HLW treatment AOA, nor did it  have life-cycle cost estimates related to the pretreatment facility, as called  for by best practices. In addition, Ecology, a key regulatory stakeholder  for the Hanford cleanup, has raised concerns about the AOA as well as  EM\u2019s engagement with regulators during this process.\n\n\t\tEM Has Been Pursuing LAW Pretreatment Alternatives since 2013 to Begin Treating LAW by 2023\n\nIn 2013, to meet its deadline to begin treating LAW by 2023, EM began  work on a strategy to bypass the pretreatment facility and instead  separate out some of the LAW to remove most of the radioactivity from  the tank waste. This approach, called DFLAW, has involved several  different activities since 2013 such as constructing separate facilities and  infrastructure to accomplish this work, as well as modifying existing  facilities:\nDirect-Feed Low-Activity Waste Modifications and Effluent  Management Facility. EM has spent $272 million on modifications to  the WTP to support the DFLAW approach, including designing and  constructing the Effluent Management Facility. The Effluent  Management Facility is intended to manage the high volume of  contaminated liquid generated through the processing of LAW. This  capability was originally designed to be located in the pretreatment  facility.\nLow-Activity Waste Pretreatment System. In fiscal years 2014  through 2018, EM spent approximately $146 million on the Low- Activity Waste Pretreatment System. The Low-Activity Waste  Pretreatment System included designing a permanent facility to  receive and treat liquid waste, separating out the less radioactive  portion from the underground tanks in preparation for direct feed to  the WTP\u2019s LAW facility. This function was originally intended to be  accomplished by the pretreatment facility. In November 2017, ORP  ordered work on this permanent facility to be suspended because,  according to EM officials, the cost estimates for completing it had  become too high and the urgency of meeting the pending treatment  deadline too great.\nTank Side Cesium Removal System (TSCR). EM spent about $6  million for work on a demonstration of the TSCR technology in fiscal  year 2018 after suspending the Low-Activity Waste Pretreatment  System. TSCR will be built next to an underground double-shelled  waste tank and will filter waste directly from the tank to remove solids  and cesium. The resulting waste will be pumped to a different  underground tank for storage until it can be sent to the LAW facility for  vitrification. This would enable the rest of the waste to be fed directly  to the WTP\u2019s LAW facility. ORP plans this demonstration project to be  complete as early as 2021 and then, depending on the results, ORP  could decide to build additional TSCR units near other tank farms to  treat more of the tank waste.\nIn addition to DFLAW, EM briefly pursued a smaller-scale pretreatment  approach\u2014known as the Test Bed Initiative\u2014in which low-level waste  was drawn directly out of the underground tanks (using existing  processes and commercial facilities), grouted on site, and shipped to a  disposal facility in Texas. EM spent about $4.8 million in fiscal years  2016 through 2018 to design the technology and treat 3 gallons of waste  from the underground tanks. EM suspended the Test Bed Initiative in  June 2019.\nIn total, EM has spent about $428 million developing these alternative  pretreatment approaches for LAW, in addition to the $752 million spent on  the pretreatment facility since 2012. (See fig. 5.)\n\n\t\tEM Has Not Yet Met Two Best Practices or DOE Guidance in Analyzing HLW Treatment Alternatives\n\n\t\t\tLow-Activity Waste Analysis of Alternatives\n\nEM began exploring alternative LAW pretreatment approaches as early  as 2006 in connection with its analysis of options for treating the  supplemental LAW at Hanford. In September 2013, in an effort to make  progress while working to resolve technical challenges on the  pretreatment facility, EM announced plans to pursue these alternative  LAW pretreatment approaches and received funding to do so. However,  as we reported in May 2015, EM did not properly define the mission need  for the analysis or develop a reliable life-cycle cost estimate for the  alternatives it analyzed prior to selecting its preferred alternative:\nFirst, in May 2015, we found that EM had developed a narrow  statement of mission need that effectively excluded other potential  alternatives from being considered. This, we noted, was contrary to  DOE requirements in DOE Order 413.3B and our best practices for an  AOA process, which specify that statements of mission need should  not identify a particular solution such as equipment, facility, or  technology, to allow the analysis the flexibility to explore a variety of  alternatives without limiting potential solutions. We noted that by  narrowly defining the mission need in this way, EM effectively  narrowed the range of acceptable options and excluded from  consideration other alternatives to expediting waste treatment and  addressing the potential danger posed by the leakage of waste from  the tanks.\nSecond, we noted in May 2015 that in choosing its current approach  to treating LAW, EM did not develop a life-cycle cost estimate for its  Low-Activity Waste Pretreatment System approach and did not  develop life-cycle cost estimates for all of the alternatives before  choosing its course of action. Our AOA best practices and DOE\u2019s  AOA Guide call for developing a life-cycle cost estimate for each  alternative, including all costs from inception of the project through  design, development, deployment, operation, maintenance, and  disposal.\nWe recommended in our May 2015 report that EM revise its mission need  statement and life-cycle cost estimate for the Low-Activity Waste  Pretreatment System. EM opted to change this alternative pretreatment  approach and in 2018 began designing and building TSCR, as noted  above. EM did not undertake an AOA process before making that  decision; instead, EM chose to pursue TSCR, a technology similar to one  being used at the Savannah River Site in South Carolina. EM officials  said the decision to move forward on these LAW pretreatment  alternatives without an AOA process was based on the urgency of the  upcoming requirement to begin treating LAW by 2023. We continue to  believe that as EM pursues additional treatment alternatives, EM should  properly define the mission need for the analysis and develop a reliable  life-cycle cost estimate for the alternatives it is analyzing.\n\n\t\t\tHigh-Level Waste Analysis of Alternatives\n\nIn April 2019, EM initiated an AOA for treating the HLW in the tanks at  Hanford and plans to conclude the review and report its findings in  September 2020. According to the review team\u2019s September 2019 study  plan, the review is to analyze 15 alternatives, including completing the  pretreatment facility as planned, repurposing the pretreatment facility, and  changing the current approach to pursue other pretreatment options.  Some of the other options the review team plans to explore include  sending HLW directly from the underground tanks to the HLW facility for  treatment, building alternate HLW pretreatment facilities, and shipping the  HLW to the Savannah River Site in South Carolina for treatment. (See  appendix IV for a list of the alternatives being analyzed.)\nEM officials said that in undertaking this AOA for HLW treatment  alternatives, they plan to meet best practices for an AOA process and  those in DOE\u2019s AOA Guide. They noted that, consistent with these AOA  best practices, EM has developed a time frame to complete the review,  established a review team, and defined and weighed selection criteria  against which to compare the alternatives. However, based on our  review, as of February 2020, EM had not yet met two key steps\u2014defining  mission need and developing a life-cycle cost estimate for the baseline  alternative\u2014that are among the best practices we identified for an AOA  process.\nFirst, EM has not yet defined the mission need, which is the first  element in a successful AOA and is called for in DOE\u2019s guidance for  conducting an AOA. One ORP official said that a succinct definition of  the mission need for the AOA does not exist but is or can be deduced  from the documents provided to the contractor conducting the  analysis. An official from DOE\u2019s Office of Project Management  confirmed that there is no mission need statement and noted that  because the WTP began prior to the DOE Order requiring a mission  need statement, there is no such statement for the WTP or for the  current AOA. We have previously noted that defining the mission  need is the first step in the AOA process in order to ensure that the  AOA process does not favor one solution over another. We have  also previously noted that when a concise set of objectives is  established, it can ensure that the decision-making process stays  open to a range of potential options.\nSecond, as we noted earlier in this report, EM does not have an  updated cost estimate for the baseline (or status quo) alternative of  completing the pretreatment facility. As such, it is uncertain if or how  EM will have a life-cycle cost estimate to compare the baseline  alternative to the other alternatives it is analyzing. One of the best  practices for an AOA process calls for the inclusion of the cost to  pursue the baseline alternative (in this case, the cost of completing  the existing pretreatment facility), to provide a basis of comparison  among alternatives. However, EM officials told us that they do not  intend to update EM\u2019s cost estimate for completing the existing  pretreatment facility because it is not a priority for ORP; instead,  ORP\u2019s priority is beginning DFLAW operations. Without a life-cycle  cost estimate for EM\u2019s baseline alternative, decision makers will not  have a complete picture of the costs and will have difficulty comparing  the alternatives because comparisons may not be based on accurate  information.\nWithout a defined mission need and a complete cost estimate for the  baseline alternative, EM\u2019s AOA for HLW treatment alternatives will be  missing key elements that are necessary to provide decision makers with  the information needed to make the best decision going forward. EM\u2019s  analysis and the subsequent decisions that are made based on that  analysis could be undermined as a result.\n\n\t\tEM and Ecology Disagree about the Adequacy of Ecology\u2019s Engagement in the Process to Analyze Alternatives to the Pretreatment Facility\n\nOfficials from Ecology have raised concerns about EM\u2019s lack of progress  on finishing the original pretreatment facility and EM\u2019s shifting focus on  the pretreatment mission. In a letter to EM in May 2019, Ecology\u2019s  director outlined a series of concerns related to the pretreatment mission  and stated that Ecology is not \u201cconceding to, accepting, or acquiescing in  any alternative path forward that is different than what has been agreed to  in the TPA and Amended Consent Decree between our two agencies.\u201d In  September 2019, ORP informed Ecology that a serious risk had arisen  that DOE might be unable to meet certain Amended Consent Decree  milestones related to, among other things, the construction of the  pretreatment facility. In the same month, ORP agreed to participate in  \u201cholistic negotiations\u201d to identify a new path forward for treating and  disposing of Hanford\u2019s tank waste. As part of this agreement, the parties  involved\u2014EM, Ecology, and the Environmental Protection Agency\u2014could  use the services of a mediator to assist with negotiations, which may be  completed by July 31, 2020.\nEcology officials also said that EM has not adequately consulted with  them while making important decisions about the pretreatment mission  and facility. In particular, in January 2020, Ecology officials told us that  they had not been engaged early, often, or appropriately by EM regarding  EM\u2019s changing plans to pretreat the tank waste and that they were  concerned about the possible negative impacts of EM diverting its  resources away from completing the pretreatment facility. According to  Ecology officials, they have been invited to key EM meetings but have not  been properly engaged in the decision-making process. In an October  2019 presentation to panelists from the National Academies of Sciences,  Engineering, and Medicine, Ecology officials noted their frustration with  \u201ctoo many ideas that did not work out, resulting in long delays.\u201d In  December 2019, because of concerns that EM was not providing access  to all of the information needed to make timely regulatory decisions,  Ecology issued a determination requiring EM to provide information as  required by the TPA within 30 days. In January 2020, after EM failed to  provide the information, Ecology fined EM $1 million and reiterated that  without access to this crucial data, it was nearly impossible for Ecology to  independently verify compliance with cleanup regulations.\nAccording to officials at EM headquarters, engagement with Ecology is a  priority, and ORP officials said that since 2018, their engagement with  Ecology has improved. In particular, ORP officials noted that Ecology has  had representatives on a joint team tasked with exploring the options to  be examined under the HLW AOA and has a representative on the AOA  review team to observe the deliberations.\nIn September 2019, we outlined a risk-informed framework for making  cleanup decisions and recommended that EM incorporate this framework  into its cleanup policy across the entire DOE complex. DOE agreed with  this recommendation but has yet to respond with a plan to implement it. In  that report, we state that the risk-informed decision-making framework  can be applied to a range of cleanup decisions, from selecting a cleanup  approach at a single site to prioritizing cleanup activities across sites. The  risk-informed decision-making framework consists of several steps,  including engaging with stakeholders such as Ecology throughout the  decision-making process. In that report, we noted that the goal of  engaging stakeholder groups in a risk-informed cleanup decision should  be to incorporate their viewpoints and seek their acceptance of the  decision-making process as transparent and legitimate, rather than to  obtain their concurrence with the final decision. We also found that this  can best be accomplished when EM seeks stakeholders\u2019 input and buy-in  to the process by providing meaningful opportunities for engagement  early in the process, communicating throughout the process, and  providing transparent, understandable information about the science and  rationale behind the final decision. Doing so can help improve the  likelihood that stakeholders will view the decision-making process as fair  and legitimate. By following the steps outlined in our risk-informed  decision-making framework as it makes decisions about the future of the  Hanford pretreatment facility, EM and stakeholders would have greater  assurance that EM\u2019s decision-making process is transparent,  participatory, and credible.\n\n\tConclusions\n\nAfter nearly 20 years and with over $11 billion spent since EM awarded  the contract to design and build the WTP, the WTP is not complete and  has faced numerous technical challenges, cost overruns, and schedule  delays. According to a recent study by the U.S. Army Corps of Engineers  and EM\u2019s Hanford Lifecycle Report, the largest and most complex portion  of the WTP\u2014the pretreatment facility\u2014is unlikely to be completed as  designed and scheduled. Since the early years of the project, we have  recommended that EM stop moving ahead on the pretreatment facility  until it resolves the numerous technical challenges or conducts a reliable  analysis of alternatives and determines a risk-informed, cost-effective  path forward. However, EM has yet to fully implement these  recommendations. EM officials reported that the technical challenges that  have plagued the project for years have been solved, but EM has not  developed the design and engineering changes needed to implement the  solutions. Instead, EM is focusing on analyzing alternatives to accomplish  the mission of the pretreatment facility and officials have stated that this  analysis will follow best practices we have identified and DOE guidance.  EM\u2019s current AOA of HLW treatment alternatives is still under way, and  officials told us that they intend to follow best practices for developing an  AOA. However, as of February 2020, the AOA still lacks at least two key  elements of the best practices. First, without a clear statement of mission  need, it is unclear on what basis decision makers will consider and  assess the alternatives being considered. Second, without an updated  life-cycle cost estimate to complete the pretreatment facility, it is unclear  whether the HLW pretreatment alternatives being analyzed represent a  better path forward than completing the partially constructed pretreatment  facility as originally planned. Without these key elements of an AOA, EM\u2019s  ultimate decision may not be the best option or be credible with  stakeholders. Throughout this decision-making process, EM\u2019s  engagement with Ecology has not met the expectations of the regulator,  resulting in fines and further delays as all parties participate in an  ongoing, mediated negotiation on a path forward. By following the steps  outlined in our risk-informed decision-making framework as it makes  decisions about the future of the pretreatment facility, EM can ensure that  its regulators have greater assurance that EM\u2019s decision-making process  is transparent, participatory, and credible.\n\n\tRecommendations for Executive Action\n\nWe are making the following two recommendations to DOE:\nThe Secretary of Energy should direct the Assistant Secretary of  Environmental Management to ensure that EM\u2019s final AOA for HLW  pretreatment at the Hanford Site includes a definition of mission need  and life-cycle cost estimates for the baseline or status quo alternative,  as called for in the best practices for an AOA process we have  identified and DOE guidance. (Recommendation 1)\nThe Secretary of Energy should direct the Assistant Secretary of  Environmental Management to follow the steps outlined in GAO\u2019s risk- informed decision-making framework as EM makes decisions about  the future of the pretreatment mission; in particular, engaging the  Washington State Department of Ecology in the AOA process,  communicating with them throughout the process, and providing them  with transparent information about the rationale behind the final  decision. (Recommendation 2)\n\n\tAgency Comments\n\nWe provided a draft of this report to the Secretary of the Department of  Energy. In its written comments, reproduced in appendix VI, DOE  concurred in principle with our recommendations and outlined a plan to  address the recommendations by December 31, 2020. DOE also  provided additional technical comments, which we have incorporated into  the report as appropriate.\nWe 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.\nIf 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 VII.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur report examines (1) the cost of pretreatment efforts from fiscal year  2013 through fiscal year 2018 and the status of the pretreatment facility,  (2) the status of the technical challenges facing the pretreatment facility,  and (3) the steps the U.S. Department of Energy\u2019s (DOE) Office of  Environmental Management (EM) is taking to begin treating waste by  2023 as required and the extent to which EM has engaged with  regulators.\nTo determine the cost of the pretreatment facility, we reviewed Earned  Value Management (EVM) status reports from Bechtel National, Inc.  (BNI) and fiscal year totals for EM\u2019s oversight costs and BNI\u2019s award and  contract modification fees for the pretreatment facility for fiscal years 2013  through 2018 provided by officials in EM\u2019s Office of River Protection  (ORP), which oversees the construction of the Waste Treatment and  Immobilization Plant (WTP) at Hanford. BNI\u2019s EVM status reports give  actual costs for the work performed categorized by a number of different  activities, such as engineering to design the pretreatment facility and the  acquisition of plant equipment items to be installed in the pretreatment  facility. For reporting purposes, we combined BNI accounts with similar  activity descriptions and renamed them. To determine the activities  included in the accounts, we reviewed both the Work Authorization  Document, which describes activities covered by each account used in  BNI\u2019s EVM status reports, as well as descriptions of major  accomplishments achieved each fiscal year included in the summary  status report.\nTo determine the cost of alternative pretreatment efforts, we reviewed  EVM status reports for the Direct-Feed Low-Activity Waste project, the  Low-Activity Waste Pretreatment System, and the Tank Side Cesium  Removal project for fiscal years 2014 through 2018. Because the Test  Bed Initiative project did not use an EVM system until fiscal year 2018, we  reviewed invoiced costs data for that project for fiscal years 2016 through  2018. To gain context on the planned capabilities of these projects, we  reviewed project presentations for pretreatment alternatives and  interviewed ORP and BNI officials to learn more about the progress made  in developing each project. To assess the reliability of all cost data for  both the pretreatment facility and alternative pretreatment efforts, we  reviewed documentation and officials\u2019 responses related to data-gathering  processes, data storage systems, and data limitations for each of the  relevant sources to ORP. Based on this, we found all of the data sources  to be sufficiently reliable for our reporting objectives. Finally, to determine  the extent to which EM has established a cost estimate to complete the  pretreatment facility that is consistent with DOE policy set out in DOE  Order 413.3B, we interviewed officials about EM\u2019s cost estimate to  complete the facility.\nTo examine the status of technical challenges facing the pretreatment  facility and to gather information pertaining to obstacles and risks of  project completion, we reviewed the following documents:\nORP\u2019s 2018 briefing to the Washington State Department of Ecology  (Ecology) regarding the status of challenges,\nBNI\u2019s 2018 briefing about the status of the pretreatment facility,\nThe U.S. Army Corps of Engineers\u2019 2018 report on the status of the\nThe Defense Nuclear Facilities Safety Board\u2019s (DNFSB) 2017  technical report on WTP hazards.\nWe also interviewed officials from EM, regulators at Ecology, officials  from the U.S. Environmental Protection Agency, and contractor officials  who are working to resolve these challenges to better understand the  status of the technical challenges, as well as any concerns they might  have. In addition, we interviewed officials from DNFSB\u2014an independent  agency that provides analysis, advice, and recommendations to the  Secretary of Energy regarding the adequate protection of public health  and safety at DOE\u2019s defense nuclear facilities\u2014regarding DNFSB\u2019s  assessment of the technical challenges and what additional steps, if any,  DOE needs to take to resolve the challenges.\nTo examine the steps EM is taking to begin treating waste by 2023 as  required, we visited the WTP construction site at Hanford in May 2019 to  observe the status of the construction of the pretreatment facility and  pretreatment alternatives. We reviewed historical documentation, such as  technical reports summarizing testing, and studies conducted by EM and  its contractors. These reports included Washington River Protection  Solutions\u2019 2014 low-activity waste (LAW) alternatives analyses summary  and its 2011 conceptual design report, and CH2M HILL Hanford Group\u2019s  2006 LAW First Study. We interviewed DOE officials from headquarters  to discuss the status of and future plans for the WTP and DOE officials  from ORP at Hanford to gather information about the project. We also  interviewed ORP contractors regarding their ongoing and planned efforts  related to pretreatment of the tank waste and regulator officials from  Ecology to better understand their concerns and priorities.\nTo analyze the extent to which EM is following guidance and best  practices as it conducts its analysis of alternatives (AOA) of high-level  waste (HLW) treatment alternatives, we first interviewed DOE officials  and reviewed available documentation associated with DOE\u2019s ongoing  AOA to determine the status of the draft AOA. We then reviewed the  steps EM is taking and compared them against DOE\u2019s project  management requirements (DOE Order 413.3B) and guidance (DOE  Analysis of Alternatives Guide) and the best practices for an AOA process  that we identified in our prior work. Because EM was conducting its own  AOA concurrent with our review, we selected two key best practices in an  AOA process\u2014define mission need and develop a life-cycle cost estimate  for the baseline (or status quo) alternative\u2014because these two steps are  requisite for completing the remaining steps of an AOA. These steps are  also essential to ensuring that the other 20 best practices and the results  of the AOA are credible and based on accurate information. We also  noted best practices that EM officials noted EM has met thus far. In  addition, we compared EM\u2019s decision-making process, in particular its  stakeholder engagement, against a framework for risk-informed decision- making we developed in our prior work. We developed this framework in  2019 to assist agencies in identifying and implementing the essential  elements of risk-informed decision-making. To create the framework, we  synthesized key concepts from relevant literature and input from experts  who participated in a meeting convened by the National Academies of  Sciences, Engineering, and Medicine.\nWe conducted this performance audit from February 2019 to May 2020 in  accordance with generally accepted government auditing standards.\nThose standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: GAO Analysis of Bechtel National, Inc. (BNI) Cost Accounts\n\nThe Office of Environmental Management\u2019s contractor for its pretreatment  facility, BNI, tracks its costs in its Earned Value Management system.  Costs are tracked through the use of different accounting codes that  represent the costs of different types of activities. For reporting purposes,  we combined BNI accounts with descriptions of similar activities and  renamed them. The table below lists the labels we used, the BNI account  codes included in each label, and selected examples of activities  described for each accounting code.\n\nAppendix III: Technical Challenges Facing the Department of Energy\u2019s Waste Treatment and Immobilization Plant\u2019s (WTP) Pretreatment Facility\n\nAppendix III: Technical Challenges Facing the  Department of Energy\u2019s Waste Treatment and  Immobilization Plant\u2019s (WTP) Pretreatment  Facility Description  Inadequate pulse jet mixing can lead to the accumulation of solids in process vessels, resulting in  generation and accumulation of hydrogen and potentially leading to explosions. Settled sludge  layers will rise in temperature, increasing the hydrogen generation rate.  Up to 16 of the 177 underground tanks at Hanford contain large-size plutonium particles that could  settle onto internal surfaces of the pulse-jet mixer vessels, which use compressed air to mix the  waste. If the pulse-jet mixers could not then resuspend settled particles, an uncontrolled nuclear  chain reaction known as a criticality accident could occur.  In the Pretreatment facility and High-Level Waste (HLW) facility, the accumulation of hydrogen gas  in piping and small vessels can occur after the loss of off-site power or after an interruption of a  transfer of waste due to operator error and during normal operation in isolated pipe sections,  potentially causing an explosion.   Accumulating solids in pulse-jet mixing vessels could cause excessive air to be discharged in the  vessels. This discharge could cause premature erosion of vessel surface bottoms, all of which are  located in nonmaintanable areas called black cells. In addition, pulse-jet mixing vessels may need  structural modifications to account for abnormal environmental conditions, such as seismic events.   Because of uncertainties in waste feed characteristics, the vessel and piping design in the  Pretreatment facility and HLW facility may require revisions to account for the amount of wear the  equipment will need to withstand. Excessive wear could damage plant equipment and result in  interruption of operations or leakage of material from vessels and piping.  The potential incorporation of a Standards High Solids Vessel into Pretreatment requires a detailed  study to determine the feasibility and optimization of this design change. An additional opportunity  is created to revisit the capability to perform In service inspections in order to underpin resolution of  erosion\/corrosion questions. The Project has not established an in-service inspection program.  Once WTP operations begin, equipment in black cells within the Pretreatment facility and HLW  facility must last for the WTP\u2019s 40-year expected design life without maintenance because  significant failures of components installed in the black cells could impact the throughput and  mission duration of the WTP. Potential weaknesses in equipment and piping located within black  cells must be identified before WTP operations begin to ensure that timely repairs can be  conducted, should failure of these components occur.  Ventilation systems in the Pretreatment facility, HLW facility, and Low-Activity Waste facility must  be able to contain radioactive material that could be released from primary confinement. The  structural integrity of some internal vessel components in these facilities could be compromised if  seismic or other events beyond the design basis occur. The ventilation system must survive a  release of radioactive material without shutdown, plugging, or blowing out filters to continue to  provide confinement.\n\nAppendix IV: High-Level Waste (HLW) Alternatives Being Analyzed by the Office of River Protection\n\nAppendix IV: High-Level Waste (HLW)  Alternatives Being Analyzed by the Office of  River Protection Description  HLW is received, characterized, and pretreated in HLW Feed Preparation Facility;  contaminated liquids produced in the process are concentrated in a new HLW Effluent  Management.  HLW is sampled, characterized, and staged in the tanks. HLW is then pretreated in HLW  Feed Preparation Facility; contaminated liquids produced in the process are concentrated in  HLW Effluent Management Facility.  Same as previous alternative with some processes performed at a higher temperature.\nHLW is transferred to the pretreatment facility for preparation and staging; then leached,  washed, and concentrated in the HLW Feed Preparation Facility. Contaminated liquids  produced in the process are concentrated in the pretreatment facility.  HLW treated using alternative technologies such as grouting or steam reforming. Would  require technology development, research and development, lab testing and technology  readiness assessment.  HLW is immobilized within existing tanks using alternative technologies. Would require  technology development, research and development, lab testing and technology readiness  assessment.  HLW in the tanks located furthest away from the Waste Treatment and Immobilization Plant  (in the western portion of the site) is pretreated and treated in new west area HLW Feed  Preparation Facility, HLW Effluent Management Facility, and HLW vitrification facilities.   HLW is received, characterized, and pretreated in in HLW Feed Preparation Facility;  contaminated liquids produced in the process are concentrated in new facilities. Pretreatment  facility repurposed to treat low-activity waste.\nHLW is transferred to compliant mediums for transfer to Savannah River Site for treatment  and vitrification.  Fuels Material Examination Facility would be retrofitted to provide pretreatment capabilities.\nHLW vitrification facility is abandoned; pretreatment facility is repurposed to pretreat and  vitrify HLW.  HLW is pretreated and vitrified at a near-tank mobile facility or in a centrally located facility  using bulk vitrification technology. Would require technology development, research and  development, lab testing and technology readiness assessment.  Same as the second alternative above with added filtering capability.\nHLW is sampled, characterized, and staged in the tanks. Contaminated liquids produced in  the process are concentrated in HLW Effluent Management Facility.  Same as previous alternative with added step of concentrating the HLW in the HLW Effluent  Management Facility before sending it to be vitrified.\n\nAppendix V: Analysis of Alternatives (AOA) Best Practices\n\nThe guidance below is meant as 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. 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, and the customer will  not have assurance that the preferred alternative best meets the mission  needs. Table 6 shows the 22 best practices.\n\nAppendix VI: Comments from the Department of Energy\n\nAppendix VII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments:\n\nDavid C. Trimble, (202) 512-3841 or trimbled@gao.gov  In addition to the contact named above, Amanda K. Kolling (Assistant  Director), Jeffrey T. Larson (Analyst in Charge), Mark Braza, Kelly  Friedman, Richard P. Johnson, Gwen Kirby, and Alan K. Smith made key  contributions to this report.","output":null}
{"id":"crs_R46308","pid":"crs_R46308_0","input":"\tIntroduction\n\nAccording to a 2019 study, 2 million Americans lack access to running water, indoor plumbing, or wastewater services. Many of the communities with inadequate water supply infrastructure are in rural areas or on tribal lands. Over time, Congress has authorized projects and programs through various federal agencies to address rural water supply needs. Since 1980, Congress has authorized the Bureau of Reclamation (Reclamation), among other federal agencies, to develop municipal and industrial (M&I) water supply projects in rural areas and on tribal lands. \nReclamation was established to implement the Reclamation Act of 1902, which authorized the construction of water works to provide water for irrigation in arid western states. Reclamation owns and manages 491 dams and 338 reservoirs, which are capable of storing a combined 140 million acre-feet of water. Reclamation has incorporated M&I water resource projects into larger projects that serve various other authorized purposes (e.g., irrigation, power). Reclamation-funded M&I water deliveries total approximately 10 trillion gallons of water per year. As part of Reclamation's M&I responsibilities, Congress has expressly authorized the agency to undertake the design and construction of rural water supply projects intended to deliver potable water supplies to defined rural communities.\nFrom 1980 through 2009, Congress authorized Reclamation to undertake the design and construction, and in some cases the operations and maintenance (O&M), of specific projects intended to deliver potable water supplies to rural communities in western Reclamation states. These projects were largely located in North Dakota, South Dakota, Montana, and New Mexico. The rural communities include tribal reservations and nontribal rural communities with nonexistent, substandard, or declining water supply or water quality. Many rural water projects are large in scope\u00e2\u0080\u0094taking water from one location and moving it long distances to tie to existing systems. M&I portions of Reclamation water supply facilities typically require 100% repayment of construction costs to the federal treasury with interest. Congress also has authorized rural water projects that receive funding from the federal government for some or all costs on a nonreimbursable basis (i.e., a de facto grant). For example, the federal government pays up to 100% of the cost of tribal rural water supply projects, including O&M. For nontribal rural water supply projects, the federal cost share for current projects ranges from 75% to 80%.\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) created the Rural Water Supply Program, a structured program for developing and recommending rural water supply projects. This program was to replace the previous process of authorizing projects individually\u00e2\u0080\u0094often without the level of analysis and review (e.g., feasibility studies) consistent with Reclamation's other projects. Under the Rural Water Supply Program, Congress authorized Reclamation to work with rural communities and tribes to identify M&I water needs and options to address such needs through appraisal investigations and feasibility studies. Congress would then consider feasibility studies recommended by the Administration before authorizing specific projects for construction in legislation. Ultimately, Congress did not authorize any projects for construction through this process, and the authority for the program expired in 2016. \nReclamation continues to construct rural water projects (and to provide O&M assistance for some tribal components) that were authorized and initiated outside of the Rural Water Supply Program. In 2012, Reclamation developed prioritization criteria for budgeting these projects: \ninclusion of tribal components amount of financial resources committed urgency and severity of need financial need and potential economic impact regional and watershed approach water, energy, and other priority objectives \nAccording to Reclamation, the criteria aim to reflect both the priorities identified in the statutes that authorized individual projects and the goals of the Rural Water Supply Act of 2006.\nFor FY2020, Congress appropriated $145.1 million for construction and O&M at seven authorized rural water projects, which was $117.4 million above the Administration's FY2020 budget request. As of early 2020, Reclamation reported that $1.2 billion was still needed to construct authorized, ongoing rural water projects. For FY2021, the Administration requested $30.3 million for Reclamation rural water activities, of which $8.1 million is for construction.\nThis report provides an overview of Reclamation rural water projects, including completed and ongoing rural projects and efforts under Reclamation's Rural Water Supply Program. The report also discusses considerations for Congress (e.g., funding prioritization, potential nexus with other federal programs) and presents recent legislation relating to authorizing additional projects and reauthorizing the Rural Water Supply Program. \n\n\tRural Water Projects\n\nCongress has funded water supply projects in rural areas for more than four decades. Reclamation first became involved in these efforts beginning with authorization of the WEB Rural Water Supply Project in 1980 ( P.L. 96-355 ). Since that time, Congress has authorized Reclamation to fund the construction of several other rural water supply projects (see Table 1 ). These projects have individual authorizations and generally aim to provide water exclusively for M&I water uses in rural areas\u00e2\u0080\u0094a departure from the historical mission of providing water for irrigation, with M&I water use as an incidental project purpose. According to a U.S. Government Accountability Office (GAO) report, Reclamation became involved in such projects because communities proposed projects directly to Congress and, in response, Congress created specific authorizations for these rural water supply projects, with Reclamation overseeing funding and construction. In addition to projects authorized only in Reclamation states, Congress specifically authorized Reclamation's involvement in the Lewis and Clark Rural Water Supply Project located in South Dakota, Iowa, and Minnesota.\nReclamation reported that, prior to authorization, some rural water projects did not go through the level of analysis and review that is consistent with Reclamation's other projects and did not meet the economic, environmental, and design standards that are required to determine the feasibility of federal water resources development projects. In these instances, following authorization, Reclamation was to complete the analysis that was necessary to execute the project while adhering to the project configuration and designs specified by the authorizing statutes and in accordance with other laws (e.g., Clean Water Act [33 U.S.C. \u00c2\u00a7\u00c2\u00a71251-1387], National Environmental Policy Act [42 U.S.C. \u00c2\u00a74321 et seq.]). Critics have sometimes expressed concerns over this approach\u00e2\u0080\u0094specifically, whether the authorized project would have emerged as the most cost-effective preferred alternative had a feasibility study been performed prior to authorization. \nEach rural water project authorization required that the cost ceilings authorized in the legislation be indexed to adjust for inflation to include the rising cost of materials and labor, which was estimated to be 4% annually. The result of these indexing requirements is that the overall cost of authorized rural water projects has risen and continues to rise due in part to actual federal appropriations for projects falling short of the optimal funding scenarios that were assumed under planning projections. As of early 2020, Reclamation reported that $1.2 billion was needed to construct authorized, ongoing rural water projects.\nFor FY2021, the Administration's budget proposal requested $30.3 million: $8.1 million for ongoing construction at four authorized rural water projects and $22.2 million for O&M of tribal systems (e.g., $14.5 million for the Mni Wiconi Project, $7.7 million for the Garrison Diversion Unit M&I, and $20,000 for the Mid-Dakota Rural Water System). The FY2021 request is $114.8 million less than FY2020 enacted funding of $145.1 million. The FY2021 request continues a trend since FY2014 in which the President's budget requested reduced funding for rural water projects from prior-year enacted levels. Reclamation also has emphasized its authority to accept nonfederal contributions in excess of cost-sharing requirements as one way to expedite projects in the absence of increased federal funding. In the FY2021 budget request, Reclamation noted that nonfederal parties have the ability to move forward with important investments in water resources infrastructure by contributing amounts in excess of minimum contributions. \n\n\t\tRural Water Projects Under Construction in FY2020\n\nIn FY2020, Reclamation funded $125.4 million in construction work at five projects ( Table 2 ). Reclamation's FY2020 budget request included $8.0 million in construction for four projects, but Congress provided $117.4 million in appropriations above the President's budget request. The Administration distributed the funds above the request among five authorized projects, as described in Reclamation's additional funding spend plan. The following briefly describes the projects under construction in FY2020 based on Reclamation budget documents.\n\n\t\t\tGarrison Diversion Unit of the Pick-Sloan Missouri Basin Program\n\nThe Garrison Diversion Unit of the Pick-Sloan Missouri-Basin Program was authorized in 1965 (P.L. 89-108) and was amended in 1986 by the Garrison Diversion Unit Reformulation Act ( P.L. 99-294 ) to include rural water services. Garrison Diversion Unit water supply facilities are associated with Garrison Dam of the Pick-Sloan Missouri Basin Program. They are located in eight counties in the central and eastern part of North Dakota and serve four tribal reservations (Spirit Lake, Fort Berthold, Turtle Mountain, and Standing Rock Indian Reservations). The multipurpose project principally provides tribal and nontribal M&I water, along with fish and wildlife, recreation, and flood control benefits. \n\n\t\t\tFort Peck Reservation\/Dry Prairie Rural Water System\n\nThe Fort Peck Reservation Rural Water System Act of 2000 ( P.L. 106-382 ), as amended, authorized rural water projects in northeastern Montana for the Fort Peck Reservation, serving the Assiniboine and Sioux Tribes, and for the Dry Prairie Rural Water Authority, serving towns outside of the reservation. The total service area population is around 25,000 people; rural water use is also available for commercial users and livestock. Currently, groundwater from shallow alluvial aquifers is the primary water source for the municipal systems, but groundwater quality is generally poor. The regional rural water project is to provide for a single water treatment plant located on the Missouri River, which is to distribute up to 13.6 million gallons of treated water per day through 3,200 miles of pipeline. \n\n\t\t\tLewis and Clark Rural Water System\n\nThe Lewis and Clark Rural Water System Act of 2000 (Division B, Title IV of P.L. 106-246 ) authorized the Lewis and Clark Rural Water System to serve over 300,000 people in southeast South Dakota, southwest Minnesota, and northwest Iowa. The project aims to address concerns regarding low water quality, contamination, and insufficient supplies of existing drinking water sources throughout the project area. The water source for the Lewis and Clark Rural Water System is the sand and gravel aquifers of the Missouri River near Vermillion, SD. The project is to collect, treat, and distribute water through a network of wells, pipelines, pump stations, and storage reservoirs to each of 15 municipalities (including the city of Sioux Falls) and five rural systems. As of February 2020, completed facilities delivered water to the first 14 of 20 members, serving more than 200,000 individuals in Iowa, Minnesota, and South Dakota.\n\n\t\t\tRocky Boy's\/North Central Montana Rural Water System\n\nThe Rocky Boy's\/North Central Montana Regional Water System Act of 2002 (Title IX of P.L. 107-331 ) authorized a rural water system to serve the Rocky Boy's Indian Reservation (Chippewa Cree Tribe) and surrounding communities in northern Montana. The system is designed to serve a total projected population of 43,000 (14,000 on reservation and 29,000 off reservation) by providing infrastructure to ensure existing water systems within the project service area comply with federal Safe Drinking Water Act (42 U.S.C. \u00c2\u00a7\u00c2\u00a7300f-300j-26) regulations. A core pipeline is to provide potable water from Tiber Reservoir to the Rocky Boy's Reservation, and non-core pipelines are to serve 21 surrounding towns and rural water districts. A $20 million trust fund established with Bureau of Indian Affairs appropriations is to fund O&M and replacement for the core and on-reservation systems initially; eventually, water users are expected to entirely fund the project. Reclamation states that the current authorization is not adequate to cover the project.\n\n\t\t\tEastern New Mexico Water Supply\n\nSection 9103 of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ) authorized the Eastern New Mexico Water Supply project to deliver water from Ute Reservoir on the Canadian River to eight member communities. The use of Ute Reservoir water aims to provide long-term water supply and reduce the eight communities' dependence on groundwater in the Ogallala Aquifer. Current funding is for planning, design, and construction of interim projects to deliver groundwater to the communities before treated surface water is delivered from the Ute Reservoir Pipeline.\n\n\tRural Water Supply Act of 2006\n\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) authorized the Rural Water Supply Program and directed the Secretary of the Interior to undertake certain activities to implement the program. Specifically, the act directed Reclamation to conduct appraisal investigations and feasibility studies (or to ensure that nonfederal entities conducted such studies) and to recommend proposed projects to Congress for construction authorization and subsequent funding.\nIn 2008, Reclamation published an interim final rule (43 C.F.R. \u00c2\u00a7404) that established operating criteria for the program and defined the criteria for the prioritization, eligibility, and evaluation of appraisal investigations and feasibility studies, in accordance with the act. To be eligible under the rule, a rural community must have a population under 50,000. The rule prioritized domestic, residential, and municipal uses and prohibited the use of water for commercial irrigation purposes. Interested entities (e.g., Reclamation states and western tribes) may request that either (1) Reclamation complete an appraisal investigation or feasibility study or (2) Reclamation provide financial assistance so the entity can conduct an appraisal investigation or feasibility study. \nReclamation began to implement the Rural Water Supply Program in FY2010 on a pilot basis, providing assistance to nonfederal entities to conduct appraisal investigations and feasibility studies. Between FY2009 and FY2012, Congress provided Reclamation a total of $7.9 million for the program. After FY2012, Reclamation no longer requested funding for the program and Congress did not appropriate funds for it. Overall, Reclamation reported using this authority to study approximately 22 projects to varying extents (see Appendix ). Twelve were located in the Reclamation's Great Plains region, five in the Upper Colorado region, four in the Lower Colorado region, and one in the Pacific Northwest region. Of these, Reclamation finalized and approved two feasibility reports: the Musselshell-Judith Rural Water System Feasibility Report (Montana) and the Payson-Cragin Reservoir Water Supply Project Feasibility Report (Arizona). Reclamation did not recommend these or any other projects for authorization, and Congress did not authorize any projects. In justifying its lack of construction recommendations, Reclamation pointed to existing rural water construction obligations, which it argued precluded recommendation of new projects with completed feasibility studies. \nThe authority for the Rural Water Supply Program expired at the end of FY2016 and has not been renewed. Members of Congress have introduced legislation in the 116 th Congress that would reauthorize both the Rural Water Supply Program and particular projects and studies previously considered through the expired program (see \" Legislation in the 116th Congress \").\n\n\tIssues for Congress\n\nCongress continues to fund construction and O&M (only required for tribal components) of authorized rural water projects; however, since the FY2016 expiration of the Rural Water Supply Program, Reclamation has for the most part ceased activities relating to new project study and authorization. Congress may consider conducting oversight or legislating changes to Reclamation's rural water activities, including those related to existing or new program and project authorizations, funding prioritization criteria, and Reclamation's role in supporting rural water projects. \n\n\t\tAddressing Ongoing Rural Water Needs\n\nThe Rural Water Supply Act of 2006 required the Secretary of the Interior to assess the demand for new rural water supply projects in Reclamation states. In FY2009, Reclamation estimated that identified needs for potable water supply systems in rural areas ranged from $5 billion to $8 billion for nontribal needs; in the same year, it estimated approximately $1.2 billion for specific tribal water supply projects. However, the Administration has not recommended, and Congress has not authorized, any new Reclamation rural water projects since 2009. Additionally, because authorization of Reclamation's Rural Water Supply Program lapsed at the end of FY2016, Reclamation lacks a structured program for developing and recommending rural water supply projects. \n\n\t\t\tLegislation in the 116th Congress\n\nIn the 116 th Congress, House and Senate companion bills H.R. 967 and S. 334 , both titled the Clean Water for Rural Communities Act, would authorize $5 million for a feasibility study for the Dry Redwater Rural Water System and $56.7 million (2014 price levels) for construction of the Musselshell-Judith Rural Water System. As noted, a feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program, but the Administration did not recommend the project to Congress for authorization. \nCongress also is considering legislation to reauthorize the Rural Water Supply Program through FY2026. In the 116 th Congress, both the Water Justice Act ( H.R. 4033 ) and the Securing Access for the Central Valley and Enhancing (SAVE) Water Resources Act ( H.R. 2473 ) would reauthorize the existing program. \nCongress may consider other legislative proposals to address the demand for rural water assistance in the West. For example, the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would require the Secretary of the Interior to establish a grant program to provide financial assistance to disadvantaged communities of less than 60,000 residents that have experienced a significant decline in quantity or quality of drinking water. The grants could fund technical assistance, initial operating and capital costs for edible facilities, and up to 25% of such facilities' O&M. Other legislative proposals would address rural water needs by amending authorities to specific water technology and programs. For example, the Western Water Security Act of 2019 ( H.R. 4891 ) would amend the Water Desalination Act of 1996, as amended ( P.L. 104-298 ; 42 U.S.C. \u00c2\u00a710301 note), to add a classification for rural desalination projects with a higher federal cost share than desalination projects serving more than 40,000 individuals.\n\n\t\tFunding of Current and Future Projects\n\nIn early 2020, Reclamation stated that $1.2 billion was needed to complete authorized rural water projects under construction by the agency. In addition, Reclamation has previously estimated nontribal rural water supply needs in excess of $5 billion, and some observers have reported that assistance for communities is needed to address these needs. Some stakeholders have requested continued and increased funding for Reclamation rural water projects. In the 115 th Congress, representatives of the National Water Resources Association and the Family Farm Alliance asked Congress to compel Reclamation and the Office of Management and Budget to implement the Rural Water Supply Program and investigate opportunities to develop loan and loan guarantee programs that can help fund new water infrastructure projects.\nOver the years, Reclamation has provided its views regarding funding for rural water projects. In general, Reclamation has testified that rural water projects must compete with a long list of other priorities, including aging infrastructure, environmental compliance and restoration actions, and dam safety. During the consideration of authorizing existing rural water projects, Reclamation stated that long-standing agency policy was that local sponsors, particularly those that are nontribal, should reimburse Reclamation for 100% of the costs incurred for rural water supply from multipurpose projects. Reclamation notes in its budget requests to Congress that constrained federal budgets do not preclude nonfederal sponsors' ability to move forward with rural water projects by funding in excess of the minimum nonfederal contributions. Reclamation has recommended that tribes, where possible, and other project beneficiaries be responsible for the O&M expenses of their rural water projects. \nCongress has appropriated funds for rural water projects on a nonreimbursable basis (i.e., as de facto grants). In some cases, local and tribal sponsors do not have funds or have not prioritized funds to increase their funding contributions. Should Congress continue to support rural water projects through Reclamation, Congress may consider various options. These might include\nContinue to provide Reclamation annual appropriations for the agency to allocate funds to individually authorized rural water projects based on established agency criteria. Establish mandatory funding for Reclamation to allocate funds to individually authorized rural water projects based on established agency criteria. For example, the Authorized Rural Water Projects Completion Act ( S. 1556 ) in the 115 th Congress would have created a Reclamation Rural Water Construction Account to receive $80 million annually that otherwise would be deposited into the Reclamation Fund. Funds in the Reclamation Rural Water Construction Account, in addition to amounts appropriated for rural water projects, would be available for the construction of authorized rural water projects. Provide grant funding through a competitive process for nonfederal sponsors to support local projects, such as the grant program the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would establish for communities with fewer than 60,000 residents. Direct appropriations to individually authorized rural water projects. \n\n\t\tOther Rural Water Options\n\nAs GAO noted in a 2007 report, numerous federal entities provide funding for water supply and wastewater projects. In addition to Reclamation (which funds only water supply projects), the U.S. Department of Agriculture (USDA), Environmental Protection Agency (EPA), Army Corps of Engineers (USACE), Department of Housing and Urban Development (HUD), and Department of Commerce (DOC) all provide funding for both water supply and wastewater projects. USDA, EPA, HUD, and DOC have formal, nationwide programs with standardized eligibility criteria and processes under which communities compete for funding. In contrast, Reclamation and USACE fund water projects in defined geographic locations under explicit congressional authorizations. According to GAO, Congress has chosen Reclamation to fill a void for projects that are larger and more complex than other rural water projects and that do not meet the criteria of other rural water programs.\nSome might argue that these projects would be better accomplished via other existing federal water quality or water supply programs. However, as GAO has observed, as designed, some of Reclamation's authorized rural water projects do not fit criteria of other agency's programs due to their cost and regional focus; thus, project proponents have looked to Reclamation for funding. For example, Reclamation may assist rural areas with populations in excess of 10,000 residents that may not be eligible for funding under other programs. Reclamation rural water projects also may serve more than one community (i.e., a regional area, as opposed to a single area).\nReclamation developed its Rural Water Supply Program with the intent to complement, rather than duplicate, the efforts of the other agencies' programs and activities. In creating the program, Reclamation signed memoranda of understanding and related documents with other agencies to coordinate efforts. Reclamation has stated that it participates in a variety of broad coordination activities among agencies related to ongoing authorized projects. With the expiration of the Rural Water Supply Program, this formal coordination between Reclamation and other agencies' programs is no longer required.\n\n\t\t\tAppendix. Rural Water Supply Program Appraisal Investigations and Feasibility Studies\n\nThe Bureau of Reclamation (Reclamation) provided the Congressional Research Service with a list of appraisal investigations and feasibility studies conducted for potential projects under the Rural Water Supply Program. Before the program authorization expired in FY2016, 22 appraisal investigations were conducted, with nine recommendations for a feasibility study. Five feasibility studies were conducted. Reclamation did not recommend any projects for construction funding, although two studies found feasible alternatives for rural water supply. Reclamation issued concluding reports for appraisal investigations and feasibility studies of projects that were not recommended for construction funding. Reclamation provided a range of reasons for issuing concluding reports: studies being incomplete, no found feasible alternatives, lack of funding, and program expiration. According to Reclamation, some concluding reports were not issued due to a lack of time or resources. In these cases, Reclamation considered the appraisal reports as concluding reports for the purposes of the Rural Water Supply Program. A feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program. Legislation introduced in the 116 th congress, the Clean Water for Rural Communities Act ( H.R. 967 and S. 334 ), would authorize the Central Montana Musselshell-Judith Rural Water System.","output":null}
{"id":"gao_GAO-20-230","pid":"gao_GAO-20-230_0","input":"\tBackground\n\nThe Immigration and Nationality Act (INA) of 1952, as amended by the  Immigration Reform and Control Act of 1986, authorizes the  establishment of the H-2B visa category which allows U.S. employers to  bring non-immigrant workers into the United States to perform temporary  non-agricultural work. Generally, U.S. employers may apply for H-2B  visas when they can establish that (1) their need for an H-2B worker\u2019s  labor is temporary, meaning a one-time occurrence, a seasonal need, a  peak load need, or an intermittent need; (2) qualified U.S. workers are  unavailable to perform the work; and (3) the employment of an H-2B  worker will not adversely affect the wages or working conditions of  similarly-employed U.S. workers. Generally, an H-2B worker\u2019s  authorized stay per the TLC will be no more than 10 months. However,  DHS may authorize an extension of up to one year to H-2B workers  already in the United States, based on a subsequent TLC, with a  maximum stay of up to three years.\nPursuant to the INA, as amended by the Immigration Act of 1990, the H- 2B visa program is subject to an annual cap of 66,000 visas. These  visas are divided into two semiannual allocations: up to 33,000 workers  may be issued H-2B visas or provided H-2B nonimmigrant status in the  first half of the fiscal year(October 1 \u2013 March 31),  and the remaining  annual allocation will be available in the second half of the fiscal year  (April 1 \u2013 September 30). In fiscal years 2005, 2006, 2007, and 2016,  Congress amended the INA to include a provision that established a  returning worker exemption. This exemption enabled H-2B workers who  were counted against the visa cap during one of the three preceding fiscal  years to not be counted against the visa cap for the relevant fiscal year.\n\n\t\tH-2B Program Screening and Approval Process\n\nFederal agencies use a multi-step process to screen employers to ensure  eligibility to hire H-2B workers and later screen nonimmigrant workers on  eligibility to work under the H-2B visa category (see fig. 1).\nDOL\u2019s Office of Foreign Labor Certification (OFLC) screens and  processes TLC applications from employers. OFLC is to review these  applications to ensure that no qualified U.S. workers are available for the  job in question and that the wages and working conditions offered to H-2B  workers will not adversely affect similarly employed U.S. workers. In  2015, DOL and DHS jointly issued regulations that set forth a number of  specific requirements that employers must meet in order to obtain a  TLC, including taking specific steps to recruit U.S. workers before hiring  H-2B workers; paying a wage equal to or exceeding the highest of the  prevailing wage or the federal, state, or local minimum wage; paying for  H-2B workers\u2019 transportation costs; and guaranteeing a minimum number  of work hours to H-2B workers. Although employers may submit a TLC  application requesting a specific number of H-2B workers, DOL may  approve all the workers requested, approve a smaller number of workers,  or deny the application. Employers can petition DHS\u2019s U.S. Citizenship  and Immigration Services (USCIS) for a number of workers up to the  number approved by DOL, then USCIS screens and processes  employer\u2019s petitions. DHS is to send the approved petitions to the  Department of State, which screens workers that apply for H-2B visas at  U.S. embassies and consulates overseas. The Department of State is  responsible for interviewing H-2B applicants and reviewing their visa  applications and supporting documentation as part of their adjudication  process.\n\n\t\tEnforcement of the H-2B Program\n\nDOL is the primary agency that enforces H-2B employer requirements  and relevant labor laws.  This enforcement authority is delegated within  the DOL to the Administrator of the Wage and Hour Division (WHD).   WHD  conducts investigations, inspections, and law enforcement  functions that carry out the provisions of 8 U.S.C. \u00a7 1184(c), INA section  214(c), and the regulations pertaining to the employment of H\u20132B  workers, any worker in corresponding employment, or any U.S. worker  improperly rejected for employment or improperly laid off or displaced,  according to DOL. WHD investigates complaints filed by both foreign and  U.S. workers affected by the H\u20132B program, as well as concerns raised  by other federal agencies, such as DHS or the Department of State,  regarding particular employers and agents. WHD also conducts targeted  or directed (i.e., not complaint-based) investigations of H\u20132B employers  to evaluate program compliance.\nThrough OFLC, DOL may audit adjudicated applications to ensure  employers\u2019 compliance with the terms and conditions of their H-2B  Registration, Application for Prevailing Wage Determination, Application  for Temporary Employment Certification, or H-2B Petition and to fulfill the  Secretary\u2019s statutory mandate to certify applications only where  unemployed U.S. workers capable of performing such services cannot be  found. For non-compliant applications, OFLC may request more  information from employers prior to possible debarment. Audits can also  be used to establish a record of employer compliance or non-compliance  with program requirements and because the information they contain  assists DOL in determining whether it needs to further investigate an  employer or its agent or attorney.  In such instances, OFLC refers its  audit findings and underlying documentation to DHS, WHD, or other  appropriate enforcement agencies, who in their turn might conduct a  targeted investigation.\nMoreover, DOL\u2019s Office of Inspector General may conduct investigations  of applications suspected of potential fraud. DHS can also conduct certain  enforcement activities exercised through USCIS. USCIS has the authority  to adjudicate the H-2B petition and conduct inquiries on the employer\u2019s H- 2B petition, which includes the approved TLC and any supporting  documentation, to prevent fraud and ensure compliance with H-2B  requirements.\n\n\t\tAdministration of H-2B Visas and Statutory Changes Made in Recent Years\n\nGenerally, according to DHS, it processes and approves employers\u2019  petitions in order of receipt until the cap is reached. However, for the  second half of fiscal year 2018, USCIS announced that employers had  petitioned for more visas during the first five business days of the filing  period than were available under the semiannual allocation. As a result,  per its regulations, DHS used a computer-generated process to randomly  select petitions to consider for approval. Additionally, during fiscal years  2017, 2018 and 2019, Congress enacted provisions that authorized DHS,  after consultation with DOL, to make more visas available beyond the  statutory cap of 66,000 if the agencies determined that the needs of U.S.  businesses could not be satisfied with willing, qualified and able U.S.  workers. Under these provisions, the total number of additional visas  that DHS could make available could be up to the highest number of  returning workers approved in any fiscal year that the returning worker  exemption was in place, which was about 65,000 visas in fiscal year  2007, according to DHS and DOL (therefore up to about 131,000 visas  could be made available in each of these fiscal years). The Secretary of  Homeland Security, after consultation with DOL, decided to make 15,000  additional visas available for each year in fiscal years 2017 and 2018  (81,000 visas total in each year) and 30,000 additional visas for returning  workers in fiscal year 2019 (96,000 visas total). The federal agencies  announced the availability of these additional visas during different  months, based on the date they received statutory authorization, which  were all in the second half of the respective fiscal years (July 2017, May  2018, and May 2019).\n\n\tDemand for H-2B Visa Workers Increased as Unemployment Decreased\n\nEmployer demand for H-2B visas increased from 2010 through 2018 as  the U.S. economy strengthened. The number of employer-submitted  TLC applications that were certified by DOL increased in each year since  2012, and more than doubled from fiscal year 2010 (about 3,700) to 2018  (about 9,500). Additionally, the number of H-2B workers on DOL- certified applications has increased each year since 2012. In fiscal year  2018, DOL certified applications representing about 147,600 H-2B  workers, about a 70 percent increase from fiscal year 2010. As the  number of certified TLC applications and workers has generally increased  since 2010, national unemployment has declined each year since 2010  (see fig. 2).\nAfter DOL certifies the TLC, employers petition DHS to obtain H-2B visas  for the workers they plan to employ. Employers that filed petitions for H- 2B workers varied in the number of workers requested and most were  concentrated in several industries. According to our analysis of DHS  data, in fiscal year 2018, DHS approved petitions from about 3,700 H-2B  employers. The number of H-2B visa workers that employers were  approved for ranged from one to 1,169, with a median of 12 approved H- 2B workers (see fig. 3 for full distribution). Of the about 3,700 employers,  127 were approved for more than 100 visas.\nThe employers were generally concentrated in administrative and support  services (including landscaping); hospitality, amusement and recreation;  forestry, fishing, and hunting; construction; and manufacturing industries  (see table 1).\nIn our analysis, we found that in 2018, H-2B employers were  concentrated in 737 counties in the United States that have, on average,  larger labor forces and stronger labor markets than counties without H-2B  employers. For each fiscal year from 2015 through 2018, there were  about 700 counties with H-2B employers and about 2,400 counties  without any H-2B employers, according to our analysis of DHS CLAIMS3  data. Our analysis showed counties with H-2B employers have, on  average, larger labor forces than those without H-2B employers and are  located mostly along the coasts, but can be found throughout the United  States (see fig. 4).\nOur analysis of DHS and DOL data found that counties with H-2B  employers generally had lower unemployment rates and higher average  weekly wages than counties that do not have any H-2B employers.  Specifically, the approximate 700 counties with H-2B employers had, on  average, unemployment rates that were about 0.4 of a percentage point  lower than those in counties without H-2B employers. Moreover, lower  unemployment was consistent in every month from fiscal years 2015  through 2018, regardless of seasonality (see fig. 5). Further, average  weekly wages in counties with H-2B employers were higher by about  $113 per week r than in counties without H-2B employers (average  weekly wage for counties with H-2B employers is $866 and for counties  without H-2B employers is $754). This relationship held for every  quarter from fiscal years 2015 through 2018 (see fig. 6).\nThe connection between strong labor markets and employers\u2019 use of H- 2B workers may stem from multiple factors. Counties with strong labor  markets may have a smaller pool of unemployed workers to fill seasonal  positions leading employers in these counties to use H-2B visas as a way  to fill these positions. Alternatively, counties with larger, more urban  populations may have stronger labor markets. These larger population  counties have more employers than smaller counties; therefore, they are  more likely to have at least one employer with H-2B workers.\n\n\t\tSelected Businesses Reported Difficulty with Planning Due to Visa Cap, but Effects on Economic Performance and U.S. Employment Varied across Industries Many Selected Businesses Reported that Uncertainty in Getting H- 2B Visas Presented a Planning Challenge, but Responses about Economic Performance and Employment Were Not as Consistent\n\nMost selected H-2B employers we interviewed said uncertainty in getting  H-2B visas is a challenge to their business planning. We interviewed and  gave questionnaires to 35 H-2B employers\u201419 of which operated small  businesses. In our interviews, 21 H-2B employers said the uncertainty  of receiving H-2B visas affected their ability to plan for possible business  growth and investment.\nSome employers explained that their operations depended on getting H- 2B workers annually and that any decrease in the number of expected H- 2B workers would substantially impact their business decisions. For  example, one Texas-based landscaping employer we interviewed cited  uncertainty as a reason to stop accepting new contracts and to reduce  investments in new equipment, such as trucks and lawn mowers, and  other landscaping supplies. In Maryland, one seafood processing  employer said that because of the uncertainty related to receiving H-2B  visas they could not implement planned investments, such as expanding  their facilities or purchasing trucks for transporting goods, and shut down  their business for a time. Similarly, one hospitality employer in Michigan told us that due to the uncertainty of getting visas, they opted not to invest  in expanding their hotel amenities or make renovations.\nIn addition, of the 35 H-2B employers we interviewed, seven said the  lottery system used by DHS exacerbated the uncertainty of getting H-2B  visas. Some of these seven employers described the lottery as seemingly  unfair to employers who might have been long-time participants of the  program and would not be able to predict if they will be getting visas.  Some employers stated that they would prefer that DHS use a more  equitable method to award and distribute visas, such as giving every  employer a proportion of the visas they petition for.\nBeyond the uncertainty associated with the H-2B program, employers we  spoke with reported varying business experiences during fiscal years  2017 and 2018. Specifically, the 29 H-2B employers who completed our  questionnaire\u201415 of whom did not receive all requested H-2B visas  under the standard cap in 2018\u2014reported varied experiences in terms of  revenue, purchases of goods and services for their businesses, and the  employment of U.S. workers.\nRevenues. Employers who did not receive all requested H-2B visas  under the standard cap more frequently reported revenue declines than  employers who received visas, according to our analysis of the  questionnaire responses (see fig. 7). Some employers reported that the  loss of customers or contracts may have also contributed to these  revenue declines. According to the questionnaire responses, 12 of the 14  employers who did not receive all requested H-2B visas under the  standard cap reported losing customers and contracts in fiscal year 2018.\nHowever, employers\u2019 experiences varied across industries, and other  factors besides obtaining H-2B visas may have also affected revenues.  For example, seafood processing employers that did not receive all  requested H-2B visas under the standard cap more frequently  experienced revenue declines than construction employers that did not  receive all requested H-2B visas under the standard cap, as the latter  may have been better positioned to mitigate the loss of H-2B workers.  (Industry and location-specific factors from our case studies are  discussed later in this report.)\nPurchases of goods and services. Based on responses to our  questionnaire, employers that did not receive all requested H-2B visas  under the standard cap more frequently reported declines in purchases of  goods and services than employers who received visas in 2018 (see fig.  8). Employers\u2019 decisions to delay investments on their businesses may  have contributed to declines in the purchases of goods and services.  Based on questionnaire responses, 11 of the 15 employers who did not  receive all requested H-2B visas under the standard cap reported delayed  investments in equipment or maintenance repairs. Additionally, some also  reported delayed investments in business expansion. Corroborating what  H-2B employers reported, nine of the 12 supply companies we interviewed in our case studies said they experienced decreased demand  for their services when H-2B employers did not get visas or got them late.\nSimilar to their experiences with revenues, employers\u2019 reported  experiences with purchases of goods and services varied across  industries as other factors apart from obtaining H-2B visas may have  affected employers\u2019 purchases of goods and services. For example, more  construction employers who did not receive all requested H-2B visas  under the standard cap reported on their questionnaires that they could  maintain their levels of purchasing goods and services than hospitality  employers who did not receive all requested H-2B visas under the  standard cap, possibly due to construction employers\u2019 ability to mitigate  the impacts of not receiving H-2B workers.\nEmployment of U.S. workers. Based on our questionnaire responses,  no clear pattern emerged among employers with regard to changes in the  employment of U.S. workers (see fig. 9). Mainly there is no evidence of  a notable number of layoffs of U.S. workers among employers that did not  receive all requested H-2B visas under the standard cap. According to  our questionnaire responses, three of the 15 employers who did not  receive all requested H-2B visas under the standard cap in fiscal year  2018 reported having to lay off or reduce hours of U.S. workers. However,  responses regarding increases in U.S. employment are difficult to  interpret because our questionnaire did not ask how long newly hired  employees actually stayed with employers.\n\n\t\tEmployers in Different Industries and Locations Reported Varying Characteristics and Efforts to Mitigate Effects of Visa Cap\n\nLocal and industry-specific characteristics affected how selected  employers mitigated impacts from the H-2B visa cap and may help  explain the varied outcomes reported in revenue, supply purchases, and  employment of U.S. workers. For example, 18 of the 35 employers we  interviewed said that the characteristics of their own businesses, such as  seasonality, affected how they tried to mitigate impacts from the H-2B  visa cap. Employers told us that they used several methods to mitigate  the effects of not having H-2B workers; however, their success in  mitigating impacts varied (see table 2).\n\n\t\t\tSeafood Processing\n\nSeafood processing employers on Maryland\u2019s eastern shore\u2014which  includes Dorchester County\u2014hire H-2B workers for picking meat out of  crabs, according to a local trade association (see fig. 10). Typically,  crabbing season begins on April 1st and ends in late November. These  employers are heavily reliant on H-2B workers, and, on average, 54  percent of their workforce is comprised of H-2B workers for fiscal year  2018, according to questionnaire responses. Seafood processing  employers we interviewed were also long-time users of the H-2B  program. Of the six seafood processing employers we interviewed, five  said they had participated in the H-2B visa program for more than 20  years, while the remaining employer had participated for about two  years.\nSeafood processing employers that did not receive all requested H-2B  visas under the standard cap in 2018 reported notable impacts to their  businesses. Of the five seafood employers that responded to our  questionnaire, three did not receive the H-2B visas they requested under  the standard cap, and these employers reported that their revenue  declined by more than 10 percent. All three employers attributed their  revenue declines to not getting the requested H-2B workers in time for the  season. Two of the employers who did not receive H-2B workers in time  for the season, told us that they shut down their operations for part of the  season.\nMoreover, seafood processing employers told us that not getting H-2B  workers, or getting them late in the season, led to a reduction in U.S.  employment. For example, one employer we interviewed said the use of  truck drivers and administrative staff declined without H-2B workers to  perform the crab picking work. In addition, all of the seafood processing  employers who did not get their H-2B workers reported declines in  supplies purchased (e.g., crabs, boxes, pots, and packaging). Of the five  seafood supply companies we interviewed, all of them confirmed that  when H-2B employers did not receive all requested H-2B visas under the  standard cap, demand for their services and products declined.\nEmployers told us that impacts of the H-2B visa cap were aggravated by  several industry-specific factors. For example, one employer said the  strict seasonality of crab picking made delays in receiving H-2B workers  problematic. In addition, seafood employers said their efforts to recruit  U.S. workers faced challenges. Different employers mentioned  challenges including this strict seasonality; the nature of the work, which  generally does not appeal to U.S. workers including high school and  college students; and the employer\u2019s remote location. Finally, some  employers emphasized that there was not a good substitute for manual  labor when they did not get H-2B workers. One seafood processing  employer said the industry had tried to automate crab picking, but was  unsuccessful.\n\n\t\t\tLandscaping\n\nSelected landscaping employers we interviewed in Dallas-Ft. Worth,  Texas said they typically hire H-2B workers to perform residential and commercial landscaping, such as mowing lawns, planting trees, building  outdoor living spaces, and performing other lawn care maintenance (see  fig. 11). Landscaping employers told us that their season can begin as  early as February and can last until mid-December. On average, among  the landscaping employers that responded to our questionnaire, 35  percent of their workforce was comprised of H-2B workers. Of the 11  landscaping employers we interviewed, eight said they have participated  for about 10 years or more, while three said they have participated in the  H-2B visa program for about three years or less.\nOf the 11 landscaping employers who responded to our questionnaire,  three did not get all visas requested under the standard cap. All three  employers who did not receive all requested H-2B visas reported revenue  declines and said during our interviews that revenue declines were due to  not getting H-2B workers or getting them late in the season. Moreover, of  the 11 landscaping employers that responded to our questionnaire, six\u2014 including employers that did and did not receive all requested visas under  the standard cap\u2014reported declines in supply purchases.\nLandscaping employers told us that low local unemployment and the  intensive manual labor in the heat were challenges to recruiting more  U.S. workers. Of the 11 landscaping employers we interviewed, three  said that when they did not get their H-2B workers, they tried to partially  mitigate the situation by having existing staff work additional overtime  hours. Other efforts to mitigate the impacts of having fewer H-2B workers  included spreading their work across the year and helping returning H-2B  workers apply for permanent residency using EB-3 visas\u2014immigrant  visas available to certain categories of skilled and unskilled workers.  Some landscaping employers said that using EB-3 visas would enable  them to have more workers who are permanent residents, which would  help promote a more stable workforce, according to our interviews.\n\n\t\t\tConstruction\n\nSelected construction employers we interviewed in Maricopa County,  Arizona, said they generally hire H-2B workers to perform manual labor,  such as building housing panels or drywalling (see fig. 12). Construction  employers said their season generally begins as early as March and lasts  until November. On average, among the construction employers that  responded to our questionnaire, 8.5 percent of their workforce was  comprised of H-2B workers. Of the six construction companies we  interviewed, all of them said they have participated in the H-2B visa  program for about five years or less.\nThe three construction employers who did not receive all requested H-2B  visas under the standard cap in 2018 and responded to our questionnaire  reported that they did not experience significant revenue declines. Of  these three employers, two reported increased revenues between 2017  and 2018, while one did not report revenue. One employer said during  interviews that had they received H-2B workers in 2018 they might have  experienced a significant revenue increase compared to 2017 because of  the expansion of the construction industry overall in Maricopa County. In  addition, among the three construction employers who responded to our  questionnaire and did not receive all requested H-2B visas under the  standard cap, two reported increased supply purchases during fiscal year  2018.\nAlthough construction employers told us that recruiting more U.S. workers  was challenging due to low unemployment and the manual nature of the  work, several factors may have helped construction employers mitigate  the impacts of the visa cap. Of the six construction employers we  interviewed, two told us they attempted to mitigate impacts from the visa  cap by spreading their work across the year and prebuilding housing  frames during the offseason\u2014a practice referred to as even-flowing.  Moreover, some construction employers said they either subcontracted  work during times they could not hire new U.S. workers, or had their  existing U.S. workers work additional overtime hours.\n\n\t\t\tHospitality\n\nSelected hospitality employers in Mackinac Island, Michigan, and  Barnstable County, Massachusetts, said they commonly hire H-2B  workers to perform work such as housekeeping and working in kitchens  (see fig. 13). Generally, some employers said their season begins in  April and lasts through the end of October or early November. Of the 12  hospitality employers we interviewed, five said they have participated in  the H-2B visa program for between five to 20 years, four said they have  participated in the visa program for more than 20 years, and three did not  say when they started participating in the visa program. Moreover, H-2B  workers comprised an average of 35 percent of the hospitality employers\u2019  workforce, based on questionnaire responses.\nOf the nine hospitality employers who responded to our questionnaire, six  did not receive all requested H-2B visas they petitioned for under the  standard cap in 2018. Of those six employers, three reported revenue  declines in 2018, while the other three reported increased revenues.  However, some hospitality employers said that the lack of H-2B workers  did affect the quality of their services or led them to reduce their  operations. For example, one resort we interviewed said they had to close  down a signature restaurant because they did not receive the H-2B  workers necessary for the season. Of the nine hospitality employers that  responded to our questionnaire, five reported a decline in supply  purchases for 2018.\nA variety of factors may help explain the outcomes for hospitality  employers. On one hand, hospitality employers told us they were  challenged to recruit more U.S. workers due to the seasonality of the  work and sparse local population, and the fact that students are not  available for the whole season. On the other hand, one hospitality  employer that did not receive H-2B visas in 2018 said during interviews  that they did not experience a revenue decline because guests had  booked their reservations in advance. Also, hospitality employers  reported using various strategies to mitigate the impact of the cap. For  example, of the six hospitality employers who did not receive all  requested H-2B visas in 2018, three employers hired more foreign  students under the J-1 exchange program for certain students and other  visitors. Moreover, four hospitality employers said they applied for H-2B  visa extensions, which according to one employer are for H-2B workers  already in the United States. In addition, one employer also mentioned  that they contracted their housekeeping services to outside cleaning  crews, which negatively affected the establishment\u2019s quality of service.\n\n\tStakeholders Identified Potential Effects of Proposed Changes to the H-2B Visa Program\n\nIn response to the increase in demand for H-2B visas and the uncertainty  employers expressed regarding whether they would be approved for  workers under the H-2B visa cap, stakeholders and others have  suggested changes to the H-2B program. Based on interviews with  knowledgeable stakeholders and a review of their publications, we  identified six proposals for changing the H-2B visa cap. In our  discussion groups and interviews, 12 knowledgeable stakeholders\u2014 henceforth referred to as stakeholders\u2014identified potential effects for  each of the six proposals. As the stakeholders discussed the various  policy proposals, they identified two recurring policy goals: policy  proposals should (1) minimize uncertainty and (2) maintain or increase protections for U.S. and H-2B workers. We did not independently assess  the individual merits or accuracy of the views expressed by these  stakeholders, nor did we assess the feasibility or administrative costs of  the proposals discussed. Additionally, we did not assess which options  would require Congressional action or which options could be  implemented through agency action. Below, we present summaries of the  six proposals and some of their potential effects as identified by these  stakeholders. The first two proposals listed would eliminate or adjust the  cap and the remaining four would keep the current cap in place and  address alternative ways to allocate visas.\nShortage list. This proposal would eliminate the statutory cap and allow  employers to recruit foreign workers for occupations with worker  shortages. An expert commission would compile the shortage list  annually, based on relevant factors, such as wage growth or job  vacancies.\nPotential effects identified by stakeholders:  It would provide more evidence-based and data-driven  justifications for the number of visas and the  industries\/occupations that receive them.\nIt would foster public credibility for the H-2B visa program because  it demonstrates a bona fide need for H-2B workers.\nIt would accelerate the H-2B visa approval process for certain  industries.\nBecause wage growth would be an indicator of occupational  shortages, it may incentivize employers in major H-2B industries  to offer higher wages, if economically beneficial.\nSome employers approved under the current system would not be  approved for H-2B visa workers because their occupations are not  on the shortage list.\nIt may lack accuracy because national level occupational  shortages may not reflect shortages in certain industries and  occupations within specific locations or identify local labor market  trends. BLS data may not accurately capture such trends.\nAnnual adjustment. This proposal would adjust the cap annually (either  up or down) based on economic indicators such as unemployment rate or  number of TLC applications approved by DOL.\nPotential effects identified by stakeholders:  It would allow employers to use H-2B workers when U.S. workers  are not available due to low unemployment and revert to U.S.  workers in times of higher unemployment. Having a flexible cap  could be more predictable than the current system.\nIt would be a more accurate reflection of need than using an  arbitrary cap.\nWhile not discussed in the proposal language, if wage growth is  also considered as an economic indicator in the annual  adjustment, it might incentivize employers to improve wages, if  economically beneficial.\nUsing a national indicator would not fully reflect localized needs  for H-2B workers.\nIt would put DOL in a position where it would be determining  employers\u2019 needs.\nUsing approved TLC applications is not a good measure of  demand because they may not reflect demand for labor.\nAny delays in processing TLC applications could lead to difficulties  in determining the annual adjustment in a timely manner.\nReturning workers exemption. This proposal would retain the current  H-2B visa cap of 66,000 and make the returning worker exemption  permanent.\nPotential effects identified by stakeholders:  It could lead to increased predictability. Employers would have  more certainty on whether they will be approved for H-2B visas,  and H-2B workers would know whether they would have the  option to return to their jobs in the United States.\nThere is familiarity\u2014among employers, H-2B workers, and  administrators\u2014with returning worker exemption as it has been  implemented before.\nIt may be more efficient for employers as returning workers  already have training.\nThere could be potential cost savings for program as returning  workers have already been vetted.\nIt rewards both workers and employers who are compliant with the  H-2B program.\nA permanent returning worker exemption, like any proposed  reform that involves eliminating or increasing the cap, requires  better enforcement of worker protections.\nIt could increase the possibility that H-2B workers return to poor  working conditions because they have no other economic options.  One stakeholder said this could be mitigated by allowing returning  workers the flexibility to work for different employers than they  worked for in prior years if so desired.\nPriority list. This proposal would retain the current H-2B visa cap of  66,000 and give priority to applications from employers that offer the  highest wages or better working conditions.\nPotential effects identified by stakeholders:  It creates incentives for employers to improve working conditions.\nIt may be easy to implement under current law, and may not  require new legislation.\nIt alleviates problems associated with calculating the prevailing  wage.\nIt does not account for the wage variation among small and large  employers, geographical locations, or industries. Using the highest  wages to allocate the visas skews the program to certain  occupations and higher-paying geographical locations (even  within the same industries and among similarly sized employers).\nIf based solely on wages, a priority list could penalize employers  that also have to provide workers with additional benefits such as  housing at no cost.\nIt would need to be combined with stronger enforcement, such as  employer audits, to ensure that workers are getting paid the  promised higher wage or better conditions.\nQuarterly allocation. This proposal would retain the current H-2B visa  cap of 66,000 and allocate visas quarterly rather than twice a year.\nPotential effects identified by stakeholders:  It might improve fairness for employers whose season starts late  in the semiannual allocations.\nIt helps ease the burden on DOL\u2019s computer system.\nIt reduces the number of employers applying for visas before their  period of need and spreads demand more evenly across the year.\nIt does not seem to mitigate the issue of having demand exceed  the cap.\nIn practical terms, quarterly allocation would result in shifting visas  away from certain employers and toward others. Demand for H- 2Bs is especially high in April to June, the third quarter of the fiscal  year. This option would reduce the number of visas for the third  quarter and shift more visas to the fourth quarter.\nAuction. This proposal would retain the current H-2B visa cap of 66,000  and the visas would be auctioned to the highest employer bidders.\nPotential effects identified by stakeholders:  It uses market forces; employers evaluate how much an H-2B  worker is worth.\nIt demonstrates the economic cost of keeping the cap low and  determines whether employers are strictly looking for cheap labor.\nAuction revenues could be used to ensure the H-2B program has  less adverse effects on U.S. and H-2B workers, raises wages, or  leads to more audits by DOL.\nDepending on the design of the auction, it may create a system  where larger, better funded employers unfairly benefit.\nIt does not address issues of uncertainty faced by employers of H- 2B workers.\nIt increases labor costs which could reduce the profitability using  H-2B workers.\n\n\tFederal Agencies Have Taken Steps to Address H-2B Employers\u2019 Hiring Needs and Protect U.S. Workers, but Gaps Remain\n\n\t\tAgencies Made Efforts to Respond to Demand for H-2B Workers but Have Not Fully Considered Alternative Approaches Identified in the 2019 Report\n\n\t\t\tAlternative Approaches for Visa Allocation\n\nDHS, in consultation with DOL, has identified some alternatives to the  current approach for allocating H-2B visas. In the Joint Explanatory  Statement accompanying the fiscal year 2018 DHS Appropriations Act,  Congress directed DHS\u2014in consultation with DOL\u2014to review and report  on options for addressing the problem of unavailability of H-2B visas for  employers that need foreign workers late in each semiannual period of  visa availability. In response, DHS issued a report to Congress in June  2019 that laid out six approaches for revising how H-2B visas are  allocated among employers\u2014some of which were similar to the proposals  identified above. The DHS options include (1) a merit-based system for  eligibility that prioritizes employers that have made a significant  contribution to the U.S. economy, (2) designation of eligible occupations  or industries based on factors such as industry unemployment rates, and  (3) distributing visas on a quarterly basis.\nDHS has not assessed which of the options outlined in the June 2019  report could be implemented by agency action alone and which would  require Congressional action, nor has it identified which options have the  greatest potential benefit for employers. DHS officials have told us that  they currently lack the resources to assess or implement the proposals  from their June 2019 report or any other alternatives and, while an  assessment may be possible in the future, it would have to be balanced  against other administration priorities. Standards for internal control in the  federal government call on agencies to identify, analyze, and respond to  significant change, including change in the economic environment.  Moving forward with assessing available reform options would position  DHS and DOL to better inform their own and Congress\u2019s decision- making.\n\n\t\t\tConsideration of Economic Trends in Determining Additional Visa Numbers\n\nIn determining the number of additional H-2B visas to make available  beyond the standard cap in fiscal years 2017 to 2019, DHS\u2014in  consultation with DOL\u2014relied on data from prior years. In each of the  three years, federal law authorized DHS after consultation with DOL to  provide additional H-2B visas beyond the standard cap if the needs of  U.S. businesses could not be met with U.S. workers, up to the maximum  number of H-2B returning workers in any prior year when the returning  worker exemption was in effect (about 65,000 in 2007, according to the  agencies). DHS made up to 15,000 additional visas available in fiscal  years 2017 and 2018 and up to 30,000 in 2019. In each year, DHS in  consultation with DOL determined the appropriate number of additional  visas by looking at demand for visas in prior years. Specifically, in 2017 it  determined that 15,000 visas would be sufficient to at least meet the  same level of demand as in fiscal year 2016. In 2018, DHS used the  same rationale to determine that up to 15,000 additional visas would  again be sufficient, based on experience with the additional visas in  2017. Most recently, in 2019, DHS in consultation with DOL raised the  number of additional visas to 30,000 in recognition partly of the higher  demand in 2018\u2014when employers filed petitions for about 29,000 visas  during the first five days of the filing period for additional visas. The  demand for returning H-2B workers in prior years and the amount of time  remaining in the fiscal year were also factors in the agencies\u2019 decision  about how many additional visas to provide.\nHowever, using demand in prior years as the primary basis for setting the  number of additional visas in the current year is not consistent with  standards for internal control in the federal government, which call for  agencies to identify, analyze, and respond to significant change, including  change in the economic environment. Indeed, the outcome in 2018,  when DHS made 15,000 additional visas available but employers applied  for almost 30,000 visas, demonstrates the potential limitations of relying  solely on past demand as a predictor of future demand. Examples of  other types of data that may be relevant to gauging trends in employer  demand include unemployment rate, employment, and earnings, which  we have previously identified as potential indicators of labor market  shortages. Some stakeholders have also suggested that the number of  H-2B workers on approved TLC applications is a good measure of visa  demand. The agencies said in the 2018 and 2019 temporary rules making  additional visas available that they did not have enough time remaining in  those fiscal years to conduct a more formal analysis of the adverse  effects on U.S. workers that may result from a broader cap  increase.Assessing the advantages and disadvantages of considering  current economic trends in addition to past demand would help the agencies decide if such an approach would be a better way to estimate  employer need in any future years when Congress authorizes visas  beyond the H-2B standard cap.\nAccording to DHS and DOL, the agencies have also sought to balance  employers\u2019 hiring needs and the interests of U.S. workers by setting a  higher standard that employers must meet to qualify for additional H-2B  visas. To qualify for visas under the standard cap, employers must have  an approved TLC, demonstrating, among other things, that they have a  temporary need for labor and have taken steps to recruit workers in the  United States. From 2017 to 2019, employers applying for the additional  visas were also required to attest that without the visas, they were likely  to suffer irreparable harm, i.e., suffer a severe and permanent financial  loss.  According to the 2017 temporary rule announcing the availability  of additional H-2B visas above the statutory cap, DHS decided to focus  on businesses likely to suffer a severe and permanent financial loss, in  part, to be responsive to some stakeholders that U.S. workers could  potentially be adversely affected by a general cap increase applicable to  all potential employers.  To support their attestation of severe and  permanent financial loss, employers were required to retain  documentation, such as contracts, reservations, or orders that would  have to be cancelled absent the requested H-2B workers. DOL officials  told us the agency\u2019s Wage and Hour Division evaluates the sufficiency of  this documentation in the course of its investigations of H-2B employers,  when applicable. Officials said they examine documentation related to  loss of contracts and dependence on H-2B workers, among other things,  in order to detect significant and voluntary violations of program  requirements.\n\n\t\t\tChanges to Procedures for Assigning TLC Applications to Analysts for Review and Processing\n\nDOL has sought to address rising demand for TLCs and H-2B visas  through changes to how it assigns TLC applications to analysts for  review and processing. Prior to 2018, DOL processed applications  sequentially according to the day they were received, and released  certifications on a rolling basis as all requirements for certification  were met. DOL reported that on January 1, 2018, the first day of the  filing period for employers seeking workers to start on April 1, 2018, it  received approximately 4,498 applications covering 81,008 worker  positions, exceeding the annual visa allotment by nearly 250 percent.  According to the agency, this was the first time in recent years that  this had happened. On January 17, 208, agency officials announced  that beginning February 20, 2018, they would begin to release  certified applications sequentially according to the day and time of  receipt. This in turn led to a large number of employers with approved  TLCs submitting their H-2B visa petitions within a small window. DHS  officials explained that receiving a large volume of petitions in a short  time frame required USCIS to approve petitions following random  selection.\nIn June 2018, anticipating further increases in applications, DOL  announced that it would sequentially assign applications to analysts in  order of day and\u2014in an adjustment from the earlier procedures\u2014time  of receipt to the millisecond. Once applications were assigned,  analysts would initiate review of applications in the order of receipt  date and time, issue first actions on a rolling basis, and issue  certifications as all regulatory requirements were met.\nDOL reported that in January 2019, it received approximately 5,276  applications covering more than 96,400 worker positions for start  dates of work on April 1, exceeding the semiannual visa allocation by  nearly 300 percent.  Furthermore, DOL reported that on January 1,  2019, within the first five minutes of the filing period for April 1 start  dates of employment, the agency\u2019s network infrastructure supporting  OFLC\u2019s electronic filing system experienced almost 23,000 log-in  attempts, in contrast with 721 attempts in the same time period in  2018. This volume of simultaneous system users caused the  electronic filing system to become unresponsive, preventing nearly all  employers from submitting applications until the system reopened on  January 7, 2019..\n\n\t\tDOL Has Made Efforts to Strengthen U.S. Worker Protections, but Does Not Target Its Audits of H-2B Employers\n\n\t\t\tAudits of H-2B Employers\n\nDOL\u2019s Office of Foreign Labor Certification conducts recordkeeping audits  of adjudicated TLCs to assess employers\u2019 compliance with the terms and  conditions attested to in their applications and to fulfill the Secretary\u2019s  statutory mandate to certify applications only where unemployed U.S.  workers capable of performing the needed work cannot be found. DOL  officials told us the agency reviews the original TLC application and  requests additional documentation of the employer\u2019s activities when  conducting audits to determine whether the employer is in compliance  with program requirements. Specifically, employers with minor violations  receive a warning; violations described in 20 C.F.R. \u00a7 655.71 could lead  to increased DOL monitoring and assistance with the employer\u2019s  recruitment efforts; and employers with violations described in 20 C.F.R.  \u00a7 655.73 could be debarred from the H-2B program.\nDOL is defending a challenge to its implementation of the randomization process for  assigning applications filed by employers seeking H-2B visas, in Padilla Construction Co.  v. Scalia, No. 2:18-cv-01214-GW-AGR (C.D. Cal.).\nWhile DOL has changed its TLC procedures so they call for a randomization process on  an on-going basis, DHS generally processes employers\u2019 petitions on a first-come, first- served basis except when a large number of petitions are received in the first five days of  the filing period. officials reported that during fiscal year 2018 they initiated 493 audits of  H-2B employers, representing seven percent of all employers with  approved TLCs issued during the year. They also reported that of the 503  audits completed during fiscal year 2018, which includes audits initiated  during 2017, more than half resulted in a warning letter being sent to the  employer, with only a small number finding more serious violations (see  fig. 14).\nIn our review of a non-generalizable sample of letters sent to H-2B  employers with audit results, we found several examples of the types of  issues identified by DOL. Several warning letters noted violations  related to the period of employment of H-2B workers, such as failing to  notify OFLC when H-2B workers left their jobs earlier than planned. In  letters of assisted recruitment that we reviewed, employer violations  included failure to accurately advertise rates of pay and failure to meet  requirements for posting job advertisements in newspapers. Finally, the  debarment letters we reviewed cited the employer\u2019s failure to provide the  documentation that DOL requested as part of the audit.\nDOL has not taken a risk-based approach to selecting employers to audit.  OFLC\u2019s Certifying Officer has the sole discretion to choose the  applications selected for audit, including selecting applications using a  random assignment method. DOL officials said the agency has for the  most part randomly selected H-2B employers for audits, although they  also select some employers because of a prior violation. Officials said  that the system currently used to track audits captures data on audit  workloads and final audit outcomes, but the agency has a plan to develop  a new system that would also track the individual violations found in  audits and the industry and job classification associated with the  employer. With this capacity, officials said they could take a more risk- based approach to selecting employers for audits, based on trends in  violations by industry or job classification. However, officials said that the  further development and implementation of this tracking system is  currently on hold due to resource constraints with no firm date for moving  forward. Standards for internal control in the federal government call on  agencies to identify, analyze, and respond to risks to meeting their  objectives. Until it implements a risk-based approach to selecting H-2B  employers for audits, DOL may miss opportunities to allocate its limited  audit resources more efficiently and to detect violations that could  adversely affect U.S. and H-2B workers. Taking a more targeted  approach is especially important in light of a 2019 Office of Inspector  General (OIG) report that stated over the past decade, the OIG and other  federal agencies have conducted over 70 criminal investigations in the H- 2B program related to potential fraud involving employers, attorneys, and  others.\n\n\t\t\tDetermination of Prevailing Wage\n\nDOL also works to protect U.S. workers through setting the prevailing  wage that employers must pay and has taken steps to enhance the  accuracy of its prevailing wage determination by limiting the use of  employer-provided wage surveys. DOL is responsible for determining the  prevailing wage applicable to an H-2B application. An employer must  pay a wage at least equal to the prevailing wage obtained from the  National Prevailing Wage center within OFLC, or the federal, state, or  local minimum wage, whichever is the highest. The prevailing wage that  H-2B employers must pay their H-2B and U.S. workers is set by BLS\u2019s  Occupational Employment Statistics (OES) survey in all cases except  when a wage is set by a valid and controlling collective bargaining  agreement or the employer submits an employer-provided survey that  meets DOL\u2019s requirements. When they promulgated a final rule in 2015  on the methodology for determining the prevailing wages to be paid H-2B  workers, DHS and DOL decided that it would limit the circumstances  under which employers may use employer-provided wage surveys to set  the prevailing wage. The preamble to the rule described a court decision  that found that DOL had arbitrarily allowed wealthy employers to pay for  expensive private surveys when other employers in the same occupation  who could not afford to conduct such surveys paid the higher OES mean  wage. In light of this decision, as well as DOL\u2019s own experience that  employer-provided surveys are not any more consistent or reliable, and  concerns raised by worker advocates, the agencies determined that the  options for accepting employer-provided surveys are more limited. The  2015 regulations require, among other things, that employer-provided  surveys be conducted independently by a state agency or university, and  meet certain methodological standards. Since 2014, the proportion of H- 2B employers using employer-provided wage surveys to set the prevailing  wage has declined from almost 20 percent to less than one percent  according to our analysis of DOL data (see fig. 15). DOL officials told us  the most significant contributor to the decline in employer-provided wage  surveys was the requirement to have a state agency or university  independently conduct employer-provided wage surveys\u2014prohibiting  employers from directly paying for these surveys. Officials also said that  the seafood industry in locations such as Maryland and Louisiana  continues to use employer-provided wage surveys, as state agencies  have long histories of conducting wage surveys for seafood employers in  these areas.\n\n\tConclusions\n\nEmployers we interviewed who depend on temporary foreign labor said  the statutory cap on H-2B visas presents challenges for them, and these  challenges can be driven at least partly by demand that fluctuates with  the economy. Some employers\u2014for example, those with fewer local  workers available for hire\u2014may face greater financial risks than others  when they are denied H-2B workers due to the cap. More broadly, H-2B  employers are challenged by uncertainty regarding whether they will  receive H-2B workers in any given year, complicating their efforts to plan  future operations, such as expansion or investment. DHS and DOL have  taken an important first step towards addressing these challenges by  identifying options for allocating visas. However, until the agencies  assess such options, they cannot determine which, if any, to implement  under their current authority or what legislative changes may be needed  to improve the program. In the meantime, as long as DHS and DOL  continue to rely primarily on prior year demand to determine the  appropriate number of additional visas to make available beyond the  standard cap\u2014when granted this authority by Congress\u2014the agencies  may miss an opportunity to leverage data on current economic trends and  other factors. Assessing the advantages and disadvantages of using  current economic data would help the agencies determine the feasibility  of more accurate projections, which would help mitigate uncertainty and  related challenges for H-2B employers. The steps DOL has taken in  recent years to enforce worker protection requirements and promote  accurate wage levels so as not to undermine U.S. workers show promise.  However, until DOL moves ahead with taking a more targeted approach  to selecting employers for audits, it may miss opportunities to efficiently  leverage the scarce resources available to identify and prevent worker  protection violations.\n\n\tRecommendations for Executive Action\n\nThe Director of United States Citizenship and Immigration Services  should work with the Assistant Secretary for the Employment and  Training Administration to assess options for changing the H-2B visa  program and, as warranted, implement changes or submit proposed  legislative changes to Congress. DHS and DOL could consider options  included in their June 2019 report to Congress and identify those that  may be implemented cost effectively and without adversely affecting U.S.  workers. (Recommendation 1)\nThe Assistant Secretary for the Employment and Training Administration  should work with the Director of United States Citizenship and  Immigration Services to assess options for changing the H-2B visa  program and, as warranted, implement changes or submit proposed  legislative changes to Congress. DOL and DHS could consider options  included in their June 2019 report to Congress and identify those that  may be implemented cost effectively and without adversely affecting U.S.  workers. (Recommendation 2)\nThe Director of United States Citizenship and Immigration Services  should work with the Assistant Secretary for the Employment and  Training Administration to assess the advantages and disadvantages of  considering current economic trends in determining the appropriate  number of additional H-2B visas to provide when given this authority by  Congress and, as warranted, implement an approach that considers such  trends. (Recommendation 3)\nThe Assistant Secretary for the Employment and Training Administration  should work with the Director of United States Citizenship and  Immigration Services to assess the advantages and disadvantages of  considering current economic trends in determining the appropriate  number of additional H-2B visas to provide when given this authority by  Congress and, as warranted, implement an approach that considers such  trends. (Recommendation 4)\nThe Assistant Secretary for the Employment and Training Administration  should take steps to target its audits of H-2B employers to employers with  the highest likelihood of violating program requirements; such steps could  include moving ahead with developing a system for identifying trends in  H-2B employer audit outcomes. (Recommendation 5)\n\n\tAgency Comments\n\nWe provided a draft of this report to DHS and DOL for their review and  comment. Both agencies provided written comments, which are  reproduced in appendices III and IV, respectively. Both agencies also  provided technical comments, which we incorporated as appropriate.\nIn its comments, DHS agreed with our first recommendation to assess  options for changing the H-2B visa program, and noted that it plans to  work further with DOL to explore options for improving the H-2B visa  program and possibly develop proposals for legislative changes. DHS did  not agree with our third recommendation to assess the advantages and  disadvantages of considering current economic trends\u2014which was the  other recommendation we directed to the agency. Specifically, DHS said  it would continue to work with DOL\u2014as it has done in prior years--if and  when Congress delegates the authority to make additional H-2B visas  available beyond the statutory cap to DHS. The agency also expressed  its view that Congress is better positioned to determine whether and how  many additional visas should be made available to meet the needs of  U.S. businesses.\nIn fiscal years 2017 through 2020, DHS was authorized to increase the  number of H-2B visas beyond the statutory cap, after consulting with DOL  to determine that \u201cthe needs of American businesses  be  satisfied\u2026with United States workers...\u201d  In exercising this authority in  prior years, DHS stated that \u201che scope of the assessment called for by  the statute  is quite broad, and accordingly  delegates the Secretary of Homeland Security broad discretion to identify  the business needs he finds most relevant.\u201d  In light of DHS\u2019s broad  view of its authority, we continue to believe that it would be appropriate  for DHS, in consultation with DOL, to assess the advantages and  disadvantages of considering current economic trends in determining the  appropriate number of additional H-2B visas to provide. If they determine  that using such data would be warranted, the agencies would then be well  positioned to implement such an approach if DHS is granted such  authority in the future. Moreover, if\u2014as DHS stated in its response to our  recommendation\u2014the agency believes that Congress is best suited to  determine what increases in visa numbers may be needed to meet the  needs of U.S. businesses, consistent with protecting American workers, it  may wish to work with Congress to draft a legislative proposal reflecting  this view.\nDOL agreed with the three recommendations addressed to it. Regarding  our second recommendation to work with DHS to assess options for  changing the H-2B visa program, DOL said it is prepared to work with  DHS to consider options for changing the H-2B program and to provide  any technical assistance that Congress may need on this issue.  Regarding our fourth recommendation, DOL said it is prepared to draw on  its data on labor market and economic trends to provide technical  assistance to DHS on the determination of how many additional H-2B  visas to make available. Regarding our fifth recommendation, DOL noted  that while further development of a system for tracking industry and  occupational trends in H-2B employer violations is currently on hold due  to budgetary constraints, when this system is available it will provide the  capacity to take a risk-based approach to selecting employers for audits.\nWe are sending copies of this report to applicable Congressional  committees, the Secretary of Homeland Security, the Secretary of Labor,  and other interested parties. In addition, the report will be available at no  charge on GAO\u2019s website at http:\/\/www.gao.gov.\nIf 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 members who made key  contributions to this report are listed in appendix V.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur review: (1) describes trends in the demand for H-2B workers, (2)  describes selected employers\u2019 reports of how the visa cap has influenced  their economic performance and employment of U.S. workers, (3)  summarizes proposals for adjusting the H-2B statutory cap or how visas  are allocated, and (4) assesses how the federal agencies that administer  H-2B visas sought to meet employers\u2019 H-2B hiring needs and protect U.S.  workers.\nTo address our first objective, we analyzed administrative data sets from  the Department of Homeland Security (DHS), the Department or Labor  (DOL) Employment and Training Administration, and the Bureau of Labor  Statistics (BLS). To address our second objective, we conducted case  studies of four industries in specific locations. To address our third  objective, we held discussion groups and conducted interviews with  knowledgeable stakeholders regarding proposals to change the H-2B visa  cap we had identified through background research. To address our  fourth objective, we reviewed relevant federal laws, regulations, and other  documents; reviewed agency data; and interviewed federal officials.\n\n\tAnalysis of National- and County-Level Administrative Data\n\n\t\tNational-Level Data\n\nWe used DOL temporary labor certification (TLC) data and national  unemployment rate statistics for fiscal years 2010 through 2018 to  provide trends in number of applications DOL has received and national  unemployment rate. The TLC data are administrative data on applications  from employers for H-2B visas, which we found sufficiently reliable for our  purposes after reviewing technical documentation and interviewing  knowledgeable agency officials. DOL releases public disclosure files that  contain administrative data from employers\u2019 H-2B applications for TLC.  Our analysis took the public disclosure files and reported the number of  certified applications and workers for each fiscal year from 2010 through  2018. In order to report the national unemployment rate for the United  States, we used BLS\u2019 report on historical national unemployment rates.\n\n\t\tCounty-Level Data\n\nTo address how counties with H-2B employers compare to counties  without H-2B employers, we utilized several administrative data sets. We  used DHS Computer Linked Application Information Management System  (CLAIMS3) data, which we found sufficiently reliable for our purposes by  reviewing technical documentation, interviewing knowledgeable agency  officials, and electronic testing of data, to identify the counties with H-2B  employers for each fiscal year from 2015 through 2018. The CLAIMS3  data track all petitions for H-2B visas (as well as other visas). These data  include employer address and number of H-2B visas approved. Using  the employer address information, we identified the county in which H-2B  visa employer is located. After the county is identified, we then  aggregated all of the approved H-2B visa petitions within each county.  After identifying the counties with H-2B employers, we then combined this  with BLS data sets\u2014Local Area Unemployment Statistics (LAUS) and  Quarterly Census of Employment and Wages (QCEW)\u2014which we found  sufficiently reliable after reviewing technical documentation to get county- level data on unemployment rate, labor force, and average weekly wages  to make county-level comparisons. The LAUS is a federal-state  cooperative effort in which monthly estimates of total employment and  unemployment are prepared for counties and county-equivalents. From  this data set, we used the unemployment rate and the labor force  statistics by county. The QCEW program publishes a quarterly count of  employment and wages reported by employers. From this data set, we  used the average weekly wages data across counties for fiscal years  2015 through 2018. After we had combined the CLAIMS3 data with the  LAUS and QCEW data sets, we compared summary statistics on  unemployment rates and average weekly wages for counties with H-2B  employers to counties without H-2B employers. The average weekly  wages were inflation adjusted at the state level to constant 2018 dollars.\nTo check whether our results of the comparison were being driven by a  few outlying counties, we performed several additional analyses. To see if  the results were being driven by counties that relied more heavily on H-2B  visas, we created quartiles using the number of H-2B petitions approved  within a county and also created quartiles using the percentage of H-2B  visas as a percent of the total labor force. Next, in order to determine if  the results were because of the population sizes of the counties, we spilt  the counties in quartiles based on the size of labor force to compare  counties with and without H-2B employers by similar sized counties by  population. Finally, we incorporated TLC data on industries to provide  comparisons between our selected industries noted above (see appendix  II).\n\n\tCase Studies of Four Industries\n\nTo examine the experiences of H-2B employers and their suppliers with  the H-2B program in recent years we conducted case studies of four  industries in specific locations: seafood processing in Dorchester County,  Maryland; landscaping in Dallas County, Texas; construction in Maricopa  County, Arizona; and hospitality in Mackinac County, Michigan (hotels),  and Barnstable County, Massachusetts (restaurants). (See fig. 16).\nWe selected these industries because they were among the heaviest  users of the H-2B program in fiscal year 2018. Using DOL data on fiscal  year 2018 TLCs, we determined the total number of H-2B workers  approved across all TLCs associated with each NAICS code, and then  identified the NAICS codes with the greatest number of approved  workers. The four selected industries were all among the ten leading  industries in terms of number of approved workers (see table 3).  Amusement, gambling, and recreation industries and support activities for  forestry were also among the top ten. However, representatives of these  industries told us that employers typically move from location to location  during their seasons, making it difficult to conduct a case study of  employers in a particular location.\nFor each industry, we selected one or two counties in which to conduct  our case study. We selected these counties to achieve diversity in  several factors: the total number of H-2B workers approved for employers  in the county in fiscal year 2018; the number of H-2B workers approved  under TLCs associated with that particular industry in the county in fiscal  year 2018 (e.g., the number of H-2B landscaping or hospitality workers);  the proportion of all workers in the county who are H-2B workers in 2018;  the proportion of workers in that particular industry that are H-2B workers  in the county in 2018 (e.g., the proportion of all landscaping workers in  the county that are H-2B workers); county unemployment rate in January  2018; and geographic location (see table 4).\nAs part of each case study, we interviewed H-2B employers who received  visas during fiscal year 2018, H-2B employers who did not receive visas  during fiscal year 2018, and businesses who supply goods or services to  H-2B employers. Across the case studies, we interviewed 15 H-2B  employers who received visas, 20 H-2B employers who did not receive  visas, and 12 supplier businesses. We conducted a mix of individual and  group interviews with employers, and generally used the same questions  for each category of employers across industries. For all of our case  studies, we worked with industry groups to recruit employers to  participate in our interviews. These industry groups reached out to local  employers to identify H-2B employers and in some cases also supplier  businesses who would be willing to speak with us. In a few cases, we  also identified supplier businesses for interviews through our case study  interviews with employers. In our interviews with employers, we asked  about topics including their efforts to recruit U.S. workers, their  experiences with the H-2B program in recent years, any impacts on their  businesses of being denied H-2B visas, actions taken to adapt to not  receiving visas, and any impacts on supplier businesses of being denied  H-2B visas. Besides interviewing employers, we also interviewed a state  workforce agency as part of each case study, asking questions about  topics including the agency\u2019s role in helping H-2B employers recruit U.S.  workers, the outcomes of H-2B employers\u2019 recruitment efforts, and any  challenges with such recruiting efforts.\nIn addition, as part of our case studies, we asked the H-2B employers we  interviewed to complete a questionnaire. This questionnaire covered  topics including the employer\u2019s gross sales in fiscal years 2017 and 2018;  the employer\u2019s number of employees in fiscal years 2017 and 2018, both  U.S. and H-2B employees; the employer\u2019s purchases of goods and  services in fiscal years 2017 and 2018; and any challenges created by  not receiving H-2B visas in fiscal year 2018. We received responses from  30 employers, including from five seafood processing employers, 11  landscaping employers, four construction employers, and 10 hospitality  employers. Some respondents did not answer every question in the  questionnaire. We dropped one of the 30 questionnaire responses from  our analyses because the employer reported not receiving H-2B visas in  2017 which, if included, could distort our findings. In our analysis of  changes to revenues, supply purchases, and employment based on  questionnaire responses, we did not control for factors beyond the H-2B  visa cap that may have affected the results. So, any results reported from  the questionnaire may be due in part to these unobserved factors.  Additionally, we did not independently verify the information provided in  the questionnaire responses, which could lead to our analysis not  completely representing the full effect of the H-2B visa cap. Finally, the  questionnaire responses we received are representative of only the firms  that responded and may not be more widely generalizable to the industry  level or larger geographic regions.\n\n\tDiscussion Groups and Interviews with Stakeholders on Proposals to Change the H-2B Visa Cap\n\nAs we performed background research on H-2B visas and the cap, we  interviewed several knowledgeable stakeholders. We then identified the  proposals for changing the H-2B visa cap in the background interviews  and publications of these stakeholders (see table 5).\nTo address what options have been proposed for adjusting the H-2B  statutory cap or how visas are allocated, we interviewed 12  knowledgeable stakeholders across two discussion groups and two  interviews. The discussion groups were held on July 25, 2019 and July  29, 2019, and the interviews were held on August 1, 2019 and August 12,  2019.\nAs part of our discussion with the experts and knowledgeable  stakeholders, we asked for additional proposals that were not included in  the six identified in the above table. This discussion led to additional  proposals. These additional proposals are presented in table 6.\nWe used several approaches to begin identifying potential stakeholders  on the H-2B visa program. First, we reviewed our background interviews  with stakeholders for this engagement to craft a preliminary list of  potential individuals to contact. Then, we identified additional researchers  that have published works on the H-2B visa program. Afterward, we  conducted several searches on the Congressional Quarterly website to  collect a list of witnesses who testified before Congress on H-2B visa  issues. Finally, obtained an additional list of authors who published work  on the H-2B visa program and names of individuals that have testified  before Congress on issues related to the H-2B visa program. Through  this process, we identified 22 stakeholders to be included in our  discussion groups and interviews. We selected 12 knowledgeable  stakeholders based on several criteria: published work on the H-2B visa  program and number of times publications have been cited by other  scholars, testified before Congress on H-2B visa issues, advocated for  relevant stakeholder groups interested in the H-2B visa program, and  identified by peers as being a knowledgeable stakeholder on the H-2B  visa program. We also sought to achieve a balance of perspectives by the  selected knowledgeable stakeholders (see table 7).\n\n\tAssessment of Federal Agencies\u2019 Administration of H-2B Visa Program\n\nTo assess DHS\u2019s and DOL\u2019s efforts to meet employers\u2019 hiring needs and  protect U.S. workers, we reviewed relevant federal laws, regulations, and  documents such as agency procedures and visa application forms. We  interviewed DHS and DOL officials. We reviewed DOL data on the  number and outcomes of audits conducted of H-2B employers during  fiscal year 2018. We assessed the reliability of these data by interviewing  DOL officials, and found them to be sufficiently reliable for our reporting  purpose, which was to present a summary of the agency\u2019s H-2B audit  program in fiscal year 2018. We reviewed 25 letters that DOL sent to H- 2B employers as part of audits completed from September 14, 2017,  through April 5, 2019, including eight requests for supplemental  information, six warning letters, six assisted recruitment letters, and five  debarment letters. The samples of requests for supplemental information,  warning letters, and assisted recruitment letters were non-generalizable  samples of all letters in these categories. They were judgmentally  selected from a randomly generated sample of all letters in the universe  to achieve diversity in terms of employer industry and location, among  other things. The debarment letters we reviewed represented the full  universe of such letters. In our review of the letters, one analyst identified  issues discussed in each letter and placed them in broader categories,  another analyst verified the issues and categories, and any differences in  interpretation were resolved. We analyzed DOL data on how prevailing  wage levels were determined for H-2B employers for fiscal years 2014 to  2018. We assessed the reliability of these data through review of related  documentation and interviews with DOL officials, and found the data to be  sufficiently reliable for our reporting purpose, which was to present the  trends in how prevailing wage was set among H-2B employers over a 5- year period. After identifying DHS\u2019s and DOL\u2019s actions through methods  such as reviewing documents and interviewing agency officials, we  assessed them according to standards for internal control in the federal  government related to identifying and responding to change and risk.\n\nAppendix II: Additional Analyses\n\nIn our analysis of Department of Homeland Security and Department of  Labor data, we found that counties with H-2B employers have lower  unemployment rates and higher average weekly wages than counties  without H-2B employers. We extended this analysis to determine whether  the results are robust to changes in labor force, employers\u2019 usage of H-2B  workers, and industries.\nTo see if our results were being driven by larger population counties, we  separated counties into quartiles by labor force and compared similar- sized counties. Looking at the top quartile, we found that, similar to our  main results, counties with H-2B employers had about 0.3 percentage  point lower unemployment rate and about $120 higher average weekly  wage than counties without H-2B employers. For the bottom quartile,  counties with H-2B employers had about a 0.1 percentage point lower  unemployment rate than counties without H-2B employers, but about $34  lower average weekly wages, which we discuss further in the following  paragraph.\nWe next split the counties with H-2B employers by their usage of H-2B  employees to analyze the connection between intensity of employer  usage and strong labor markets. The first way we measure usage of H-2B  employees is by the number of approved H-2B petitions within the county.  When we compare the top quartile of counties by number of approved H- 2B petitions to all counties without H-2B employers, we found that they  have about 0.5 percentage point lower unemployment rates and about  $187 higher average weekly wages. We also used the ratio of approved  H-2B visas to the county\u2019s labor force population to capture the counties\u2019  reliance on H-2B visas. When we compare the top quartile of counties by  proportion of approved H-2B visas to labor force, we find that their  unemployment rate is about 0.1 percentage point lower and average  weekly wages about $4 higher than counties without H-2B employers.  The small difference in wages for counties with a high ratio of H-2B  workers to labor force, and the previous finding that counties with H-2B  employers in the bottom quartile by labor force have lower average  weekly wages, suggests that the difference in wages in our main finding  may be partially driven by the counties with larger labor forces.\nIn our final extension of our analysis, we isolated four selected industries  to compare whether the counties with H-2B employers within the  specified industry have higher average weekly wages in that industry than  counties without. In this analysis of fiscal year 2018, we found that for  each industry (construction, seafood processing, hospitality, and  landscaping) the counties with H-2B employers within the industry have  higher average weekly wages than counties without H-2B employers in  the industry. These higher average weekly wages for counties with H-2B  employers in the industry ranged from about $96 higher for seafood  processing to about $238 higher for landscaping.\n\nAppendix III: Comments from the Department of Homeland Security\n\nAppendix IV: Comments from the Department of Labor\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nCindy Brown Barnes (202) 512-7215 or brownbarnesc@gao.gov  In addition to the individual named above, Nagla\u2019a El-Hodiri, Assistant  Director; Lorin Obler, Analyst in Charge; Genesis Galo, Michael Naretta,  Alejandro Oliva, and Sonya Zhu made key contributions to this report.  Also contributing to this report were Amy Anderson, Susan Aschoff,  James Bennett, Kathryn Bernet, Colleen Candrl, Sherwin Chapman, Pin- En Annie Chou, Pamela Davidson, Rebecca Gambler, Joel Green, Kristy  Kennedy, Grant Mallie, Sheila R. McCoy, John Mingus, James Rebbe,  Oliver Richard, Margie Shields, Ardith Spence, Almeta Spencer, Kathleen  van Gelder, and Jessica Yutzy.\n\nRelated GAO Products\n\nNonimmigrant Visas: Outcomes of Applications and Changes in  Response to 2017 Executive Actions. GAO-18-608. Washington, D.C.:  August 7, 2018.\nH-2A and H-2B Visa Programs: Increased Protections Needed for  Foreign Workers. GAO-15-154. Washington, D.C.: March 6, 2015.\nH-2A Visa Program: Modernization and Improved Guidance Could  Reduce Employer Application Burden. GAO-12-706. Washington, D.C.:  September 12, 2012.\nH-1B Visa Program: Reforms Are Needed to Minimize the Risks and  Costs of Current Program. GAO-11-26. Washington, D.C.: January 14,  2011.\nH-2B Visa Program: Closed Civil and Criminal Cases Illustrate Instances  of H-2B Workers Being Targets of Fraud and Abuse. GAO-10-1053.  Washington, D.C.: September 30, 2010.\nH-1B Visa Program: Labor Could Improve Its Oversight and Increase  Information Sharing with Homeland Security. GAO-06-720. Washington,  D.C.: June 22, 2006.","output":null}
{"id":"gao_GAO-20-324","pid":"gao_GAO-20-324_0","input":"\tBackground\n\n\t\tU.S. Sanctions\n\nSanctions are imposed pursuant to statute, executive order, or other  authorities. For example, the President may use authorities granted in the  International Emergency Economic Powers Act (IEEPA) and the National  Emergencies Act (NEA) to issue executive orders authorizing sanctions.  The United Nations Participation Act of 1945 provides the basis for the  U.S.\u2019s implementation of United Nations Security Council sanctions  mandated under Article 41 of the United Nations Charter. Sanctions  provide a range of tools that Congress and the President may use to  attempt to alter or deter the behavior of a foreign government, an  individual, or an entity in furtherance of U.S. national security or foreign  policy objectives. For example, sanctions may be imposed in response to  human rights abuses, weapons proliferation, or occupation of a foreign  country. Sanctions may include actions such as limiting trade; blocking  assets and interests in assets subject to U.S. jurisdiction; limiting access  to the U.S. financial system, including limiting or prohibiting transactions  involving U.S. individuals and businesses; restricting private and  government loans, investments, insurance, and underwriting; and denying  foreign assistance and government procurement contracts.\nThe United States imposes comprehensive sanctions and targeted  sanctions.\nComprehensive sanctions generally include broad-based trade  restrictions and prohibit commercial activity with an entire country.  Examples of comprehensive sanctions include U.S. sanctions against  Iran and Cuba.\nTargeted sanctions restrict transactions of, and with, specific persons or  entities. For example, the U.S. sanctions program related to Somalia  targets persons engaging in acts threatening the peace, security, or  stability of that country.\nSectoral sanctions are a form of targeted sanctions directed at a  specified sector, or sectors, of a target\u2019s economy. For instance,  Executive Order 13662 authorized sanctions targeting persons  operating in certain sectors of the Russian economy as might later be  determined by the Secretary of the Treasury in consultation with the  Secretary of State, such as the financial services, energy, mining, and  defense and related materiel sectors.\nSupplementary sanctions, also known as secondary sanctions, target  third-party actors doing business with, supporting, or facilitating  targeted regimes, persons, and organizations. For example, in  February 2017, Treasury imposed sanctions against 13 individuals  and 12 entities for their involvement in, or support for, Iran\u2019s ballistic  missile program as well as for acting for or on behalf of, or providing  support to, Iran\u2019s Islamic Revolutionary Guard Corps\u2013Qods Force.\nOFAC\u2019s implementation of sanctions includes publishing the Specially  Designated Nationals and Blocked Persons List of individuals, groups,  and entities whose assets in the United States are blocked and with  whom U.S. persons are prohibited from dealing. The addition of an  individual, group, or entity to this list is referred to as a sanctions  designation.\nAgencies may issue licenses to authorize transactions with sanctioned  entities that otherwise would be prohibited by existing sanctions.  According to OFAC, many of its licensing determinations are guided by  U.S. foreign policy and national security concerns. In making these  determinations, OFAC must often coordinate with State and other  government agencies, such as Commerce. OFAC issues two types of  licenses: (1) general licenses, which authorize a particular type of  transaction for a class of persons without the need to apply for a specific  license, and (2) specific licenses, which OFAC issues to a particular  person or entity to authorize a particular transaction. Commerce\u2019s Bureau  of Industry and Security (BIS) issues two forms of authorization: (1) an  individual validated license requiring an application and (2) a license  exception allowing an export or reexport, under stated conditions, for  which no application is required.\n\n\t\tAgency Roles and Selected Mandated Resource and Activity Reporting\n\nLaws and executive orders establishing sanctions may designate agency  implementation roles. Some sanctions-related executive orders designate  both primary and consultative agencies. For example, Executive Order  13818 establishes sanctions that include blocking the U.S. assets of  persons whom the Secretary of the Treasury, in consultation with the  Secretary of State and the Attorney General, determines to be  responsible for, or complicit in, serious human rights abuse, among other  measures. Executive orders may also broadly direct U.S. government  agencies to take appropriate measures within their authorities to perform  specified functions and duties. When roles are not assigned by the law or  executive order authorizing the sanctions, agency roles are typically  assigned through an interagency process.\nThe IEEPA and the NEA mandate that the President report to Congress  when using authorities granted under those laws. The IEEPA requires  the President to report, among other things, actions taken in the exercise  of IEEPA authorities to Congress at least once during each succeeding 6- month period following the administration\u2019s initial reporting of the  authorities\u2019 use. The NEA requires the President to transmit a report to  Congress within 90 days after the end of each 6-month period following a  declaration of a national emergency, providing the total U.S. government  expenditures that are directly attributable to the exercise of powers and  authorities conferred by declaration of the emergency. The President  has delegated responsibility for many of these reports to the Secretary of  the Treasury. However, the President delegated responsibility for the  report on the National Emergency With Respect to Proliferation of  Weapons of Mass Destruction, Executive Order 12938, to the Secretary  of State.\nThe Foreign Narcotics Kingpin Designation Act (Kingpin Act), enacted in  1999, mandates that the President prepare classified reports by July 1 of  each year that include the number of new Kingpin Act designations and  the personnel and resources directed toward the imposition of Kingpin  sanctions.\nThe Trade Sanctions Reform and Export Enhancement Act of 2000  (TSRA) mandates that the applicable department or agency submit  quarterly and biennial reports on activity under the act regarding the  department or agency\u2019s determinations and processing of license  applications for export of agricultural commodities, medicines, and  medical devices to specified entities and destinations, including state  sponsors of terrorism. OFAC and Commerce\u2019s BIS submit reports in  response to the TSRA.\n\n\t\tStrategic Workforce Planning\n\nTo implement sanctions, agencies need to identify the human resources  needed for the work. Strategic workforce planning focuses on developing  long-term strategies for acquiring, developing, and retaining an  organization\u2019s total workforce to meet the needs of the future. Agency  approaches to such planning can vary with each agency\u2019s particular  needs and mission. We have previously identified five principles that a  strategic workforce planning process should address:  1)  Involve top management, employees, and other stakeholders.  2)  Determine the critical skills and competencies that will be needed.  3)  Develop strategies that are tailored to address gaps in number,  deployment, and alignment of human capital approaches.  4)  Build the capability needed to address administrative, educational,  and other requirements important to support workforce strategies.  5)  Monitor and evaluate progress toward human capital goals and  the contribution that human capital results have made toward  achieving programmatic goals.\n\n\tTreasury, State, and Commerce Have Units with Roles in Sanctions Implementation\n\nTreasury, State and Commerce have units dedicated primarily to  sanctions implementation and also have units with roles in sanctions  implementation in addition to other responsibilities. Other agencies,  including the Departments of Defense, Energy, Homeland Security, and  Justice and federal financial regulatory agencies, play specific roles in  sanctions implementation based on their expertise or broader duties.\n\n\t\tAgencies May Have One or More Roles in Sanctions Implementation\n\nAgencies\u2019 roles in sanctions implementation may be assigned to them in  legislation, by executive order, in presidential memorandums, or through  the interagency process. Table 1 shows the roles that agencies may have  in sanctions implementation and examples of agency actions associated  with each role.\n\n\t\tTreasury, State, and Commerce Have Units Dedicated Primarily to Sanctions Implementation\n\nTreasury, State, and Commerce each have units that focus primarily on  sanctions implementation and that act in all five of the roles we identified.\nTreasury. Treasury\u2019s OFAC, part of the department\u2019s Office of  Terrorism and Financial Intelligence (TFI), administers and enforces  economic sanctions based on U.S. foreign policy and national security  through consultation with the Secretary of State. OFAC acts under  presidential national emergency powers, as well as authority granted  by specific legislation, to impose controls on transactions and freeze  assets under U.S. jurisdiction. OFAC consists of four offices:\nThe Office of Sanctions Policy and Implementation leads OFAC\u2019s  design, implementation, and evaluation of sanctions programs and  develops OFAC\u2019s public guidance, licenses, and regulations.\nThe Office of Compliance and Enforcement works to promote  compliance with OFAC\u2019s sanctions programs and investigates  apparent violations.\nThe Office of Global Targeting works with other units within TFI,  other U.S. agencies, and foreign partners to identify and  investigate targets for sanctions designation.\nThe Office of Sanctions Support and Operations supports all  sanctions-related functions at OFAC, including human capital and  budgetary functions.\nState. State\u2019s Office of Economic Sanctions Policy and  Implementation (SPI)\u2014housed in the Bureau of Economic and  Business Affairs, Division for Counter Threat Finance and  Sanctions\u2014is responsible for providing foreign policy guidance for the  vast majority of sanctions programs and obtaining international  cooperation with U.S. agencies enforcing sanctions. According to SPI,  it acts as State\u2019s central coordinating office for 25 of the 30 sanctions  programs that were active as of April 2019. SPI also implements  sanctions under authorities delegated to the Secretary of State,  including sanctions on Iran and Syria.\nCommerce. In Commerce\u2019s BIS, the Foreign Policy Division (FPD) of  the Office of Nonproliferation and Treaty Compliance is one of the  components that implements sanctions through U.S. export controls.  The division is responsible for developing, analyzing, evaluating, and  coordinating export controls related to sanctions policy.\nIn addition to having units that primarily focus on sanctions, Treasury,  State, and Commerce have units that carry out roles in sanctions  implementation in addition to other responsibilities.\nTreasury. Treasury has several other units that support sanctions  implementation. For example, in TFI, the Office of Intelligence and  Analysis examines classified and unclassified reporting, financial  transactions, and open-source databases for evidence of sanctions  violations. The Financial Crimes Enforcement Network monitors and  analyzes financial information on threats, producing intelligence  reports that may identify targets for designation and sanctions  violators. In addition to TFI units, the Internal Revenue Service, the  Office of International Affairs, and the Office of the General Counsel  also have roles in sanctions implementation. For example, the Office  of International Affairs helps to assess the likely impact of sanctions  and conducts outreach to foreign counterparts regarding sanctions  implementation.\nState. Units at State have sanctions implementation roles related to  their expertise. Some of these units take actions in all five of the  sanctions roles shown in table 1 and are responsible for specific  sanctions authorities within State, according to State officials. For  example, the Bureau of International Narcotics and Law Enforcement  Affairs is responsible for coordinating and communicating State\u2019s  position on existing or proposed new sanctions in relation to the  Kingpin Act and transnational criminal organizations. According to  State officials, the Bureau of Counterterrorism and Countering Violent  Extremism leads State in designating Specially Designated Global  Terrorists under Executive Order 13224 and Foreign Terrorist  Organizations under Section 219 of the Immigration and Nationality  Act. The Bureau of Economic and Business Affairs\u2019 Office of Threat  Finance Countermeasures has a primary role in implementing  sanctions under Executive Order 13224, which targets terrorist  financiers and others who provide material support to terrorists.\nCommerce. Commerce has several other units that support sanctions  implementation. For example, the Office of Export Enforcement  provides input regarding sanctions proposals and feedback regarding  any adverse impact to existing investigations. The Office of National  Security and Technology Transfer Controls implements primarily  sectoral sanctions by providing technical analyses of items and  recommendations during sanctions development. The Office of  Exporter Services provides a range of resources, including electronic  resources and educational seminars, which provide exporters with  guidance on export compliance processes and procedures.\nTable 2 provides an overview of the various roles that Treasury, State,  and Commerce units play in sanctions implementation. See appendix II  for additional details.\n\n\t\tOther Agencies Have Roles in Sanctions Implementation in Addition to Other Responsibilities\n\nSeveral other agencies have more-specific roles in sanctions  implementation, with the extent of their involvement dependent largely on  their area of expertise. These agencies carry out their sanctions-related  roles in addition to other responsibilities.\nDepartment of Defense. The Office of the Under Secretary of  Defense for Policy contributes to sanctions implementation,  participating in all roles except targeting. The office coordinates  department units\u2019 reviews of sanctions proposals, provides the  department\u2019s recommendation to interagency partners during  sanctions development, and represents the department during  interagency discussions regarding sanctions enforcement.\nDepartment of Energy. The National Nuclear Security Administration  supports sanctions by providing technical analyses of weapons of  mass destruction and conventional arms transactions that may be  subject to sanctions and by providing recommendations during  sanctions development. The National Nuclear Security Administration  also reviews export licenses for munitions and items with both military  and commercial applications, known as dual-use items, which may  include parties subject to sanctions.\nDepartment of Homeland Security. Units of the Department of  Homeland Security also have varied roles in sanctions  implementation. For example, the Human Rights Violators and War  Crimes Unit in U.S. Immigration and Customs Enforcement\u2019s  Homeland Security Investigations includes a Global Magnitsky  investigative support team, which targets serious human rights  abusers and corrupt foreign officials through OFAC sanctions and visa  denials. Units in U.S. Customs and Border Protection maintain a list  of sanctioned countries and couriers for which shipment applications  are rejected and use an automated targeting system to identify high- risk shipments and coordinate appropriate enforcement actions.\nDepartment of Justice. Multiple Department of Justice units  contribute to sanctions implementation, participating in all roles except  licensing. For example, the National Security Division works with law  enforcement partners to facilitate the investigation and prosecution of  sanctions violators.\nFinancial regulatory agencies. Financial regulatory agencies with  roles in sanctions implementation may review the compliance  programs of the institutions they oversee with respect to OFAC  requirements. Some of these agencies can also enforce penalties  for significant deficiencies in institutions\u2019 OFAC compliance programs.  Financial regulatory agencies generally examine institutions\u2019  compliance with OFAC policies concurrently with examinations for  compliance with the Bank Secrecy Act (BSA) and anti\u2013money  laundering (AML) statutes.\nTable 3 provides an overview of the various roles of these agencies in  sanctions implementation. Also see appendix II for additional details of  agency units\u2019 sanctions implementation roles. See appendix III for  information about agency units\u2019 number of personnel with sanctions  implementation responsibilities.\n\n\tSanctions Implementation Units at Treasury, State, and Commerce Have Received Steady or Increasing Resources but Faced Challenges in Filling Some Positions\n\nAll three of the sanctions implementation units we reviewed have  generally received steady or increasing resources since fiscal year 2015  but have faced challenges in filling some positions. OFAC has received  increasing inflation-adjusted budgetary and authorized human resources  each fiscal year since 2015 but has consistently experienced a gap  between the number of authorized and actual full-time equivalents  (FTEs). OFAC officials attributed the gap to challenges in hiring due to  competition from other agencies and the private sector and the time  needed for new hires to obtain security clearances. State SPI has also  generally received additional authorized inflation-adjusted budgetary and  human resources but has not been fully staffed in recent years.  Commerce\u2019s FPD has received relatively steady inflation-adjusted  budgetary resources but, according to Commerce officials, lacks funding  to fill one of its 10 positions.\n\n\t\tTreasury\u2019s OFAC Received Increasing Resources in Fiscal Years 2015-2019 but Faces Hiring Challenges\n\nOFAC received increasing budgetary resources in each of the last 5 fiscal  years. In inflation-adjusted terms, OFAC\u2019s budgetary resources increased  by a total of 58 percent, from approximately $29.7 million in fiscal year  2014 to approximately $46.8 million in fiscal year 2019. (See fig. 1.)\nOFAC has also received authority to hire additional FTEs since fiscal year  2014, yet a number of the additional authorized positions have remained  unfilled. According to OFAC officials, OFAC allocated most of its  additional authorized FTEs to the Office of Global Targeting, which is  responsible for conducting investigations of sanctions targets. At the start  of fiscal year 2014, 10 of OFAC\u2019s 173 authorized positions (6 percent)  were unfilled. By the start of fiscal year 2020, 55 of OFAC\u2019s 259  authorized positions (21 percent) were unfilled. In the intervening period,  the gap between authorized and actual FTEs at the start of each fiscal  year ranged from 34 to 58 positions (14 to 26 percent of authorized  FTEs). (See fig. 2.)\nDespite the increase in authorized FTEs, OFAC has faced challenges in  filling the additional positions. At the start of fiscal year 2020, 21 percent  of OFAC\u2019s authorized sanctions investigator positions (13 of 62) were not  filled. Also unfilled were nine of 25 OFAC sanctions licensing officer  positions, three of 18 enforcement officer positions, two of 15 sanctions  policy analyst positions, and six of 14 sanctions compliance officer  positions. Officials of both OFAC and Treasury\u2019s Office of the Assistant  Secretary for Management cited three primary challenges in hiring  candidates with the necessary qualifications:\nCompetition with other agencies, including those in the intelligence community, which can use direct-hire authority to expedite the hiring process\nCompetition with the private sector, which offers higher salaries The time required for security clearance processing, which delays hiring for positions, such as sanctions investigators, who need a special sensitive investigation that must be adjudicated at the top secret\/sensitive compartmented information levelTreasury does not currently have direct-hire authority for OFAC but can  use other authorities to address hiring challenges. OFAC can use TFI\u2019s  agency-specific schedule A authority, which excepts up to 100 positions  at TFI from competitive selection requirements; schedule A authority is  not specific to OFAC. In August 2019, officials of Treasury\u2019s Office of the  Assistant Secretary for Management stated that the office was not  seeking direct-hire authority through the Office of Personnel  Management. Additionally, the officials noted that Treasury has used  flexibilities such as veterans\u2019 hiring preferences to fill positions. However,  in December 2019, Treasury officials stated that they had determined to  seek direct-hire authority and would support the passage of legislation  providing such authority.\n\n\t\tState\u2019s Office of Economic Sanctions Policy and Implementation Received an Overall Increase in Resources in Fiscal Years 2014-2019, but More Than Half of Its Positions Are Vacant\n\nSPI received annual budgetary resource increases in fiscal years 2015  through 2018, before a slight decline in fiscal year 2019. In inflation- adjusted terms, SPI budgetary resources increased overall by 42 percent,  from $2.3 million in fiscal year 2014 to $3.2 million in fiscal year 2019.  (See fig. 3.)\nSPI has received authority to hire six additional FTEs for fiscal year 2020,  but more than half of its authorized positions were vacant at the start of  the year. SPI\u2019s authorized FTEs ranged from 13 to 16 in fiscal years  2014 to 2019 and increased to 21 FTEs for fiscal year 2020. At the start  of each fiscal year from 2014 to 2019, SPI had one to three fewer actual  FTEs than authorized. However, the increase in authorized FTEs for  fiscal year 2020 followed a decline in the number of filled positions during  fiscal year 2019, when SPI lost more than a third of its staff. As a result,  as of the beginning of fiscal year 2020, more than half of SPI\u2019s 21  authorized FTEs were unfilled. (See fig. 4.) According to SPI officials, the  departures during fiscal year 2019 were for the most part unscheduled  and resulted from staff promotions, moves to elsewhere in State, or  resignations to accept positions in other agencies or the private sector.  SPI officials added that a department-wide backlog in hiring constrained  SPI\u2019s ability to fill these gaps and that the office would have to pay for the  additional six FTEs without an increased budget. As of December 2019,  State was recruiting to fill some of these positions, according to SPI  officials. SPI expected one staff member to start in early January, had  extended an offer to another, and was advertising to fill four additional  positions.\nWhile SPI has generally received increased budgetary resources and  authorized FTEs in recent years, State discontinued the Office of the  Coordinator for Sanctions Policy, formerly housed in the Office of the  Secretary. The office was responsible for, among other things,  coordinating sanctions strategies, integrating sanctions into foreign policy  plans, and analyzing the effects of sanctions. According to data that State  provided, the office had an authorized staff of seven FTEs at the start of  each fiscal year from 2014 through 2018, with the exception of fiscal year  2016, when eight FTEs were authorized. State also reported that the  office had one to four unfilled positions at the start of each fiscal year  during this period.\n\n\t\tCommerce\u2019s FPD Has Received Relatively Constant Resources since Fiscal Year 2015\n\nFPD received an overall increase in budgetary resources from fiscal year  2014 to fiscal year 2019, but most of the increase occurred from fiscal  year 2014 to fiscal year 2015. Overall, FPD\u2019s budgetary resources  increased by 28 percent, adjusted for inflation, from fiscal year 2014 to  fiscal year 2019. However, after a 24 percent increase in fiscal year 2015,  resources remained steady through fiscal year 2019 at approximately  $1.4 million per year, adjusted for inflation. (See fig. 5.)\nFPD has had the same number of authorized FTEs since fiscal year  2014, maintaining an authorized level of 10 FTEs from fiscal year 2014 to  fiscal year 2020. FPD generally had one fewer actual FTE than  authorized as of the beginning of each fiscal year. (See fig. 6). At the  beginning of fiscal year 2020, according to Commerce officials, the  Foreign Policy Division lacked funding to advertise and hire for the vacant  position. According to Commerce officials, FPD receives a funding  amount for personnel and the funding they have received is sufficient for  nine FTEs.\n\n\tAgencies Assess Resource Needs through the Annual Budget Process and OFAC Has Begun Workforce Planning, but All Agencies Face Challenges in Determining Needs\n\nOfficials at sanctions-focused units at Treasury, State, and Commerce all  described their use of the annual budget process to assess their resource  needs, and Treasury and Commerce have undertaken broader planning  efforts. Treasury\u2019s OFAC has begun an internal workforce planning  process that, if implemented as described, would satisfy principles for  strategic workforce planning that we have previously identified. According  to State SPI officials, SPI assesses its resources in the annual budget  formulation process and has been able to add temporary positions in  response to workforce needs. Commerce BIS officials stated that they  shift resources in response to needs, and BIS has previously prepared a  budget strategy that included its office primarily responsible for sanctions  implementation. Treasury, State, and Commerce all face challenges in  measuring changes in their sanctions workload over time.\n\n\t\tTreasury OFAC Assesses Resources through Budget Development and Has an Additional Ongoing Workforce Planning Effort\n\nTreasury\u2019s OFAC reviews and requests resources as part of the annual  TFI budget development process, which considers OFAC\u2019s requests  along with those of other TFI components. According to OFAC officials,  OFAC submits its funding and resource needs to TFI for consideration.  The OFAC budget justification for TFI includes the number of positions  requested for all OFAC components as well as a description of each  request. According to OFAC, once TFI has considered all of its  component submissions, TFI submits its budget request to the Assistant  Secretary for Management, who considers it as part of Treasury\u2019s larger  budget request. OFAC also stated that it has also used quarterly  meetings and discussions as part of Treasury\u2019s quarterly performance  reviews to review resource needs and challenges.\nIn addition to undertaking reviews as part of the budget process, OFAC  launched a workforce planning effort in fiscal year 2019 and stated that it  would be led by OFAC\u2019s Office of Sanctions Support and Operations. As  part of this effort, the Office of Sanctions Support and Operations stated  that it plans to use Treasury\u2019s department-wide workforce planning model  and tools to gather information from OFAC\u2019s component offices as a  basis for, among other things, analyzing risks to OFAC\u2019s mission,  identifying resource gaps, and developing an action plan to address them.  OFAC further stated that it plans to use its ongoing workforce planning  model to assess the effectiveness of its current hiring authorities. In  October 2019, OFAC officials stated that they expected to submit  preliminary recommendations for each OFAC component to OFAC  leadership by the end of December 2019. However, OFAC officials later  stated that, because of the departure of the Assistant Director of  Management Programs\u2014the OFAC senior leader responsible for  implementing the workforce planning initiative\u2014on October 1, 2019, the  planned date to submit preliminary recommendations to OFAC leadership  was rescheduled to March 31, 2020.\nWe analyzed the model and tools that OFAC is using for its ongoing  resource analysis, to determine whether the process they set out would  address five principles for strategic workforce planning that we had  previously identified. We concluded that, if it were implemented as  OFAC documents describe, the process would satisfy these principles.  For example, the process calls for involving management and employees  during its development and implementation and calls on managers to  consider critical skills and competencies in their workforce analysis.\n\n\t\tState SPI Assesses Workforce Needs through the Budget Process and Has Filled Positions on a Temporary Basis\n\nState SPI requests resources as part of its annual budget process. State  does not request a separate budget for SPI but instead combines SPI  with the Office of Threat Finance Countermeasures (TFC) in its annual  budget request. According to SPI officials, State sends the combined  request for TFC and SPI to the Office of Management and Budget (OMB)  every year, although the resources obtained may not reflect SPI\u2019s original  request. For example, SPI officials stated that SPI requested a greater  increase in authorized positions for fiscal year 2020 than it ultimately  received.\nSPI officials described ways that they assess staff workloads and seek to  add or adjust resources on a continual basis. According to SPI officials,  they have worked to fill positions on a temporary basis in response to  rising needs. For example, SPI was authorized to add three temporary  positions to cover the additional workload from Iran and Venezuela  sanctions in early 2019. According to SPI officials, in justifying the request  for additional temporary positions, SPI noted a significant increase in  officer workload during the reimposition of sanctions against Iran, as well  as maximum-pressure campaigns against Iran and Venezuela and  increased activity related to existing and new sanctions authorities. As of  October 2019, State planned to convert the three positions to permanent  positions. Similarly, SPI officials stated that SPI justified its request for an  increase in positions for fiscal year 2020 by noting an increasing use of  sanctions as part of U.S. maximum economic pressure campaigns across  multiple regions.\nAgency approaches to workforce planning can vary depending on each  agency\u2019s particular needs and mission. For subunits such as SPI, using  the budget process, identifying changing priorities, and responding  flexibly to those changes can address workforce planning needs. SPI  officials further stated that SPI expects to review its workforce needs and  structure if new executive orders delegate additional sanctions authorities  to the Secretary of State.\n\n\t\tCommerce Assesses Needs through the Budget Process and Shifts Personnel in Response to Demands\n\nCommerce BIS units such as FPD assess and communicate their  resource needs as part of the annual budget formulation process,  according to BIS officials. BIS officials described budget formulation at  Commerce as a \u201cbottom-up\u201d process, with BIS units providing information  that is folded into Commerce\u2019s overall budget. During this process, BIS  budget office staff meet with program staff, review budget guidance  provided by OMB as well as BIS\u2019s own guidance, and ask program  officials to identify any new initiatives or any new requirements for  resources. According to BIS officials, each program office prepares a  summary description of the request and needed resources for approval  by the Assistant and Deputy Assistant Secretary for that office, the  Deputy Under Secretary, and ultimately the BIS Under Secretary.  According to BIS officials, BIS\u2019s budget office then requests additional  information about the approved activities. BIS\u2019s Budget Office in turn  submits the materials to the Commerce Departmental Budget Officer,  who takes into account any known OMB and congressional viewpoints  and department priorities. According to BIS officials, because of  competing priorities, BIS funding priorities are not always carried over into  the department\u2019s overall request. BIS officials noted that, absent  additional resources, they have some flexibility to shift personnel within  the bureau to address periods of increased sanctions-related demand.  For smaller units such as FPD, using the budget process, identifying  changing priorities, and responding flexibly to those changes can address  their workforce planning needs.\nCommerce previously prepared a multiyear budget strategy that  assessed workforce needs throughout BIS, including FPD. In 2016, a  contractor that Commerce hired prepared a Five-Year Budget Strategy  Plan, which included workforce planning and projections. As part of the  assessment, the plan analyzed BIS license volume and estimated the  amount of time that staff in the BIS Export Administration\u2019s Office of  Nonproliferation and Treaty Compliance (which includes FPD) spent on  particular tasks, such as conducting license application reviews, making  license determinations, and developing regulations related to sanctioned  countries. The plan projected future BIS license volume, external factors  that would affect BIS workload, and the future FTEs that BIS would need  to perform its mission. The plan examined the workload projection and  the effect of attrition and concluded that FPD would need 0.5 additional  FTEs by 2020 and 1.25 additional FTEs by 2022. BIS officials stated that  they initially used the budget strategy plan to help with budgeting.  However, according to the officials, the plan and its assumptions quickly  became obsolete and they did not use it in subsequent years. In addition,  BIS officials stated that the plan did not recognize BIS\u2019s ability to shift  resources or request appropriations as needed.\n\n\t\tAgencies Face Challenges in Measuring Workload to Assess Resource Needs\n\nTreasury, State, and Commerce units that focus primarily on sanctions  implementation have information that can measure changes in agency  workload over time; however, agency officials cited challenges in using  this information as accurate measures of workload for the purpose of  informing resource needs. For example, counting the number of individual  actions taken to implement sanctions (e.g., designations, licenses, or the  imposition of a penalty) does not capture the actions\u2019 varying complexity  or the time spent on developing potential actions that are ultimately not  taken. Agency officials noted that, in general, the drivers of their  workloads are global events and U.S. foreign policy priorities that may  lead to more or less sanctions activity. Table 4 shows (1) selected  information that can be used to measure changes in agency workload  over time and (2) the potential weaknesses of these measures.\n\n\tAgencies Provide Information on Sanctions Activities and Expenses in Selected Mandated Reports\n\nOFAC and State each prepare and submit reports in response to the  requirements of the IEEPA and the NEA. Both OFAC and State report  sanctions implementation actions in response to the requirements of the  IEEPA. OFAC\u2019s NEA-mandated reports generally include information on  expenditures reported by Treasury and State and by any other agencies  identified in the relevant executive order. However, according to State\u2019s  most recent NEA reports, no specific State expenditures were directly  attributable to the exercise of authorities conferred by the declaration of a  national emergency under the NEA during the reporting period. In  previous reviews, we and Treasury\u2019s Office of Inspector General have  found weaknesses in the consistency and timeliness of OFAC reports  mandated by the Kingpin Act and the TSRA, respectively.\n\n\t\tOFAC\u2019s Mandated NEA Reports Include Expenses for Agencies with Roles in Sanctions Implementation, while State\u2019s Have Reported No Expenditures\n\n\t\t\tIEEPA Reporting on Sanctions Activities\n\nBoth OFAC and State include information on actions taken to implement  sanctions programs in response to the requirements of the IEEPA.  OFAC\u2019s reports on sanctions programs under the IEEPA include data on  the number of designations and the type of entity designated, the number  of licensing actions, and the number and value of blocked transactions for  sanctions programs authorized by the IEEPA. State\u2019s IEEPA-mandated  report for a weapons of mass destruction sanctions program (Executive  Order 12938), prepared by State\u2019s Bureau of International Security and  Nonproliferation (ISN), summarizes the actions State has taken to  address nonproliferation through bilateral and multilateral channels,  including actions taken against Russia, North Korea, Syria, and the  reimposition of nuclear-related sanctions on entities in Iran. Both OFAC  and State included the reports responding to IEEPA requirements as part  of the same document submitted in response to the NEA report  requirements.\n\n\t\t\tNEA Reporting on Sanctions Expenditures\n\nOFAC\u2019s reports on sanctions programs under the NEA include a  summary total of expenditures reported by various agencies to implement  those programs, as well as a listing of the agencies whose expenditures  are included in the reports. The reports state that the expenditures  included are predominantly personnel wage and salary costs. OFAC  contacts multiple agencies to compile estimates of total expenditures for  its NEA reports. According to OFAC officials, OFAC contacts an agency  about its expenditures if the relevant executive orders have delegated  sanctions implementation authority to the agency or tasked it with certain  duties. Using a standardized request message, OFAC asks such  agencies to estimate their expenditures for the national emergency by, for  example, estimating the hours spent by staff members on activities  related to the emergency and multiplying that number by appropriate  hourly compensation rates. OFAC stated that it always asks State to  provide estimated expenditure information and contacts other agencies to  seek their expenditures on a program-by-program basis.\nOFAC\u2019s NEA reports include Treasury and other agencies. All 25 of the  NEA reports from mid- to late 2018 that we reviewed included Treasury  expenditures, which were in many cases limited to OFAC and the  Treasury Office of General Counsel. All but one report included State  expenditures. Three reports included Commerce expenditures, five  included Department of Homeland Security expenditures, and 12 included  Department of Justice expenditures. While the reports did not include  other agencies\u2019 expenditures, some of the reports explicitly acknowledged  that they did not reflect certain operating costs incurred by the intelligence  and law enforcement communities.\nState ISN\u2019s May 2019 NEA-mandated report for Executive Order 12938  stated that there were no specific expenditures directly attributable to the  exercise of authorities conferred by the declaration of a national  emergency under the NEA during the 6-month reporting period. The prior  two reports also stated that there were no specific expenditures directly  attributable to the sanctions program. The reports included no other  information about the program expenditures.\nIn response to our requests, State officials provided additional information  about the NEA reporting of expenditures. According to the officials, State  reported no expenditures for implementation activities for Executive Order  12938 because those activities have been subsumed into expenditures  for normal, daily work\u2014similar to overhead expenses. Expenditures for  the implementation activities are mixed with, and indivisible from, the  ongoing programming activities of the relevant offices and agencies.  State officials indicated that State would report an amount other than zero  if funds were reprogrammed, additional staff were required, or staff  engaged in activities in addition to daily, normal work to implement the  executive order. State officials also told us that they consulted State\u2019s  Bureau of Arms Control, Verification and Compliance, regional bureaus,  and offices in the Departments of Commerce, Defense, and Energy in  preparing the report.\nHowever, State\u2019s reports have not included any of these additional  statements about the information that State considered in concluding  there were no specific expenditures attributable to the sanctions program.  Standards for Internal Control in the Federal Government states 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. Because  State\u2019s reports do not include the additional information that State  considered, Congress lacks complete information regarding sanctions  implementation expenditures.\n\n\t\tPrior Studies Have Noted Limitations in Other Required OFAC Sanctions Reporting\n\n\t\t\tKingpin Act Reports Do Not Provide Consistent Expenditure Data\n\nWe have previously found that agencies do not report expenditures in  response to OFAC\u2019s Kingpin Act data requests in a consistent fashion.  The Kingpin Act mandates that the President prepare a classified report  to the Permanent Select Committee on Intelligence of the House of  Representatives and the Select Committee on Intelligence of the Senate  by July 1 of each year that, among other things, includes the status of  sanctions imposed under the Kingpin Act and the personnel and  resources directed to the imposition of Kingpin sanctions. OFAC  compiles and submits these reports. OFAC\u2019s Kingpin reports include  previous year and cumulative data on the number of asset-blocking  actions and Kingpin designations. The reports also include Treasury,  State, DOD, and Justice expenditures, which the reports indicate are  mostly personnel salary costs. However, we recently found that the  agencies did not use consistent methods, across agencies and time, in  providing their expenditures to OFAC for Kingpin Act program activities.  We recommended that the Secretary of the Treasury (1) ensure that  OFAC provide its partner agencies more specific guidance regarding  Kingpin Act\u2013related expenditure data to improve the consistency of data  submitted by these agencies and (2) disclose information about  limitations in the consistency and reliability of the agency expenditure  data in its annual reports to Congress.\n\n\t\t\tTreasury\u2019s Inspector General Has Recommended OFAC Improve Timeliness of TSRA- Mandated Reports\n\nTreasury OFAC and Commerce BIS each submit reports to Congress  mandated by the TSRA. Treasury\u2019s Inspector General found that OFAC  had not submitted its reports in a timely fashion and recommended OFAC  take steps to improve the timeliness of its submissions.\nOFAC. OFAC\u2019s TSRA-mandated reports include information about its determinations regarding applications for licenses as well as the time it spent processing the applications. In April 2018, Treasury\u2019s Office of Inspector General found that OFAC had not issued these reports in a timely manner and recommended that OFAC provide guidance to ensure that future TSRA-mandated reports are timely. According to the Treasury Office of Inspector General, Treasury\u2019s actions in response\u2014bringing its submission of the TSRA-mandated reports up to date and revising its TSRA report procedures\u2014satisfied the intent of the office\u2019s recommendation, but the Inspector General would continue to follow up. However, OFAC\u2019s submission of the TSRA- mandated reports has continued to lag. OFAC released the TSRA- mandated reports for the second, third, and fourth quarters of fiscal year 2018 (i.e., January through September 2018) in November 2019; released the report for the first quarter of fiscal year 2019 in December 2019; and released the report for the second quarter of fiscal year 2019 in February 2020. OFAC\u2019s most recent biennial report, for October 2014 through September 2016, was issued in August 2019.\nBIS. BIS\u2019s TSRA-mandated reports include information about the licensing actions taken by BIS in relation to exports of agricultural commodities to Cuba, as well as processing times for those actions. BIS submitted its most recent report on January 17, 2020, covering the period from October 1 to December 31, 2019. BIS\u2019s most recent biennial report, for October 2016 through September 2018, was issued in November 2018.\n\n\tConclusion\n\nThe United States has increasingly relied on sanctions as a means to  achieve important foreign policy goals. Implementing these sanctions  involves multiple government agencies, some of which have multiple units  with roles in sanctions implementation. Key agencies that implement  sanctions have generally received steady or growing resources in recent  years, but Treasury and State have staffing gaps and face challenges in  securing the staff needed to fill their authorized positions. Treasury OFAC  has an ongoing effort to assess its workforce needs, and Treasury, State,  and Commerce all assess workforce needs through the budget process.\nThe IEEPA and NEA each include requirements for reports to Congress  that Congress can use to review the activities and expenditures that have  been used for implementing these sanctions. However, State\u2019s reports for  Executive Order 12938 have not explained the information that State  considered in reporting no expenditures. As a result, Congress does not  have complete information about the data that State considers in  calculating its sanctions implementation resources, which Congress could  use to inform its review of agency resource requests.\n\n\tRecommendation for Executive Action\n\nThe Secretary of State should direct the Assistant Secretary for  International Security and Nonproliferation to include additional  information about the expenditures it considers in its NEA-mandated  reporting for Executive Order 12938.\n\n\tAgency Comments\n\nWe provided a draft of this report to the Departments of Commerce,  Defense, Energy, Homeland Security, Justice, State, and the Treasury,  as well as the Commodity Futures Trading Commission, Federal Deposit  Insurance Corporation, Federal Reserve System, Internal Revenue  Service, National Credit Union Administration, Office of the Comptroller of  the Currency, and Securities and Exchange Commission for review and  comment. State provided official comments, which are reproduced in  appendix IV. State concurred with our recommendation and indicated that  it will provide additional clarity on its procedures in future NEA-mandated  reporting for Executive Order 12938. The Departments of Commerce,  Homeland Security, Justice, State, and the Treasury, as well as the  Internal Revenue Service, Office of the Comptroller of the Currency, and  Securities and Exchange Commission also provided technical comments,  which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees and to the Secretaries of Commerce, Defense, Energy,  Homeland Security, Justice, State, and the Treasury, as well as the  Chairman and Chief Executive of the Commodity Futures Trading  Commission, Chairman of the Federal Deposit Insurance Corporation,  Chair of the Board of Governors of the Federal Reserve System,  Commissioner of the Internal Revenue Service, Chairman of the National  Credit Union Administration, the Comptroller of the Currency, and the  Chairman of the Securities and Exchange Commission. In addition, the  report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nOur objectives were to examine (1) agencies\u2019 roles in sanctions  implementation, (2) the resources available to agency units that focus  primarily on sanctions implementation, (3) the extent to which agency  units that primarily focus on sanctions implementation have assessed  their resource needs, and (4) agencies\u2019 reporting to Congress on  sanctions implementation expenses and activities.\nTo examine agencies\u2019 roles in sanctions implementation, we identified  agencies involved in sanctions implementation by reviewing sanctions  authorities, including statutes and executive orders, and agency  documents and websites and interviewing agency officials. We used  these documents and interviews to summarize agencies\u2019 principal roles in  sanctions implementation, and we vetted this summary with the  Departments of the Treasury (Treasury), State (State), and Commerce  (Commerce), which we had identified through our initial interviews and  review of background materials as having units that focus primarily on  sanctions implementation. We then prepared a data collection instrument  to obtain information on sanctions implementation from agencies across  the government. Using this instrument, we requested information about  the specific actions these agencies performed for each of the roles we  identified, the number of staff they devoted to sanctions implementation,  and the estimated percentage of time these staff spent on sanctions  implementation in fiscal year 2019. We also requested information about  the sources and methods that agencies or agency units used to produce  these estimates. We pretested the instrument with the Office of the  Comptroller of the Currency and the Department of Homeland Security\u2019s  U.S. Customs and Border Protection and made changes based on the  results of the pretest before sending the instrument to all agencies or  agency units that we had identified as having a role in sanctions  implementation. To estimate in full-time equivalents (FTE) the staff  resources that agencies devoted to sanctions implementation, we  multiplied agencies\u2019 estimates of the number of staff devoted to sanctions  implementation by the agencies\u2019 estimates of the percentage of time  those staff spent on sanctions-related duties.\nTo examine the resources available to agency units that focus primarily  on sanctions implementation, we reviewed congressional budget  justifications and used a data collection instrument to obtain information  on (1) funding for units that focused primarily on sanctions  implementation at Treasury, State, and Commerce in fiscal years 2014  through 2019 and (2) personnel in these units as of the beginning of fiscal  years 2014 through 2020. We compared the information that agencies  provided with data in their congressional budget justifications and  determined that these data were sufficiently reliable for reporting on  trends in funding, authorized FTEs, and filled positions at these agency  units. We then examined challenges associated with hiring for, and filling,  positions at these agency units by interviewing agency officials and  reviewing agencies\u2019 responses to our written questions.\nTo examine the extent to which agency units that primarily focus on  sanctions implementation have assessed their resource needs, we  interviewed agency officials and reviewed their written responses to our  questions about their budget development processes and any relevant  workforce analyses and plans they had prepared. We reviewed  documentation of Treasury\u2019s ongoing workforce planning process against  criteria for strategic workforce planning that we had previously identified,  to assess whether the process, if completed according to plan, would  address principles of strategic workforce planning that we had previously  identified. We reviewed agency performance reports and annual reports  and interviewed agency officials representing Treasury, State, and  Commerce units that focus primarily on sanctions implementation, to  identify any additional information the agencies had that could measure  changes in agency workload over time. We then reviewed that  information and interviewed agency officials to assess how accurately the  measures reflected each agency\u2019s sanctions workload.\nTo examine agency reporting to Congress on sanctions implementation  expenses and activities, we reviewed background information on  sanctions implementation to identify mandated reports that included  information on sanctions expenses and activities. We confirmed our list of  the mandated reports that included sanctions expenses and activities with  Treasury\u2019s Office of Foreign Assets Control. We also reviewed sanctions  legislation such as the International Emergency Economic Powers Act,  the National Emergencies Act, the Foreign Narcotics Kingpin  Designation Act and the Trade Sanctions Reform and Export  Enhancement Act of 2000 to identify the specific requirements for those  mandated reports on agency expenses and activities. We then requested  from agency officials copies of the agencies\u2019 most recently submitted  mandated reports as of January 2019 and analyzed the agencies and  types of expenses the reports identified. We requested information from  agency officials and reviewed supporting documentation in order to  describe how agencies estimated their expenses for sanctions  implementation.\nWe conducted this performance audit from October 2018 to March 2020  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Agency Roles in Sanctions Implementation\n\nTo determine agencies\u2019 roles in sanctions implementation, we sent a data  collection instrument to all agency units that we had identified as having a  role in sanctions implementation, requesting information on the specific  actions the agency units perform for each role. Tables 5 through 12  summarize the information provided in the agency units\u2019 responses to the  data collection instrument.\n\nAppendix III: Agency Personnel with Sanctions Implementation Duties\n\nWe identified units of 13 agencies that have a role in sanctions  implementation, and we requested that each unit report the number of  personnel with sanctions-related duties and the estimated percentage of  time these personnel spent on such duties in fiscal year 2019. The  agency units used various methods to generate their estimates. Several  of the units were unable to estimate numbers of personnel with sanctions- related duties or the percentage of time these personnel spent on  sanctions-related duties. In many cases, agency units were unable to  disaggregate the relatively minimal resources devoted to sanctions  implementation from the resources for wider duties related to their  mission. The following provides information about each agency or agency  unit.\nDepartment of State (State). All nine units that State identified as having a role in sanctions implementation were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. The units used sources such as position descriptions and management surveys of staff to generate the estimates.\nDepartment of the Treasury (Treasury). Of the seven Treasury units from which we received information, five were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. Officials of the sixth unit stated that they could not provide such an estimate. The seventh unit, the Office of Intelligence and Analysis of the Office of Terrorism and Financial Intelligence (TFI), provided an estimate of the percentage of time its analytic staff devoted to sanctions but, because of sensitivity concerns, did not provide estimates of the number of personnel with sanctions implementation duties.\nDepartment of Commerce (Commerce). Of the six Commerce units from which we received information, five were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. However, Export Enforcement, a much larger BIS unit with over 170 employees, was not able to disaggregate the time its personnel spent on sanctions implementation from its broader export control enforcement activities. According to Export Enforcement officials, its investigative management system does not record whether its activities respond to potential violations of Office of Foreign Assets Control (OFAC) sanctions or violations of the Export Administration Regulations. Many of the cases that the office investigates include potential violations of both sanctions and the regulations.\nDepartment of Defense. The Department of Defense\u2019s Office of the Under Secretary of Defense for Policy, which includes the Defense Technology Security Administration, was able to estimate the number of personnel with sanctions implementation duties. To generate the estimates, the office used sources including position descriptions and management judgement of time spent by individual action officers on sanctions.\nDepartment of Energy. The Department of Energy\u2019s National Nuclear Security Administration relied on management judgment to estimate the number of personnel with sanctions duties.\nDepartment of Homeland Security. At the Department of Homeland Security, units in U.S. Immigration and Customs Enforcement were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019 by analyzing their investigative case management database. However, other department units were unable to provide such estimates. For example, Coast Guard officials reported that it would be difficult to estimate the number of personnel with sanctions implementation duties because these personnel are located throughout the United States and the world and do not record the time they spend on sanctions.\nDepartment of Justice. At the Department of Justice, the National Security Division and most sections of the Criminal Division were able to estimate the number of personnel with sanctions implementation duties in fiscal year 2019. However, other department units were unable to provide such estimates. For example, Drug Enforcement Administration (DEA) officials stated that it is difficult to quantify the time that DEA\u2019s special agents dedicate specifically to sanctions. According to agency officials, investigations and operations to secure evidence for indictments can also be used to support sanctions designations. As a result, according to DEA, the agents spend minimal time on sanctions implementation that they would not have spent on their work in any case. The Federal Bureau of Investigation noted the same justification for why the bureau was unable to provide estimates of the number of personnel with sanctions-related duties.\nFinancial regulatory agencies. The six financial regulatory agencies identified as having a role in sanctions implementation were unable to estimate numbers of personnel with sanctions implementation duties. Financial regulators were generally unable to disaggregate the time that personnel spent on OFAC compliance examinations because these are often performed concurrently with broader Bank Secrecy Act\/Anti\u2013Money Laundering examinations.\nSee table 13 for additional information about each agency unit.\n\nAppendix IV: Comments from the Department of State\n\nAppendix V: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgements\n\nIn addition to the contact named above, Drew Lindsey (Assistant  Director), Michael Simon (Analyst-in-Charge), Neil Doherty, Justin Fisher,  Reid Lowe, Grace Lui, Christina Pineda, Julia Robertson, and Paul Sturm  made key contributions to this report.","output":null}
{"id":"crs_R45999","pid":"crs_R45999_0","input":"\tIntroduction\n\nThe National Flood Insurance Program (NFIP) is the primary source of flood insurance coverage for residential properties in the United States, with more than five million policies in over 22,000 communities in 56 states and jurisdictions. The program collects about $4.6 billion in annual revenue from policyholders' premiums, fees and surcharges and provides over $1.3 trillion in coverage. The NFIP was established by the National Flood Insurance Act of 1968. The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods.\nThe Federal Emergency Management Agency (FEMA), which administers the NFIP, is planning to introduce Risk Rating 2.0 , which represents the biggest change to the way the NFIP calculates flood insurance premiums since its inception. The new rates are scheduled to go into effect on October 1, 2021, for all NFIP policies. \nThe price of insurance is generally based on three components: (1) the average annual loss, which is the expected loss per year; (2) the risk, which depends on the variability or uncertainty in loss estimates; and (3) expenses. These rating factors are used to calculate the premium that is sufficient to cover expected losses. The methodologies used to estimate these components, particularly the average annual loss and the risk, have changed over the decades that the NFIP has been in operation. This report will outline how the NFIP currently rates risks and sets premiums to cover losses, and how these are expected to change with the introduction of Risk Rating 2.0.\n\n\tThe NFIP's Current Rating Structure\n\n\t\tHow the NFIP Currently Determines Flood Insurance Premiums\n\nThe NFIP's current rating structure follows general insurance practices in effect at the time that the NFIP was established and has not fundamentally changed since the 1970s. The current NFIP rating structure uses several basic characteristics to classify properties based on flood risks. Structures are evaluated by their specific flood zone on a Flood Insurance Rate Map (FIRM), occupancy type, and the elevation of the structure relative to the Base Flood Elevation (BFE). In addition, the premium structure includes estimates for the expenses of the NFIP, including servicing of policies.\nFEMA uses a nationwide rating system that combines flood zones across many geographic areas. Individual policies do not necessarily reflect topographical features that affect flood risk. FEMA calculates expected losses for groups of structures that are similar in flood risk and key structural aspects, and assigns the same rate to all policies in a group. For example, two properties that are rated as the same NFIP risk (e.g., both are one-story, single-family dwellings with no basement, in the same flood zone, and elevated the same number of feet above the BFE ) , are charged the same rate per $100 of insurance, although they may be located in different states with differing flood histories or rest on different topography, such as a shallow floodplain as opposed to a steep river valley. In addition, two properties in the same flood zone are charged the same rate, regardless of their location within the zone.\n\n\t\t\tRisk Modeling\n\nFEMA's current efforts to model risk consider only the potential for coastal storm surge and fluvial (river) flooding. The NFIP expresses flood risk in terms of the expected economic loss due to inundation and the probability of that loss. Information about the flood hazard is determined through NFIP flood studies, the vulnerability of the structure being insured, and the performance of certain flood protection measures. This is incorporated into a flood risk assessment, which yields an estimate of the average annual loss. The insurance rate is determined from this loss after adjusting for expenses, deductibles, underinsurance (because not all structures are insured to their full value), and other factors.\nIn inland areas, NFIP flood studies focus on a river's watershed, the topography along the river and adjacent floodplain where structures are located, and the hydraulic characteristics of the river and floodplain. In coastal areas, the studies also assess the effects of storm surge and wave action. Models of relevant physical processes are coupled with statistical models of weather events to compute flood depths and velocities, and their likelihood of occurring. The model prediction results are summarized in reports and portrayed on FIRMs which show water surface elevations, floodplain boundaries, and flood zones. \nAn area of specific focus on the FIRM is the Special Flood Hazard Area (SFHA). Properties in an SFHA are subject to the mandatory purchase requirement, which requires owners of properties in the mapped SFHA, in a community that participates or has participated in the NFIP, to purchase flood insurance as a condition of receiving a federally backed mortgage. Within the SFHA, there are two broad flood zones, the A zone and the V zone. V zones are distinguished from A zones in that V zones are subject to wave action (i.e., coastal flooding).\n\n\t\t\tGeographical and Structural Variables\n\nTo calculate the premium, the current rating system considers the flood zone , the building occupancy type, the foundation type, the number of floors, the presence or not of a basement, whether the property is entitled to a subsidy, whether or not the property is a primary residence, prior claims, and the structure's elevation relative to the BFE. The amount of coverage and the deductible will also affect the premium. \n\n\t\t\tPremium Subsidies and Cross-Subsidies\n\nExcept for certain subsidies, flood insurance rates in the NFIP are directed to be \"based on consideration of the risk involved and accepted actuarial principles,\" meaning that the rate is reflective of the true flood risk to the property. FEMA determines full-risk rates by estimating the probability of a given level of flooding, damage estimates based on that level of flooding, and accepted actuarial principles. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer subsidies or cross-subsidies to certain classes of properties in order to achieve the program's objectives so that that owners of certain existing properties in flood zones are able to afford flood insurance. There are three main categories of properties which pay less than full risk-based rates:\n1. Those built or substantially improved before FEMA published the first post-1974 flood insurance rate map (FIRM); 2. Most properties newly mapped into a SFHA on or after April 1, 2015, if the applicant gets flood insurance coverage within a year of the mapping; and 3. Those that had flood insurance on the property that complied with a prior FIRM, but the property was remapped into a different rate class (a practice known as \"grandfathering\").\n\n\t\t\t\tPre-FIRM Subsidy\n\nPre-FIRM properties are those which were built or substantially improved before December 31, 1974, or before FEMA published the first FIRM for their community, whichever was later. By statute, premium rates charged on structures built before they were first mapped into a flood zone that have not been substantially improved, known as pre-FIRM structures, are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to pre-funding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, flood insurance could distribute some of the financial burden among those protected by flood insurance and the public. As of September 2018, approximately 13% of NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased.\n\n\t\t\t\tNewly Mapped Subsidy\n\nThe Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) established a new subsidy for properties that are newly mapped into a SFHA on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. Certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the Preferred Risk Policy (PRP) rate, but with a higher Federal Policy Fee, for the first 12 months following the map revision. After the first year, the newly mapped rate begins to transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As a result of the increases to the multiplier, premiums for newly-mapped policies are increasing 15% per year. As of September 2018, about 4% of NFIP policies receive a newly mapped subsidy. \n\n\t\t\t\tGrandfathering\n\nFEMA allows owners of properties that were built in compliance with the FIRM which was in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as grandfathering, and is separate and distinct from the pre-FIRM subsidy. A property can be grandfathered due to a change in its flood zone or a change in its BFE. \nZone grandfathering is the most common form of grandfathering. An example of zone grandfathering would be a property that is initially mapped into a flood zone and is built to the proper building code and standards, and is later remapped to a higher-risk flood zone. If the policyholder has maintained continuous insurance coverage under the NFIP, the owner of this property can pay the flood insurance premium based on the prior mapped zone. \nElevation grandfathering occurs when a new FIRM increases the BFE, but the property itself does not change flood zones. For example, a property that was initially mapped as being four feet above BFE but is now, under the revised FIRM, only one foot above BFE, would still be allowed to pay the premium associated with a property four feet above BFE.\nFEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because grandfathered properties are within a class of policies that are not subsidized for the class as a whole; instead, the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. As of September 2018, about 9% of NFIP policies were grandfathered.\n\n\t\tPremium, Fees, and Surcharges\n\nIn addition to the building and contents premium, NFIP policyholders pay a number of fees and surcharges mandated by law. \n\n\t\t\tPaid by All Policyholders\n\nThe Federal Policy Fee (FPF) was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. Since October 2017, the FPF has been $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies. A reserve fund assessment was authorized by Congress in the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) to establish and maintain a reserve fund to cover future claim and debt expenses, especially those from catastrophic disasters. Since April 2016, FEMA has charged every NFIP policy a reserve fund assessment equal to 15% of the premium. All NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the HFIAA surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. \n\n\t\t\tPaid by Most Policyholders\n\nThe NFIP requires most policyholders to purchase Increased Cost of Compliance (ICC) coverage . This is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. The ICC policy has a separate rate premium structure, and provides an amount up to $30,000 in payments for certain eligible expenses. Congress has capped the amount that can be paid for ICC coverage at $75. ICC coverage is not required on condominium units and content-only policies.\n\n\t\t\tPaid by Some Policyholders\n\nIn April 2019, FEMA began charging a Severe Repetitive Loss premium equivalent to 5% of the premium on all severe repetitive loss properties. If a community is on probation from the NFIP, all policyholders in that community will be charged a probation surcharge of $50 for a full one-year period, even if the community brings its program into compliance and is removed from probation. \n\n\tProposed Rating Structure Under Risk Rating 2.0\n\n\t\tHow the NFIP Will Determine Flood Insurance Premiums\n\nAs proposed, NFIP premiums calculated under Risk Rating 2.0 will reflect an individual property's flood risk, in contrast to the current rating system in which properties with the same NFIP flood risk are charged the same rates. This will involve the use of a larger range of variables than in the current rating system, both in terms of modeling the flood risk and also in assessing the risk to each property. \n\n\t\t\tRisk Modeling\n\nThe current rating system includes only two sources of flood risk: the 1%-annual-chance fluvial flood and the 1 %-annual-chance coastal flood . In contrast, Risk Rating 2.0 is designed to incorporate a broader range of flood frequencies and sources, including pluvial flooding (flooding due to heavy rainfall) , flooding due to tsunami, and coastal erosion outside the V zone. Risk Rating 2.0 is expected to use a multi-model approach to support the development of the new rates, with data from multiple sources including existing NFIP map data, NFIP policy and claims data, United States Geological Survey (USGS) 3-D elevation data, National Oceanographic and Atmospheric Administration (NOAA) SLOSH storm surge data, and U.S. Army Corps of Engineers data sets. \nAccording to FEMA, Risk Rating 2.0 will also use three commercial catastrophe models to estimate future loss potential. The use of catastrophe models to estimate potential losses caused by events such as hurricane wind, storm surge, inland flooding, tornadoes, earthquakes, and wildfires has become a standard risk management practice in the insurance industry. Catastrophe models were initially developed to address the shortcomings inherent in using historical data to project potential losses from infrequent, severe events that impacted many properties that were not geographically diverse. While each peril model reflects factors specific to the peril being modeled, catastrophe models generally have similar components, including modules simulating (1) the probability of the particular catastrophe occurring; (2) the intensity of the catastrophe; (3) the damage to structures; and (4) the allocation of the amount of the loss among those responsible for payment. \nThe first stage of catastrophe modeling is to generate a stochastic event set, which is a database of simulated events. Each event is characterized by a probability of occurrence (event rate) and geographic area affected. Thousands of possible event scenarios are simulated, based on realistic parameters and historical data, to model probabilistically what could happen in the future. The hazard component of catastrophe models quantifies the severity of each event in a geographical area, once the event has occurred. An event footprint is generated, which is a spatial representation of hazard intensity from a specific event. For example, a model could calculate the peak wind speeds at each location affected by hurricane winds. Property vulnerability is modeled using mean damage ratios (MDRs), which are losses expressed as a percent of value, for a given hazard level (e.g., hurricane wind speed) and location. MDRs give the average percentages of damage that are expected for a structure with the characteristics input into the model. Finally, a financial or insurance module quantifies the financial consequences of each event from various financial perspectives. The policy terms such as deductibles, limits, and reinsurance are applied to the damage from each insured property from the vulnerability model to calculate the allocation of the loss amount.\nIn the first stage of Risk Rating 2.0 modeling, FEMA is to conduct probabilistic flood risk analyses, in which structures are assigned specific annualized probabilities of being impacted by flood, and to validate these results with NFIP historical data. The next step is to compare the results of this analysis with the output of commercial catastrophe models. Finally, FEMA is to generate average annual loss values for certain geographies, focusing particularly on leveed areas and complex flooding hazards.\n\n\t\t\tGeographic and Structural Variables\n\nGeographical variables to be used in Risk Rating 2.0 are to include the distance to water and the type of water (e.g., river, stream, coast), the elevation of the property relative to the flooding source, and the stream order, which is a measure of the relative size of streams and rivers. The structural variables which have been identified by FEMA for use in Risk Rating 2.0 include the foundation type of the structure, the height of the lowest floor of the structure relative to BFE, and the replacement cost value of the structure. \n\n\t\t\tReplacement Cost Value\n\nIn the current NFIP rating system, rates are based on the amount of insurance purchased for a structure rather than the replacement cost of that structure. For most actuarially-rated structures, the NFIP classifies the first $60,000 of building coverage for single-family residences ($175,000 for businesses) and $25,000 of contents coverage as the basic limit. It charges higher rates for coverage below this amount, because losses are more likely to occur in this range. Rates for additional coverage above the basic limit are lower. The basic and additional rates are weighted to account for the average tendency to buy less insurance than the replacement value. For example, a post-FIRM single-family property in Zone A with no basement would currently pay a basic rate of 1.1% per $100 coverage on the first $60,000 and an additional rate of 0.3% per $100 of coverage over $60,000.\nThe two-tiered rating structure was used by the NFIP for two reasons. First, it ensured that the premium collected is sufficient to cover the typical claim, even if a policy is under-insured; according to FEMA, most NFIP claims are below $60,000. By charging a high rate for coverage up to $60,000, a policyholder's premium is likely to be sufficient to cover a typical claim. Secondly, it encouraged policyholders to insure their structure fully. By charging a low additional rate, policyholders are encouraged not just to insure a typical claim, but to insure against the unlikely but possible higher claim. \nFor much of the NFIP's existence, the two-tiered rating structure operated with minimal inequity. However, as the range of replacement values widened, particularly through the 2000s, the potential for inequity caused by rating based on coverage instead of structure value grew. Two groups are most subject to inequity. First, structures whose value is closer to the $60,000 basic limit pay more than they would if their rate was based on their structure value because their entire rate is mainly comprised of the higher basic rate. Second, structures whose value is above $250,000 pay less than they would if their rate was based on structure value, because their rate is based on an average structure value that is much less than their actual structure value. In addition, high-valued structures can produce much higher claims than lower valued structure with the same intensity of damage. \nIf replacement cost value were to be used in setting NFIP premium rates, it is anticipated that those structures with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those structures that are below the average, which would pay less. How much more, or how much less, is undetermined.\n\n\t\t\tMitigation Credits in Risk Rating 2.0\n\nRisk Rating 2.0 is to initially provide credits for three mitigation actions: \n1. installing flood openings according to the criteria in 44 C.F.R. \u00c2\u00a760.3 ; 2. elevating onto posts, piles, and piers; and 3. elevating machinery and equipment above the lowest floor . \nFEMA has not yet given any information on how these credits will be applied to individual property premiums. Currently the only mitigation activity for which the NFIP gives premium credit is elevating a structure, so Risk Rating 2.0 could encourage individual policyholders to do more to mitigate the flood risk for their property. \n\n\t\tRisk Rating 2.0 and Flood Zones\n\nFlood zones are to no longer be used in calculating a pro perty's flood insurance premium following the introduction of Risk Rating 2.0; instead, the premium are to be calculated based on the specific features of an individual property. However, as proposed, flood zones will still be needed for floodplain management purposes ; for example, all new construction and substantial improvements to buildings in Zone V must be elevated on pilings, posts, piers, or columns. T he boundary of the SFHA will still be required for the mandatory purchase requirement . The FIRM map appeal process will still exist, but once Risk Rating 2.0 begins, map appeals are not to have any effect on the premium that a policyholder pays.\nAlthough FEMA has not yet given any details of how grandfathered properties will be affected by Risk Rating 2.0, other than to say that \"all properties will be on a glide path to actuarial rates,\" the implication of the fact that flood zones will no longer be used to set premiums appears to indicate that zone grandfathering, at least, will no longer be relevant. \n\n\tMaximum Premium Increases under Current Statute\n\nFEMA has statutory authority to set premium rates. The limitations on annual premium increases are also set in statute, and Risk Rating 2.0 will not be able to increase rates annually beyond these caps. HFIAA set maximum rate increases for primary residences at 5-18% per year. HFIAA permits individual property increases of up to 18%, but limits the rate class increases to 15% per year. In other words, the average annual premium rate increase for primary residences within a single risk classification rate may not be increased by more than 15% a year, while the individual premium rate increase for any individual policy may not be increased by more than 18% each year. Other categories of properties are required to have their premium increased by 25% per year until they reach full risk-based rates: this includes non-primary residences, non-residential properties, business properties, properties with severe repetitive loss, properties with substantial cumulative damage, and properties with substantial damage or substantial improvement after July 6, 2012.\nHowever, FEMA does not consider everything that policyholders pay to the NFIP to be part of the premium and therefore subject to these caps. When premium rates are calculated for compliance with the statutory caps, FEMA only includes the building and contents coverage, the Increased Cost of Compliance coverage, and the reserve fund assessment. Other fees and surcharges are not considered part of the premium and therefore are not subject to the premium cap limitations, including the Federal Policy Fee, the HFIAA surcharge and, if relevant, the 5% Severe Repetitive Loss premium and\/or probation surcharge. \n Table 1 shows the effects of a maximum statutory increase on the national average premium for a Standard Flood Insurance Policy (SFIP) which pays the full $75 for Increased Cost of Compliance (ICC) coverage. According to FEMA, the national average premium for an SFIP is $700. The reserve fund assessment for this policy would be $105 and the ICC premium would be $75, for a total premium of $880. For an SFIP primary residence, the maximum 18% increase would be calculated on this premium of $880, leading to an increase of $158.40 and a new premium of $1038.40. However, an SFIP primary residence would also pay an FPF of $50 and a HFIAA surcharge of $25, so the total amount due to the NFIP after an 18% increase would be $1113.40. \nAn SFIP for a non-primary residence would be subject to a 25% increase on the initial premium of $880, leading to an increase of $220 and a new premium of $1100. Costs for such a policy for a non-primary residence would also include an FPF of $50 and a HFIAA surcharge of $250, so the total amount due to the NFIP after a 25% increase would be $1,400. \n\n\t\tRisk Rating 2.0 and NFIP Cross-Subsidies\n\nThe current three categories of properties which pay less than the full risk-based rate (pre-FIRM, newly-mapped, and grandfathered) are determined by the date when the structure was built relative to the date of adoption of the FIRM, rather than the flood risk or the ability of the policyholder to pay. As proposed, the new rating system will not eliminate the three categories, nor the process of phasing out subsidies which began with BW-12, but rate changes will not necessarily be uniform within each category. Premiums for individual properties will be tied to their actual flood risk rather than the flood zone, but the rate at which the subsidies will be phased out will continue to be constrained by law. \nIn general, Risk Rating 2.0 is expected to lead to the reduction of cross-subsidies between NFIP policyholders, and the eventual elimination of premium subsidies and cross-subsidies once all properties are paying the full risk-based rate. However, certain non-insurance activities of the NFIP are funded by cross-subsidies from NFIP policyholders' premiums. For example, through a program called the Community Rating System (CRS), FEMA encourages communities to improve upon the minimum floodplain management standards that are required to participate in the NFIP. Policyholders in communities which participate in the CRS can get discounts of 5% to 45% on their flood insurance premiums. These discounts are determined by the activities carried out by the community to reduce flood and erosion risk and adopt measures to protect natural and beneficial floodplain functions. The National Research Council estimated that the CRS program provided an average 11.4% discount on SFIP premiums across the NFIP. The CRS discount is cross-subsidized into the NFIP program, such that the discount for one community ends up being offset by increased premium rates in all communities across the NFIP. An average 11.4% discount for CRS communities is cross-subsidized and shared across NFIP communities through a cost (or load) increase of 13.4% to overall premiums. It is not yet clear how Risk Rating 2.0 will affect the CRS cross-subsidy. \nIn addition, as much as 42% of the funding for flood mapping and floodplain management is collected from NFIP policyholders in the form of the FPF. About 66% of the resources from the FPF are allocated to flood mapping, with floodplain management receiving about 19% of the overall income from the FPF. Again, it is not yet clear how Risk Rating 2.0 might affect funding for floodplain management and flood risk mapping. \n\n\tConcluding Observations\n\nFEMA believes that the more transparent and accurate flood insurance pricing in Risk Rating 2.0 will lead to better risk communication and an increase in flood insurance take-up rate. However, Risk Rating 2.0 is not designed to increase or decrease revenue for the NFIP. According to FEMA, Risk Rating 2.0 will not be allowed to create a shortfall relative to the amount of premium income under the current rating system. If the new rates lead to a shortfall, the rating plan will be revised. \nFEMA is carrying out an actuarial analysis and cannot give any information at the time of writing about the number or percentage of properties which will see their premiums change under Risk Rating 2.0. However, certain types of properties may be more likely to be affected, either positively or negatively. These may include zone-grandfathered properties, properties which are currently on the border of flood zones, properties currently outside the SFHA at risk of pluvial flooding, and properties with above-average or below-average replacement cost values. For example, the use of distance to water, rather than flood zone, may mean that premiums for properties at the landward boundary of an SFHA could go down, while premiums for a property at the water boundary could go up. \nConcerns about premium increases in the past have focused on certain subsidized properties, but under Risk Rating 2.0 all types of properties may be subject to higher rates of increase than at present. For example, as of April 1, 2019, the premium for pre-FIRM properties increased by 7.3% and the premium for newly mapped properties increased by 15%. Premiums for post-FIRM V zone properties increased by 6%, post-FIRM A zones increased by 4%, and X zone properties increased by 1%. These properties could face higher premiums under Risk Rating 2.0. \nRisk Rating 2.0 is may lead to premium increases for some NFIP policyholders, which could raise questions of affordability. When the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) went into effect, constituents from multiple communities expressed concerns about the elimination of lower rate classes, arguing that it created a financial burden on policyholders, risked depressing home values, and could lead to a reduction in the number of NFIP policies purchased. Similar concerns may be expressed with Risk Rating 2.0. Although risk-based price signals could give policyholders a clearer understanding of their true flood risk, charging actuarially sound premiums may mean that insurance for some properties is considered unaffordable, or that premiums increase at a rate which may be considered to be politically unacceptable.\nFEMA does not currently have the authority to implement an affordability program, nor does FEMA's current rate structure provide the funding required to support an affordability program. However, affordability provisions are included in the three bills which have been introduced in the 116 th Congress for long-term reauthorization of the NFIP: the National Flood Insurance Program Reauthorization Act of 2019 ( H.R. 3167 ), and the National Flood Insurance Program Reauthorization and Reform Act of 2019 ( S. 2187 ) and its companion bill in the House, H.R. 3872 . As Congress considers a long-term reauthorization of the NFIP, a central question may be who should bear the costs of floodplain occupancy in the future and how to address the concerns of constituents facing increases in flood insurance premiums.","output":null}
{"id":"crs_R45827","pid":"crs_R45827_0","input":"\tIntroduction\n\nThe funding of public elementary and secondary schools in the United States involves a combination of local, state, and federal government revenues. State and local governments generally provide over 90% of the revenue available for public elementary and secondary education on an annual basis, with the federal government providing the remainder. As such, there is consistent congressional interest in understanding how the majority of available funds are provided to local educational agencies (LEAs) and, ultimately, to public schools. This report intends to provide context for consideration of the comparatively small but important role of the federal assistance programs in financing public education, discuss some of the ways that state and local finance policies and practices intersect with federal involvement, and explain selected key concepts in this field. \nThe report provides a basic overview of the mechanisms used by states and LEAs to fund public education and an introduction to core school finance concepts. It begins with an examination of the sources of funding for public elementary and secondary education and how these funding sources vary by state and over time. It then considers how states and LEAs raise revenue for public education through different types of taxes, including property taxes. \nThe report then focuses on state school finance programs, the varieties of policies under which states provide funds to LEAs, and the local units of government that administer public K-12 education. This includes an examination of the key concept of \"equalization\" in state school finance programs. School finance programs often incorporate state-level weighted student funding programs, under which additional funds are provided to LEAs for the education of students with certain high-cost needs (e.g., associated with low family income or student disabilities) or who are in high-cost educational programs (such as technical education). \nThe next section of the report considers LEA programs to finance individual public schools. This is followed by a discussion of aspects of the largest federal K-12 education aid program, Title I-A of the Elementary and Secondary Education Act (ESEA), that incorporate a state school finance equity factor or weighted student funding components. In addition, a new ESEA Title I-E, as most recently comprehensively amended by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), authorizes the Secretary of Education to provide participating LEAs with flexibility to consolidate eligible federal funds with state and local funding for individual public schools to create a \"single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students.\"\nThe report concludes with a review of recent efforts to collect and report data on the level of expenditures per pupil at individual public schools within LEAs, a topic that has garnered increasing interest among policymakers in recent years.\n\n\tPercentage Shares of Revenues for Public Elementary and Secondary Education by Government Level\n\nThe funding of public elementary and secondary schools in the United States involves a combination of local, state, and federal government revenues, in proportions that vary substantially both across and within states. Overall, a total of $678.4 billion in revenues was devoted to public elementary and secondary education in the 2015-16 school year (the latest year for which detailed data on revenues by source are available). State governments provided $318.6 billion (47.0%) of these revenues, local governments provided $303.8 billion (44.8%), and the federal government provided $56.0 billion (8.3%). \nOver the last several decades, the share of public elementary and secondary education revenues provided by state governments has increased, the share provided by local governments has decreased, and the federal share has varied within a range of 6.0% to 12.7%. The federal share peaked in the recessionary period of 2009-2011, and has declined thereafter. Table 1 provides the local, state, and federal shares for selected years over the 50-year period from 1965-1966 to 2015-2016.\nThere is substantial variation among the states with respect to the shares of public elementary and secondary education revenues provided by state, local, and federal governments ( Table 2 ). For example, Hawaii, with a statewide system of public elementary and secondary education and no LEAs, provides virtually no local government revenues; almost 90% of funding comes from the state government. At the other end of this spectrum, the District of Columbia, which has no state government, provides approximately 90% of revenues from local sources. The other states fall between these two extremes of providing all or almost all of the nonfederal revenue from either state or local sources. Illinois has the lowest state share of revenues (24.1%) and the highest local share (67.4%) of the 50 states. \n\n\tSources of State and Local Government Revenues Used for Public Elementary and Secondary Education\n\nRevenues are raised at the state and local levels to support public elementary and secondary education. Local revenues may be raised directly by an LEA itself (fiscally independent LEAs), or be raised and provided to an LEA by a general purpose unit of local government, such as a county or city (fiscally dependent LEAs). The primary source of local revenues for public elementary and secondary education is the property tax. This tax is primarily applied to real property (residences, commercial buildings, etc.), and in some cases to vehicles or boats. According to data from the U.S. Census Bureau for 2016, 72.0% of all local government tax revenues were from property taxes, 17.4% were from sales taxes, 6.0% were from individual and corporate income taxes, and the remaining 4.6% came from motor vehicle and other miscellaneous taxes. \nThe property tax is an annual percentage of the assessed value of residential and commercial \"real\" property (i.e., buildings and land) and, in some localities, \"personal\" property (i.e., automobiles, other vehicles, and occasionally other items such as livestock). The property tax rate unit is often referred to as a \"mill\" or one-thousandth of the assessed value of the property. Because almost three-quarters of all local government revenues come from property taxes, variations in the value of such real or personal property relative to the number of school-age children in a locality is usually the primary cause of local variations in capacity to raise revenues per pupil for public elementary and secondary education. Beyond differences in taxable property per pupil, localities in many states are able to select their local property tax rate, at least within a limited range, and may choose to tax themselves at higher rates than other localities in the same state.\nState revenues for public elementary and secondary education are raised from a variety of sources, primarily personal and corporate income and retail sales taxes, \"excise\" taxes such as those on tobacco products and alcoholic beverages, plus lotteries in several states. According to data from the U.S. Census Bureau for 2016, 47.8% of all state government tax revenues were derived from sales taxes, 42.2% were from individual and corporate income taxes, 1.7% were from property taxes, and the remaining 8.3% came from motor vehicle and other miscellaneous taxes.\n\n\tState School Finance Programs\n\nAs depicted in Table 2 , all states (but not the District of Columbia) provide a share of the total revenues available for public elementary and secondary education. This state share varies widely, from approximately 25% in Illinois to almost 90% in Hawaii and Vermont. Starting in the early 20 th century, all states began to establish public elementary and secondary finance programs in order to diminish somewhat the high degree of inequality in revenues per pupil that would result if funding were based only on local taxable resources and the willingness of local citizens to tax themselves. \nThe primary policies under which states allocate these revenues among their LEAs have been catalogued and categorized by school finance analysts on several occasions in recent decades. For several years, the U.S. Department of Education's National Center for Education Statistics (NCES) financed and supported a joint effort with the American Education Finance Association and the National Education Association to compile detailed information on the characteristics of state school finance programs. However, the most recent of these publications was released in 2001, was based on the 1998-1999 school year, and has not been updated.\nSince the publication of the last NCES catalog of state school finance programs, individual education policy analysts have coordinated efforts to update at least some of the information. For example, annual updates of key school finance policies for each state have recently been published by Professor Deborah Verstegen of the University of Nevada at Reno. Note that while those organizing and compiling the surveys of state school finance programs provide guidance intended to elicit consistent responses from the states, responses are generally prepared by different individuals in each state who may not describe various policies using the same terminology or focus.\nThe programs through which state funds are provided to LEAs for public elementary and secondary education have traditionally been categorized by those involved in the compilations discussed above and other education finance analysts into five types of programs: (1) Foundation Programs, (2) Full State Funding Programs, (3) Flat Grants, (4) District Power Equalizing, and (5) Categorical Grants. In many cases, states often have elements of two or more of these types of programs in their school finance policies. Precise counts of how many states have finance programs in each of these categories vary\u00e2\u0080\u0094due to differences in the time at which analyses are conducted combined with the evolution of state policies over time, as well as variations of interpretation by individuals in each state responding to state policy surveys, among other factors. Nevertheless, there is general agreement that the first of these types of state school finance programs, typically referred to as Foundation Programs, is much more common than the other four types, and may be found to some degree in as many as 80% of the states. \n\n\t\tFoundation Programs\n\nFoundation Programs began to come into existence in the 1930s. A typical Foundation Program includes required local tax effort, state equalization aid, and local leeway funds. Under a Foundation Program, the state establishes an annual target level of funding per pupil applicable to all of the state's LEAs. As is discussed further below, the pupil count may be undifferentiated, or may be weighted to take into consideration a variety of pupil characteristics (such as grade level, type of educational program, special educational needs such as disabilities, low family income, or English Learner (EL) status) and sometimes estimated differences in the costs of providing education services in different localities. The funding target is most often (and historically) conceptualized as a \"minimum\" level of funding per pupil, or in some cases more recently as a level of funding necessary to provide an \"adequate\" educational program. In any case, Foundation Programs are designed to guarantee a \"base\" level of funding, not to achieve absolute fiscal equality among the LEAs of a state. The state target level of funding per pupil is likely to be influenced by budgetary and other political considerations. The state pays each LEA a percentage of this assumed total that varies inversely with local taxable property wealth per pupil, or some other measure of local capacity to raise revenues. The state percentage is higher for LEAs with low fiscal capacity per pupil, and lower for those with high fiscal capacity per pupil. \nFoundation Programs vary in their provisions regarding local tax rates. In most states with Foundation Programs, the state specifies at least a minimum rate at which localities must tax themselves. In other states, a local tax rate is assumed in the calculation of the Foundation Program's state share, based on the difference between the assumed total expenditure level and the state percentage of this, but localities are not actually required to tax themselves at this rate. In addition, LEAs might be allowed to raise local tax rates beyond the level required under state law, at least to a limited extent, but will not receive any state supplementation of the additional funds raised. These are commonly referred to as \"leeway funds,\" as LEAs have the leeway to choose a local tax rate higher than the standard level established under state law. Thus, a Foundation Program equalizes funding per pupil (however \"pupil\" may be defined) but only up to a target level, with LEAs often free to raise additional funds (not matched by the state) if they wish. Many states also combine Foundation Programs with one or more of the additional types of programs discussed below (except for Full State Funding) in a tiered or layered funding system. \n\n\t\tFull State Funding Programs\n\nFull State Funding is only found in Hawaii. Under such a policy there are virtually no local revenues. States such as Vermont and New Mexico come close to this category through programs that involve very limited local funding sources. \n\n\t\tFlat Grants\n\nFlat Grants are historically important, having been a dominant form of state aid in the early part of the 20 th century. While the role of Flat Grants as the primary form of state aid for public elementary and secondary education has almost disappeared, they are included as a supplement to Foundation Programs or other programs in a number of states. As the name implies, this type of program provides grants of an equal amount per pupil to all LEAs in a state, regardless of the level of taxable property wealth in those localities or specific pupil characteristics. \n\n\t\tDistrict Power Equalizing\n\nUsually called District Power Equalizing , this program type focuses specifically on equalizing the ability of different LEAs in a state to raise revenues from their available taxable property. These policies establish a minimum level of revenue that may be raised for each unit of local tax rate. For example, a state policy might set a standard that at least $1,000 per enrolled student be generated for each 5 mills of local property tax rate. If a locality cannot raise the standard level of funding per unit of tax rate, due to insufficient taxable property in the LEA, then state funds would be provided to make up the difference (often limited to a specified maximum local tax rate). \nIn other words, this program type provides for a minimum guaranteed tax base for public elementary and secondary education in the state. It is often said that District Power Equalizing focuses on equity for taxpayers, while frequently allowing substantial variation in local tax rates and thereby in total state and local funding per pupil, depending on local preferences. Reportedly, fewer states than in the past currently rely primarily on this type of program, though several still incorporate it as part of a multifaceted state school finance system (i.e., in conjunction with Foundation Programs, etc.).\n\n\t\tCategorical Grants\n\nWhile apparently no state relies totally on Categorical Grants, many states use them in combination with the program types discussed above. Categorical Grants provide funding based on the number of students with specific needs (students with disabilities or limited English proficiency, from low-income families, etc.) or in particular educational programs (career and technical programs, etc.). States may allow such funding to be treated as general aid by LEAs, or they may require that funds be used to serve the specific students upon whom the grants are based. \nAt the federal level, the largest federal programs of aid to public elementary and secondary education are Categorical Grants. These include ESEA Title I, Part A, under which funds for the education of disadvantaged children are allocated primarily on the basis of estimates of the number of school-age children in low-income families.\n\n\t\tCategorization of State Finance Programs\n\nAs mentioned above, it is difficult to place all states neatly into one of the five aforementioned categories based on current and consistent data and terminology. Nevertheless, one relatively recent effort to do so categorized 37 states as relying primarily on Foundation Programs, 1 state as using Full State Funding, 1 state as relying primarily on Flat Grants, 2 states as relying primarily on District Power Equalizing, and the remaining 9 states as employing combinations of these types of state school finance programs. Another effort to place states in school finance program groups was published in 2003, and was based on the NCES compilation of state programs for 1998-1999. This analysis placed 35 states in the Foundation Program category, 1 state in the Full State Funding category, 2 states in the Flat Grants category, and 6 states in the District Power Equalizing category, with the remaining 6 states using combinations of these types of programs. A more recent effort to categorize state school finance programs found that \"approximately 80%\" of all states use Foundation Programs, 1 provides Full State Funding (though a few others approach this), 1 relies primarily on Flat Grants, and 2 rely primarily on District Power Equalizing, but that increasingly many states combine two or more of these program types in a tiered funding system. Finally, in August 2019, the Education Commission of the States (ECS) published data indicating that 36 states rely primarily on a Foundation model of K-12 education finance, while 8 states rely primarily on a \"Resource Allocation\" model, 3 states rely on a hybrid of Foundation and Resource Allocation models, 1 state relies on a hybrid of a Foundation Model and a Hold Harmless policy, and the final 2 states rely on \"Other\" models of school finance. \n\n\tSchool Finance \"Equalization\"\n\nA goal of all of the various types of state school finance programs is to provide at least some limited degree of \"equalization\" of spending and resources and\/or local ability to raise funds for public elementary and secondary education across all of the LEAs in the state. School finance equalization would seem to imply \"equal spending per pupil\" among a state's LEAs. However, the meanings of both \"equal\" and \"per pupil\" may vary widely. Relatively few observers advocate absolute equality of dollars spent on behalf of every pupil in the state. Almost all state school finance programs allow for some level of spending differences based on local willingness to pay for public elementary and secondary education, differences in the costs of educating various categories of high-need pupils, or differences in the costs of providing education services in different geographic areas. \nState school finance programs frequently account for certain types of pupils whose education imposes higher than average costs on LEAs, which might include pupils with disabilities, from low-income families and\/or living in areas with high concentrations of poverty, with limited proficiency in the English language, or living in sparsely populated areas. Analysts of school finance programs sometimes use the term \"horizontal equity\" to refer to equal funding on behalf of similar pupils in different LEAs across a state, and \"vertical equity\" to refer to different levels of funding on behalf of pupils with different levels of need. If a state school finance program provides more funds on behalf of high-cost pupils than other pupils in an effort to provide vertical equity, and if the distribution of these pupils is uneven across the state's LEAs, then the state's school finance system might be considered by many analysts to be equalized yet have significant differences in spending per enrolled pupil overall.\nRegardless of how one adjusts for the distribution of different types of pupils, there are two basic ways in which school finance equalization has been defined. By far the most common method is based on equalization of the level of revenues or expenditures per pupil, however \"pupil\" might be defined. The other, somewhat less common, method focuses on equalizing the amount of funds per pupil that each LEA could raise per unit of local tax rate. The first method would equalize actual amounts of funds available, while the second would equalize local ability to raise revenues. These two basic concepts of equalization are reflected in many of the state school finance programs discussed above. Foundation Programs often incorporate provisions to provide higher amounts per pupil on behalf of one or more categories of high-need pupils, and Categorical Grants often provide increased funds to serve specific high-need pupil groups. In contrast, District Power Equalizing programs focus on equalizing the funds that could be raised per unit of local tax rate.\n\n\t\tExamples of Relevant School Finance Court Cases\n\nBeginning in the early 1970s, equalization of resources for public elementary and secondary education across the LEAs in each state has been the topic of a variety of state and, to a much lesser extent, federal court cases. In 1971, in the case of Serrano v. Priest , the California State Supreme Court ruled that the quality of a child's education should not depend on the taxable property wealth of the locality in which her or his family resides. This was the first of an ongoing series of cases brought in state courts, based on state statutory law and state constitutions. \nAt the federal level, the U.S. Supreme Court decided in 1973, in the case of San Antonio Independent School District v. Rodriguez, that differences in local expenditures per pupil within a state did not violate the U.S. Constitution, as long as these differences were the result of state actions intended to meet a public purpose, such as increased local control of education that might accompany substantial reliance on local revenue sources. Following this decision, the issue of school finance equalization has been addressed primarily in state courts, based on state constitutional provisions, rather than federal courts. \n\n\t\tWeighted Student Funding in State School Finance Programs\n\nIn the discussion of state school finance programs above, it was stated that such programs often establish target levels of funding \"per pupil.\" The \"pupil\" counts involved in these programs may simply be based on total student enrollment as of some point in time, or they may be a \"weighted\" count of students, taking into account variations in a number of categories\u00e2\u0080\u0094special pupil needs (e.g., disabilities, low family income, limited proficiency in English), grade levels, specific educational programs (e.g., career and technical education), or geographic considerations (e.g., student population sparsity or local variation in costs of providing education). \nAs noted earlier, existing surveys of state school finance programs, which rely on different respondents in each state, vary in the level of detail and use of terminology in describing the programs in each state. Nevertheless, a review of the individual state entries in a recent survey is an instructive indication of the extent to which weighted student counts are used to determine funding levels under current state programs. It shows that at least 32 states used some degree of weighting of the pupil counts used to calculate state aid to LEAs. Most of these states have policies that assign numeric weights to different categories of pupils, while in other states the school finance program specifies different target dollar amounts for specific categories of pupils, which is mathematically equivalent to assigning weights.\nAnother study of the extent to which states use pupil weighting in their school finance programs was published in August 2019 by ECS. These data include fewer categories of pupil weights in state school finance programs than the aforementioned study. Overall, based on this study, 42 states, the District of Columbia, and Puerto Rico used weights for at least one pupil category.\nThe number of states reported in these two recent studies as applying weights to different pupil categories in their school finance programs is summarized in Table 3 . Pupil weighting categories for which no data are provided in the third column of this table were not included in the ECS study. It should be noted that the Verstegen study was based on survey data collected from state departments of education on state school finance policies that were in effect during the 2017-2018 school year. The study did not include the District of Columbia or Puerto Rico. The ECS study relied on relevant state statutory language, regulations, and guidance that was in effect as of July 1, 2019, in the 50 states, the District of Columbia, and Puerto Rico.\nAs detailed in Table 3 , according to both studies states most often add funding weights for pupils who are English learners, have low family income, or have disabilities. States often employ multiple weights for pupils with specific types of disabilities (i.e., higher weights are assigned as the level of disability increases), and sometimes increase low family income weights for pupils in LEAs or schools with high concentrations of low-income pupils (i.e., higher weights are assigned as the concentration of children from low-income families increases). States that do not employ pupil weights in their primary funding formulas sometimes provide extra funding for high-need pupils through separate Categorical Grants.\nMany states also adjust pupil weights for those in selected grade levels, geographic areas, or programs. Weights are often higher for pupils in the earliest grades or in grades 9-12, though policies vary widely, and a few states prioritize other grade levels such as 7-9. The population sparsity weights recognize the diseconomies of scale in areas with especially small LEAs or schools. The career and technical education weights recognize the extra costs of these types of programs.\nFor example, the state of Oregon bases allocations under its primary school finance formula on a weighted count of students in average daily membership (enrollment) in each of the state's LEAs, which is referred to as the average daily membership weighted (ADMw) count. This policy applies additional weights to counts of students who are English learners; students who are pregnant or are in parenting programs; students with disabilities; students in low-income families; foster, neglected, or delinquent students; and students in remote or small schools.\nAnother source of information on the extent to which weighted student funding and related concepts are employed in state school finance programs is the Edunomics Lab at Georgetown University. This organization compiles information on the share of state elementary and secondary education funds that various states allocate via primary state aid formulas incorporating weighted student funding, which it also refers to as the \"student based allocation.\" The Edunomics Lab has reported that 20 states allocated 33% or more of their state aid funds through a weighted student funding formula during at least some part of the period from FY2014 to FY2019.\n\n\tLEA Programs to Finance Public Schools\n\nAs seen above, the concept of pupil weighting is often applied in determining funding levels for LEAs under state school finance programs. After state funds reach LEAs, they are combined with locally raised funds to provide educational resources to students in individual schools. LEAs may also use weighted student funding formulas to allocate funds to individual public schools, but more often they use other funding strategies. This section of the report provides an overview of conventional intra-LEA budgeting policies and the use of weighted student funding policies by LEAs.\n\n\t\tConventional Intra-LEA Budgeting Policies\n\nUnder the traditional, and still most common, method of allocating resources within LEAs, there are no specific budgets for individual schools. Available state and local funds are managed centrally, by LEA staff, and various resources\u00e2\u0080\u0094facilities, teachers, support staff, school administrators, instructional equipment, etc.\u00e2\u0080\u0094are assigned to individual schools. In this process, LEA staff typically apply LEA-wide standards such as pupil-teacher ratios or numbers of various categories of administrative and support staff to schools of specific enrollment sizes and grade levels. While levels of expenditures per pupil may be determined for individual schools under these budgetary systems, they are calculated \"after the fact,\" based on whatever staff and other resources have been assigned to the school. And while standard ratios of pupils per teacher or other resource measures may be applied LEA-wide in these situations, substantial variations in the amounts actually spent on teachers and other resources in each school can result from systematic variations in teacher seniority and other factors. These variations might be masked by local policies to apply average salaries, rather than specific actual salaries, in school accounting systems. Further, under traditional school budgeting policies there is little or no immediate or direct adjustment of resources or spending when students transfer from one school to another. \n\n\t\tWeighted Student Funding Concept Applied to Intra-LEA Budgeting for\u00c2 Schools\n\nIn contrast to traditional, fully centralized budgeting and accounting policies for public schools within LEAs, a number of LEAs have in recent years applied the weighted student funding concept to developing and implementing individual school budgets. These policies are not currently applied to any federal program funds and are applied only to a portion of the state and local revenues received by these LEAs, as they continue to centrally administer and budget for various activities such as school facility construction, operations and maintenance, employee benefits, transportation, food services, and many administrative functions . The LEAs develop school budgets for teachers, support staff, and at least some other resources on the basis of weighted counts of the students currently enrolled in each school, and adjust these budgets when students transfer from one school to another. \nCRS is not aware of any comprehensive listing of all the LEAs that are currently implementing weighted student funding policies for intra-LEA allocations to schools. However, the Edunomics Lab compiles data on such LEAs, and it has identified several relatively large urban LEAs that allocated between 21% and 89% of their funds to schools through weighted student funding formulas in FY2017 and\/or FY2018. These are Baltimore City, Boston, Chicago, Cleveland, Denver, Douglas County (Colorado), Houston, Indianapolis, Jefferson County (Colorado), Metro Nashville, Milwaukee, New York City, Newark, Norwalk (Connecticut), Orleans Parish, Prince George's County (Maryland), and San Francisco. This is not an exhaustive list of LEAs employing weighted student funding for schools, especially with respect to smaller LEAs, but it may be considered to be illustrative of the current extent of the practice.\nFor example, the Boston public school system allocates funds to individual public schools on the basis of weighted student counts that vary by grade level, pupils with disabilities (multiple categories), ELs, pupils with low family income, and pupils in career and technical education programs. According to Boston Public Schools, the use of weighted student funding promotes the school system's goals of equity, empowerment for school-level staff, innovation by individual schools, accountability, and transparency regarding the level of funding available to each school. \nAdvocates for weighted student funding policies within LEAs argue that they promote equity by explicitly connecting funding levels with the distribution of high-need pupils, as defined by the LEA, resulting in higher state and local funding in schools with higher proportions of these pupils. Advocates also argue that transparency is enhanced when school budgets reflect funds actually spent at each individual school. They further argue that weighted student funding of schools enhances school choice and school-based management practices, where applicable, and promotes flexibility in resource use by schools. However, the use of weighted student funding within LEAs is a relatively new practice in most cases, and comprehensive research on its effects is not yet available. \n\n\tUse of Equalization Strategies and Weighted Student Funding in ESEA\n\nThe ESEA includes one program and one secretarial authority that incorporate elements of the equalization and weighted student funding strategies used by states and LEAs. The Title I-A program authorizes federal aid to LEAs for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. It is also the largest ESEA program ($15.9 billion), accounting for over 60% of all ESEA funds in FY2019 ($25.2 billion). The formulas used to determine grants to LEAs under Title I-A include both an equity component and weighted student funding elements. Title I-E provides the Secretary of Education (the Secretary) with authority to provide LEAs with flexibility to consolidate eligible federal funds with state and local funding to create a \"single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students.\" Both ESEA Title I-A and Title I-E are discussed below.\n\n\t\tTitle I-A\n\nUnder the ESEA Title I-A program, different portions of each year's appropriation for grants to LEAs are allocated under one of four different formulas\u00e2\u0080\u0094Basic Grant, Concentration Grant, Targeted Grant, and Education Finance Incentive Grant (EFIG). For each formula, a maximum grant is calculated by multiplying a \"formula child count,\" consisting primarily of estimated numbers of school-age children in low-income families, by an \"expenditure factor\" based on state average per pupil expenditures for public K-12 education. For some formulas, additional factors are multiplied by the formula child count and expenditure factor. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant and \"hold harmless\" provisions. \nThe formula child population used to determine Title I-A grants for the 50 states, the District of Columbia, and Puerto Rico consists of children ages 5 to 17 (1) in low-income families, according to estimates for LEAs from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) program; (2) in institutions for neglected or delinquent children or in foster homes; and (3) in families receiving Temporary Assistance for Needy Families (TANF) payments in excess of the poverty income level for a family of four persons. Children in low-income families account for about 97% of the total formula child count, so the other formula population categories are of limited significance overall. Each element of the formula child count is updated annually. In general, LEAs must have a minimum number of formula children and\/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula.\nAmong the four Title I-A formulas, the EFIG formula contains an equity factor as well as a weighted student funding component. The Targeted Grant formula also contains a weighted student funding component. Both types of funding factors are discussed below.\n\n\t\t\tEquity Factor\n\nUnder the EFIG formula, a measure of the equity of state school finance programs plays a role in the determination of the level of funds each state receives. More specifically, Title I-A grants under the EFIG formula are made to states on the basis of their formula children, an expenditure factor based on state average per pupil expenditures for public elementary and secondary education, an effort factor based on average per pupil expenditure for public elementary and secondary education relative to personal income per capita for each state compared to the nation as a whole, and an equity factor based on variations in average per pupil expenditure among the LEAs in each state. Thus, state total grants under the EFIG formula are based on each state's share, compared to the national total, of a population factor multiplied by an expenditure factor, an effort factor, and an equity factor, adjusted by a state minimum grant provision. \nThe equity factor is based on a measure of the average disparity in expenditures per pupil among the LEAs of a state called the coefficient of variation (CV). The CV is expressed as a decimal proportion of the state average per pupil expenditure. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from low-income families. The effect is that grants would be maximized for a state where LEA-level expenditures per pupil from a low-income family are 40% higher than expenditures per pupil from a non-low-income family. Typical state equity factors range from 0.00 (for the single-LEA jurisdictions of Hawaii, Puerto Rico, and the District of Columbia, where by definition there is no variation among LEAs), to approximately 0.30 for a state with high levels of variation in expenditures per pupil among its LEAs. The equity factors for most states fall into the 0.10-0.20 range. In calculating grants, the equity factor is subtracted from 1.30 to determine a multiplier to be used in calculating state grants. As a result, the lower a state's expenditure disparities among its LEAs are, the lower its CV and equity factor will be, and the higher its multiplier and its grant under the EFIG formula will be. Conversely, the greater a state's expenditure disparities among its LEAs are, the higher its CV and equity factor will be, and the lower its multiplier and its grant under the EFIG formula will be. Of the $15.9 billion appropriated for Title I-A for FY2019, EFIG received $4.0 billion (25.3% of total Title I-A funding) for the 2019-2020 school year. \n\n\t\t\tWeighted Student Funding\n\nThe EFIG formula also employs a weighted student funding concept in the allocation of grants to states. In the calculation of the formula's equity factor, state and local funds per pupil are calculated using a greater weight for students from low-income families (1.4) than for other students (1.0). As a result, a state where greater state and local funds are available for the education of students from low-income families than for other pupils would have a numerically low equity factor and ultimately higher grants under the EFIG formula. \nThe weighted student concept is also employed in the Title I-A Targeted Grant formula and in an additional way in the intrastate allocation of EFIG formula funds to LEAs within states. As with the EFIG formula, the Targeted Grant formula received $4.0 billion (25.3% of total Title I-A funding) for the 2019-20 school year. Under the Targeted Grant formula, as well as the intrastate allocation of funds under the EFIG formula, formula child counts and formula child rates are assigned weights, with higher weights applied as the formula child count or rate increases in an LEA. The higher the formula child count or rate is, the higher the grants per formula child an LEA would receive will be. \nUnder the Targeted Grant formula, one set of weighting factors is applied to all LEAs based on formula child counts and one set is applied to all LEAs based on formula child rates. In contrast, under the EFIG formula three sets of weights are used for weighting formula child counts and three sets are used for the weighting of formula child rates. The set of weights used under the EFIG formula depends on the value of each state's equity factor (described above), with lower weights applied to LEA grant calculations in states that have a lower equity factor (i.e., relatively low disparities in expenditures per pupil among the state's LEAs) and higher weights applied to LEA grant calculations in states that have a higher equity factor (i.e., relatively high disparities in expenditures per pupil among the state's LEAs). In determining LEA grants under both the Targeted and EFIG formulas, the higher of the two weighted student counts (one calculated based on formula child counts and one calculated based on formula child weights) is used in calculating grants for each LEA.\n\n\t\tTitle I-E\n\nThe Title I-E authority allows the Secretary to enter into a demonstration agreement with LEAs that are using or agree to implement weighted student funding systems to establish budgets for, and allocate funds to, individual public schools. In order to enter into a local flexibility demonstration agreement under the Title I-E authority, each LEA must have a weighted student funding system that meets specific requirements. The LEA's system must use weights or allocation amounts that provide \"substantially more funding\" than is allocated to other students to English learners (ELs), students from low-income families, and students with any other characteristic related to educational disadvantage that is selected by the LEA. The system must also ensure that each high-poverty school receives in the first year of the demonstration agreement more per-pupil funding for low-income students than was received for low-income students from federal, state, and local sources in the year prior to entering into the agreement, and at least as much per-pupil funding for ELs as was received for ELs from federal, state, and local sources in the year prior to entering into the agreement. \nThe weighted student funding system must include all school-level actual personnel expenditures for instructional staff, including staff salary differentials for years of employment, and actual nonpersonnel expenditures in the LEA's calculation of eligible federal funds and state and local funds to be allocated to the school level. It must also allocate a \"significant portion of funds,\" including state and local funds and eligible federal funds, to the school level based on the number of students in a school and an LEA-developed formula that determines per-pupil weighted amounts. In addition, the percentage of state and local funds and eligible federal funds allocated through the LEA's weighted student funding system must be sufficient to carry out the purposes and requirements of the demonstration agreement.\nEligible federal funds that may be consolidated in an LEA's weighted student funding system include, for example, those available under ESEA Title I-A (Education for the Disadvantaged), Supporting Effective Instruction (Title II-A), English Language Acquisition (Title III-A), and Student Support and Academic Enrichment (Title IV-A). No non-ESEA funds (e.g., funds available under the Individuals with Disabilities Education Act or the Perkins Career and Technical Education Act) are considered eligible funds for purposes of consolidation. Once eligible federal funds are consolidated in a participating LEA's weighted student funding system, these funds are treated the same way as the state and local funds. There are no required uses associated with the eligible federal funds provided that the expenditures are \"reasonable and necessary\" and the purposes of the eligible federal programs for which funds have been consolidated are met.\n\n\tRecent Efforts to Collect and Publish School-Level Financial Data\n\nA separate development relevant to the adoption of weighted student funding by some LEAs has been increasing interest in the collection and reporting of school-level finance data for public schools. While historically there have not been comprehensive state or federal efforts to calculate or report on specific budgets or expenditure levels for individual public schools, federal efforts to require and support the reporting of such information have expanded rapidly in recent years. The availability of school-level financial data, based on standard concepts applied consistently nationwide, could be especially helpful in the administration of a key fiscal accountability requirement of the ESEA Title I-A program, as discussed below. Such data could also inform state and local level consideration of equity among schools and groups of students, and increase transparency regarding budgeting and financial decisions by LEAs.\nOne factor that may help explain this increasing attention is the \"comparability\" requirement associated with the ESEA Title I-A program. This is a requirement that services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools within the same LEA. If all of an LEA's schools participate in Title I-A, then services funded from state and local revenues must be \"substantially comparable\" in each school within the LEA. The Title I-A comparability requirement is intended to ensure that state and local funds are used to provide a comparable level of services in Title I-A schools compared with non-Title I-A schools prior to the receipt of Title I-A funds.\nComparability is measured only with respect to the public schools within the same LEA, not statewide. It is designed to ensure that federal Title I-A funds provide a net increase in funding for Title I-A schools compared to non-Title I-A schools, and do not simply replace state and local funds that would, in the absence of Title I-A, be provided to the Title I-A schools. In demonstrating comparability, LEAs are prohibited from using staff salary differentials for years of employment in determining expenditures per pupil from state and local funds or instructional salaries per pupil from state and local funds. That is, actual staff salaries are not used in comparability determinations. In recent years, there has been renewed attention to the extent to which the comparability requirement is being enforced, and to the nature and quality of school-level expenditure data used to determine compliance.\nMore broadly, a number of other federal requirements and research efforts have reflected this increased interest in school-level finance data collection and reporting. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 , Title VIII) included a one-time requirement for states to compile and report expenditures for all public schools for the 2008-2009 school year. States were required to report total personnel salaries for all school-level instructional and support staff; salaries specifically for instructional staff; salaries specifically for teachers; and nonpersonnel expenditures, if available. ED provided guidelines on the specific types of expenditures that states and LEAs should include in their reports. States and LEAs were asked to report school-level expenditures from state and local funds only, and to exclude expenditures for special education, adult education, school nutrition programs, summer school, preschool, and employee benefits. All expenditure data was to be reported based on actual expenditures, including those for staff salaries. \nA study of the implementation of the Title I-A comparability requirement that was based on the data collection required by the ARRA determined that within LEAs that had both Title I-A and non-Title I-A schools, \"more than 40 percent of Title I schools had lower personnel expenditures per pupil than did non-Title I schools at the same grade level.\" For example, at the elementary school level 46% of Title I-A schools had state and local personnel expenditures per pupil that were below the average for non-Title I-A schools in the same LEA, while 54% exceeded the average for non-Title I-A schools in the same district. Title I-A middle schools and high schools were marginally less likely to have below-average per-pupil personnel expenditures (42% and 45%, respectively) compared to non-Title I-A schools in the same LEA. Across all levels of elementary and secondary education, 48% of Title I-A schools were not receiving the same level of per-pupil state and local personnel expenditures as non-Title I-A schools in the same LEA. While this does not represent a violation of the Title I-A comparability requirements, which are not based on actual personnel expenditures, it is an indication that a sizable group of Title I-A schools may not actually be as equally resourced as non-Title I-A schools prior to the receipt of Title I-A funds. In discussing this study, ED stated that, \"[t]raditional district allocation methods have been shown to create significant funding disparities between Title I and non-Title I schools.\"\nSeparately, ED's Office for Civil Rights began to collect selected school-level expenditure data starting with the 2009-2010 school year. These data are captured every second year as part of the ongoing Civil Rights Data Collection, and include total personnel salaries; salaries specifically for teachers, instructional aides, support services staff, and school administrators; and nonpersonnel expenditures. All expenditure data must be based on actual expenditures. Unlike data collected under the ARRA (discussed above) and ESEA (discussed below) requirements, these data are collected directly from schools and LEAs, not states.\nIn spring 2014, the Office of Management and Budget (OMB) and ED's Office of Planning, Evaluation, and Policy Development (OPEPD) requested that ED's National Center for Education Statistics (NCES) develop a school-level finance data collection, as such a collection had not been developed on a comprehensive, annual basis. In response, NCES launched pilot efforts to expand ongoing surveys of state and LEA finances to include school-level financial data as well. Beginning with the 2013-2014 school year, NCES conducted a pilot School-Level Finance Survey (SLFS) to evaluate the feasibility of collecting school-level finance data in conjunction with the School District Finance Survey and National Public Education Financial Survey for states and LEAs, jointly conducted by NCES and the Census Bureau. Twelve states participated in this pilot survey for the 2013-2014 school year, and 17 states for 2014-2015 (although only 15 states provided data deemed to be usable by NCES). Based on pilot survey results for the 2014-15 school year, NCES determined that (1) approximately one-half of the participating states were able to report complete personnel and\/or nonpersonnel data for at least 95% of their public schools, (2) SLFS data are generally consistent with data reported in other school finance surveys, (3) the development of standardized protocols \"enhances the efficiency of reporting school-level finance data, (4) there remain \"numerous inherent challenges in collecting school-level finance data,\" (5) and, nevertheless, \"the feasibility of collecting and reporting school-level finance data of reasonable quality is relatively high.\" \nA major concern regarding school-level expenditure surveys is achieving consistency among the states on what kinds on expenditures to include or exclude. The SLFS currently includes 15 unique expenditure items covering a wide variety of personnel expenditures (6 items), including salaries, as well as nonpersonnel expenditures (9 items), such as educational technology. Excluded from these items are employee benefits and services provided centrally by LEAs such as transportation, capital spending, food services, central administration, and building operations and maintenance. Data for each of the 15 expenditure items were collected two ways: (1) without additional exclusions (other than the aforementioned exclusions), and (2) with additional exclusions for expenditures paid from most federal funds, expenditures for prekindergarten, and expenditures for special education. \nBeginning with the 2015-2016 school year, the SLFS was opened to all states on a voluntary basis. Beginning with the 2017-2018 school year data collection, NCES began collecting complete operational expenditure data. NCES noted that \"[c]omplete, accurate, and comparable school-level finance data across states will take time and effort to achieve.\" However, NCES also noted that recent ESEA school-level finance reporting requirements (discussed below), further development of standardized internal protocols for school-level finance accounting, and continued SEA collaboration with NCES and the Census Bureau on the SLFS data collection should result in improved school-level finance data.\nFurther, as mentioned above, the ESSA amended ESEA Title I-A to require participating states to include in school report cards data on expenditures at each public school. These report cards are to include \"the per-pupil expenditures of Federal, State, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures of Federal, State, and local funds, disaggregated by source of funds, for each local educational agency and each school in the State for the preceding fiscal year\" (Section 1111(h)(1)(C)(x)). States are currently beginning to report expenditure data in response to this requirement.\n\n\t\tAppendix. Glossary of Acronyms\n\nARRA: American Recovery and Reinvestment Act ( P.L. 111-5 )\nCV: Coefficient of variation\nED: U.S. Department of Education\nEFIG: Education Finance Incentive Grant \nEL: English Learner\nESEA: Elementary and Secondary Education Act\nESSA: Every Student Succeeds Act ( P.L. 114-95 )\nLEA: Local educational agency\nNCES: National Center for Education Statistics (ED)\nOMB: Office of Management and Budget\nOPEPD: Office of Planning, Evaluation, and Policy Development (ED)\nSAIPE: Small Area Income and Poverty Estimates\nSEA: State educational agency\nSLFS: School-Level Finance Survey\nTANF: Temporary Assistance for Needy Families","output":null}
{"id":"crs_R46314","pid":"crs_R46314_0","input":"\tIntroduction\n\nThe Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes the operation of three federal s tudent loan programs: the William D. Ford Federal Direct Loan (Direct Loan) program, the Federal Family Education Loan (FFEL) program, and the Federal Perkins Loan program. While new loans are authorized to be made only through the Direct Loan program, FFEL and Perkins Loan program loans remain outstanding and borrowers of such loans remain responsible for repaying them. \nAs of December 31, 2019, $1.5 trillion in these loans, borrowed by or on behalf of 42.8 million individuals, remained outstanding. \nDirect Loan program loans are owned by the U.S. Department of Education (ED). As of December 31, 2019, approximately 35.3 million borrowers owed about $1.3 trillion in Direct Loan debt. FFEL program loans may be held by private lenders, guaranty agencies, or ED. As of December 31, 2019, approximately 11.8 million borrowers owed about $257.2 billion in FFEL program debt. Of that, approximately $87.7 billion was held by ED, representing between 3.3 million and 6 million borrowers, and $169.3 billion was held by private lenders or guaranty agencies, representing debt for between 6.0 million and 7.2 million borrowers. Perkins Loan program loans may be held by institutions of higher education (IHEs) that made the loans or by ED. As of December 31, 2019, about 1.9 million borrowers owed approximately $5.9 billion in Perkins Loans.\nIn response to the current coronavirus disease 2019 (COVID-19) pandemic, numerous questions have arisen regarding student loan repayment flexibilities and debt relief that may be available to individuals to alleviate potential financial effects related to COVID-19. The HEA generally authorizes several options for qualifying individuals. Recent administrative and congressional action, including the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136 ), provide additional student loan relief measures. \nThis report provides an overview of student loan repayment flexibilities and debt relief provisions that may be available to borrowers facing financial difficulties resulting from the pandemic. It first lists some pre-existing loan terms and conditions (authorized through statute and regulations) that may be available to individuals. It then discusses specific administrative and congressional actions taken to address student loan debt in the context of COVID-19. The report concludes with a brief description of additional existing authorities that could be utilized to address other aspects of student loan relief.\n\n\tPre-existing Loan Terms and Conditions\n\nSeveral loan terms and conditions that offer forms of repayment relief to borrowers were authorized in statute and regulations prior to the onset of the COVID-19 pandemic. These include periods of deferment and forbearance, which offer borrowers temporary relief from the obligation to make monthly payments; and the availability of income-driven repayment (IDR) plans (e.g., income-based repayment, Pay As You Earn [PAYE]), which afford borrowers the opportunity to make payments in amounts that are capped at a specified share or proportion of their discretionary income, for a maximum repayment period of 20 or 25 years.\n\n\t\tDeferment\n\nA deferment is a temporary period during which a borrower's obligation to make regular monthly payments of principal or interest is suspended, and during which an interest subsidy (i.e., interest does not accrue) may be provided. Where an interest subsidy is not provided, unpaid interest that has accrued on a borrower's loan during a deferment is capitalized (i.e., added to the principal) at the expiration of the deferment period. Periods of deferment do not count toward the 120 monthly payments required to qualify for Public Service Loan Forgiveness (PSLF), and most are not included in a borrower's repayment period (e.g., periods of unemployment deferment do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). In most instances, a borrower must proactively apply for and request a deferment. \nA deferment may be granted for a variety of reasons. Unemployment deferment and economic hardship deferment (described below) may be especially relevant to individuals facing financial difficulties due to COVID-19. These types of deferment are available to borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs.\n\n\t\t\tUnemployment Deferment\n\nA borrower who is seeking to obtain full-time employment and is either not employed or employed less than full-time may be granted an unemployment deferment . To be eligible, a borrower must either be receiving unemployment benefits or document that he or she has registered with a public or private employment agency (if one is available within 50 miles) and is diligently seeking to obtain full-time employment. \nThe deferment may be granted for an initial six-month period, and may be extended in six-month increments. A borrower may receive the deferment for a maximum cumulative period of three years, which may include one or more episodes of unemployment. \nDuring an unemployment deferment, an interest subsidy is provided on Direct Subsidized Loans, the subsidized component of Direct Consolidation Loans, FFEL Stafford (Subsidized) Loans, the subsidized component of FFEL Consolidation Loans, and Perkins Loans.\n\n\t\t\tEconomic Hardship Deferment\n\nA borrower may qualify for a deferment during periods while he or she is experiencing an economic hardship. To qualify, a borrower must be (1) receiving payments under a federal or state public assistance program (e.g., Temporary Assistance for Needy Families [TANF], Supplemental Security Income [SSI], Supplemental Nutrition Assistance Program [SNAP], state general public assistance, other means-tested benefits), or (2) working full-time and have a monthly income that does not exceed an amount equal to 150% of the poverty line applicable to the borrower's family size, as calculated on a monthly basis.\nThe deferment may be granted for periods of up to one year at a time, and may be extended up to a cumulative maximum of three years. Periods of up to three years while a borrower qualifies for an economic hardship deferment may be counted as part of the repayment period for each of the IDR plans.\nDuring an economic hardship deferment, an interest subsidy is provided on Direct Subsidized Loans, the subsidized component of Direct Consolidation Loans, FFEL Stafford Loans, the subsidized component of FFEL Consolidation Loans, and Perkins Loans.\n\n\t\tForbearance\n\nForbearance constitutes permission for a borrower to temporarily cease making monthly payments, to make payments in reduced amounts, or to make payments over an extended period of time. During periods of forbearance, no interest subsidies are provided (i.e., interest continues to accrue) and borrowers ultimately remain responsible for paying all of the interest that accrues on their loans. Borrowers may pay the interest as it accrues during forbearance. At the end of the forbearance period, any unpaid accrued interest is capitalized into the principal balance of Direct Loan program and FFEL program loans; it is not capitalized (but remains due) for Perkins Loan program loans. Periods of forbearance do not count toward the 120 monthly payments required to qualify for PSLF, and are not included in a borrower's repayment period (e.g., periods of student loan debt burden forbearance do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). Generally, borrowers must apply for forbearance.\nGeneral forbearance and student loan debt burden forbearance (described below) may be especially relevant to individuals facing financial difficulties due to COVID-19. These types of forbearance are available to borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs. \n\n\t\t\tGeneral Forbearance\n\nA borrower may request a general forbearance (sometimes referred to as a discretionary forbearance) on the basis of experiencing a temporary hardship due to financial difficulties, a change in employment, medical expenses, or other reasons.\nGeneral forbearance may be granted for an initial period of up to 12 months, renewed upon the borrower's request, and limited to a maximum of 36 months. At the end of the forbearance period, any unpaid interest that accrued during the period is capitalized.\n\n\t\t\tStudent Loan Debt Burden Forbearance\n\nA borrower may receive a forbearance on the basis of having a federal student loan debt burden that equals or exceeds 20% of his or her total monthly taxable income. To qualify, a borrower must demonstrate that his or her required monthly payments on HEA Title IV federal student loans (e.g., loans made under the Direct Loan, FFEL, or Perkins Loan programs) equal or exceed that amount. \nStudent loan debt burden forbearance may be granted for an initial period of up to 12 months, may be renewed upon the borrower's request, and is limited to a maximum of 36 months.\n\n\t\tIncome-Driven Repayment Plans\n\nIDR plans afford borrowers the opportunity to make payments in amounts that are capped at a specified share or proportion of their discretionary income over a repayment period not to exceed 20 to 25 years, depending on the plan. At the end of the repayment period, the remaining balance of an individual's loans is forgiven. Under these plans, it is possible for a borrower's monthly payment to equal $0. \nThere are several IDR plans currently available to borrowers: the Income-Contingent Repayment (ICR) plan, the Income-Based Repayment (IBR) plans (one version of which is available to individuals who qualify as a new borrower on or after July 1, 2014; and another which is available to individuals who do not qualify as a new borrower as of that date), the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You Earn (REPAYE) repayment plan. In general, Direct Loan borrowers (other than Parent PLUS Loan borrowers) are eligible for any of these plans. FFEL program borrowers (other than Parent PLUS loan borrowers) are only eligible for the IBR plans. Perkins Loan borrowers are not eligible for any IDR plan.\nIndividuals must apply to repay their loans according to an IDR plan. In addition, they must annually provide documentation of their income and family size to remain eligible for IDR repayment. Borrowers may update their income and family size at any time if either changes. Upon submission of such information, a borrower's monthly payment amount will be recalculated accordingly.\n\n\tAdministrative and Congressional Actions Taken in Response to COVID-19\n\nRecently, ED and Congress have taken steps to provide additional forms of relief to federal student loan borrowers. This includes cancelling Direct Loans for payment periods during which qualifying individuals withdrew from their course of study due to COVID-19, waiving Direct Subsidized Loan limitations for students affected by COVID-19, temporarily setting interest rates to 0% on qualifying loans, expanding the instances under which a forbearance may be available to borrowers of qualifying loans, and temporarily ceasing collections on qualifying defaulted loans.\n\n\t\tReturning Direct Loans\n\nUnder the HEA, a Direct Loan borrower may be required to return or repay all or part of the Direct Loans borrowed if the student does not complete a payment or enrollment period at an IHE for which the loan was received. Required procedures for such returns or repayments vary depending on whether a student did not begin attendance at an IHE or whether he or she withdrew.\n\n\t\t\tFailure to Begin Attendance\n\nIf a student does not begin attendance at an IHE in a payment or enrollment period, Title IV funds (including Direct Loan funds) must be returned to ED by the IHE and\/or the student according the regulatory provisions. For Direct Loan amounts required to be returned by the student, the IHE must immediately notify ED (or its loan servicers) when it becomes aware that the student will not begin or has not begun attendance. Loan servicers then issue a final demand letter to the borrower. The demand letter requires the borrower to repay any loan principal and accrued interest within 30 days from the date the letter is mailed. If the borrower fails to comply with the demand letter, he or she is considered in default on the loan.\nIn March 2020, ED issued guidance to IHEs specifying some flexibilities that may be used to address the return of Direct Loans by recipients who did not begin attendance at an IHE due to COVID-19. ED stated that if a student was unable to begin attendance due to a COVID-19-related school closure, the IHE is not required to notify the loan servicer of the student's failure to begin attendance. By waiving this requirement, loan servicers would not issue demand letters, and borrowers would be able to repay any loans according to the terms of the promissory note, including receiving a six-month grace period prior to the start of repayment.\n\n\t\t\tWithdrawal\n\nHEA Section 484B specifies that when a Title IV aid recipient withdraws from an IHE before the end of the payment or enrollment period for which funds were disbursed, Title IV funds (including any Direct Loans received) must be returned to ED by the IHE and\/or aid recipient according to statutorily prescribed rules (this is often referred to as Return of Title IV Aid). If an aid recipient is required to return any portion of a Direct Loan, he or she repays it in accordance with the terms of the loan.\nThe CARES Act authorizes several waivers with respect to Return of Title IV Aid procedures. Specific to Direct Loan borrowers, the act requires ED to cancel a borrower's obligation to repay the entire portion of a Direct Loan associated with a payment period during which the student withdraws from an IHE as a result of a qualifying emergency .\n\n\t\tDirect Subsidized Loan Limitations\n\nSince July 1, 2013, a student who is a first-time borrower may only borrow Direct Subsidized Loans for a period that may not exceed 150% of the published length of the academic program in which he or she is currently enrolled (e.g., six years for enrollment in a four-year bachelor's degree program). This is referred to as the Direct Subsidized Loan maximum eligibility period. \nIf a Direct Subsidized Loan borrower subject to this provision remains enrolled beyond the applicable maximum eligibility period, he or she will lose the interest subsidy and will become responsible for paying the interest that accrues on his or her Direct Subsidized Loans after the date that the maximum eligibility period is exceeded.\nThe CARES Act specifies that ED shall exclude from the maximum eligibility period any semester (or equivalent) that the student does not complete due to a qualifying emergency, if ED is \"able to administer such policy in a manner that limits complexity and the burden on the student.\"\n\n\t\tEntering Repayment\n\nIn general, borrowers of Direct Loan, FFEL, and Perkins Loan program loans are required to make payments on the loans during a repayment period. The repayment period for Direct Subsidized Loans, Direct Unsubsidized Loans, FFEL Stafford Loans, FFEL Unsubsidized Loans, and Perkins Loans begins after a grace period. The grace period begins after the borrower ceases to be enrolled in an eligible postsecondary program on at least a half-time basis (enrollment on at least a half-time basis is often referred to as in-school status for federal student loan purposes). The repayment period for Direct PLUS Loans (to graduate students and to parents of dependent undergraduate students), Direct Consolidation Loans, FFEL PLUS Loans, and FFEL Consolidation Loans is required to begin when the loan is fully disbursed. However, borrowers of these loans, along with borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, FFEL Stafford Loans, FFEL Unsubsidized Loans, and Perkins Loans, may qualify for a deferment on the basis of their in-school status (or the in-school status of the student on whose behalf a PLUS Loan was made to a parent borrower), during which time they are not required to make payments on their loans but interest may accrue. A borrower qualifies for such an in-school deferment if he or she, or the student on whose behalf a PLUS Loan is made, is enrolled on at least a half-time basis.\nED has announced some flexibilities for borrowers of Direct Loan and FFEL program loans whose loan status was in-school on the date the student's attendance at an IHE was interrupted due to COVID-19. The loan status of such borrowers will continue to be reported as in-school until the IHE determines that the student has withdrawn from it. ED has permitted IHEs to defer reporting a student's withdrawn status if the IHE has a reasonable expectation that it will reopen at the start of a payment period that begins no later than 90 days following its COVID-19-related closure and that the student will resume attendance when the IHE reopens. \nED guidance does not address Perkins Loans.\n\n\t\tInterest Accrual\n\nInterest is charged on loans made under the Direct Loan, FFEL, and Perkins Loan programs. Typically, under a limited set of circumstances the federal government subsidizes some or all of the interest that would otherwise accrue on certain Direct Subsidized Loans, FFEL Stafford Loans, and Perkins Loans. \nFor March 13, 2020, through September 30, 2020, the Administration has set interest rates on federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED) to 0%. The CARES Act specifies that during this time interest will not accrue. This means borrowers will not be responsible for paying interest on their ED-held loans for this period. This will permit borrowers to enter into a period of deferment or forbearance without concern for whether interest would accrue and capitalize. Borrowers who continue making payments on their loans during this time of 0% interest will not have decreased monthly payments. They will have the full amount of the payments applied toward loan principal. Borrowers who are eligible for this benefit need not apply for it; ED will automatically adjust their accounts to reflect the 0% interest. \nIn addition, ED has authorized FFEL program lenders and institutions that hold Perkins Loans to provide the same 0% interest rate on these nonfederally held loans on a voluntary basis. Borrowers who are ineligible for the 0% interest rate benefit because their FFEL program loan holder or Perkins Loan program IHE is not providing it may take advantage of the 0% interest period by consolidating such loans into a Direct Consolidation Loan, which is eligible for the 0% interest rate.\nThis 0% interest rate, coupled with the various options for temporary cessation of payments (e.g., forbearance, deferment) discussed throughout this report, means that qualifying borrowers may temporarily cease payments on their loans without interest accruing or being subject to capitalization when they begin to make payments again at a later point in time.\n\n\t\tCessation of Payments\n\nIn addition to the pre-existing deferment and forbearance options available to borrowers, ED and Congress have recently taken further steps to enable borrowers to temporarily cease making payments on their qualifying loans.\nFor March 13, 2020, through September 30, 2020, federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED) will be placed in an administrative forbearance. During this time, borrowers will not be required to make payments due on their loans. Borrowers who are eligible for this benefit need not apply for it; ED will automatically suspend payments. \nIn implementing these provisions, ED has indicated that borrowers may opt out of this special administrative forbearance by contacting their loan servicer. In addition, any payments made on a borrower's account between March 13, 2020, and September 30, 2020, can be refunded to the borrower. A borrower must contact his or her loan servicer to request a refund.\nED has also authorized FFEL program lenders and institutions that hold Perkins Loans to provide this special administrative forbearance to borrowers on a voluntary basis. Borrowers who are ineligible for this benefit because their FFEL program loan holder or Perkins Loan program IHE is not providing it may take advantage of the benefit by consolidating such loans into a Direct Consolidation Loan.\nGenerally, periods of forbearance do not count toward the 120 monthly payments required to qualify for PSLF, and are not included in a borrower's repayment period (e.g., periods of unemployment deferment do not count toward the maximum repayment periods of 20 or 25 years under the IDR plans). However, the CARES Act specified that ED \"shall consider each month for which a loan payment was suspended\" under this special administrative forbearance \"as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program.\" Thus, for Direct Loan borrowers (the only borrowers eligible for PSLF) this special administrative forbearance will count toward the 120 monthly payments required to qualify for PSLF if the borrower was in a qualifying repayment plan prior to the payment suspension and also works full-time in qualifying employment during the suspension. \nFor borrowers of federally held loans, the suspended payments will also count toward the 20- and 25-year repayment periods under the IDR plans, and toward the nine voluntary payments within 10 consecutive months required for individuals to rehabilitate their defaulted loans. It is unclear whether suspended payments on nonfederally held FFEL program loans whose lender has authorized this special administrative forbearance would count toward the 20- and 25-year repayment periods under applicable IDR plans. Perkins Loans, regardless of whether they are held by ED or an IHE, are ineligible for IDR plans.\nIn addition, ED recently authorized institutions that hold Perkins Loans to grant a forbearance to borrowers who are in repayment and are unable to make payments due to COVID-19. Under this forbearance, interest would continue to accrue. The initial forbearance period may not exceed three months, but it may be extended upon a borrower providing supporting documentation. Borrowers must request the forbearance from the IHE. This period of forbearance counts toward the three-year maximum limit on the number of years of forbearance that may be granted to a Perkins Loan borrower.\n\n\t\tLoan Default and Collections\n\nDefaulting on a federal student loan can result in a number of adverse consequences for a borrower. Upon default, the borrower's obligation to repay the loan is accelerated (i.e., the entire unpaid balance of principal and interest becomes due in full). In addition, the borrower loses eligibility for certain borrower benefits (e.g., deferment, loan forgiveness), as well as eligibility to receive additional Title IV federal student aid. A defaulted borrower may have his or her student loan account transferred to an ED-contracted private collection agency (PCA) that will contact the borrower and offer him or her options for voluntary debt resolution, such as loan rehabilitation, consolidation out of default, or entry into a voluntary repayment agreement. If such voluntary debt resolution attempts do not succeed, involuntary collection practices may be utilized, which include administrative wage garnishment; offset of federal income tax returns, Social Security benefits, and certain other federal benefits; and civil litigation.\n\n\t\t\tCollection of Defaulted Loans\n\nFor March 13, 2020, through September 30, 2020, ED will halt the above-described involuntary debt collection practices, and ED-contracted PCAs will stop proactive collection activities (i.e., stop making collection calls and sending letters or billing statements to defaulted borrowers) for all federally held student loans (e.g., all Direct Loan program loans, and FFEL and Perkins Loan program loans held by ED). However, borrowers may contact PCAs to continue repayment arrangements they had made prior to implementation of this policy or to consolidate their loans out of default.\nBorrowers of federally held loans whose federal tax refund or Social Security benefits were in the process of being withheld on or after March 13, 2020, and before September 30, 2020, will have any offset portion returned to them. Borrowers whose wages were garnished between March 13, 2020, and September 30, 2020, will have their wages refunded.\nIn addition, ED has authorized institutions to stop collection activities on defaulted Perkins Loans that they hold through September 30, 2020, upon notification from a borrower, a member of the borrower's family, or another reliable source that the borrower has been affected by COVID-19.\n\n\t\t\tSatisfactory Repayment Arrangements, Loan Rehabilitation, and Consolidation Out of Default\n\nTo regain Title IV student aid eligibility, a defaulted federal student loan borrower must make six on-time, voluntary monthly payments on a defaulted loan. In addition, loan rehabilitation offers defaulted borrowers an opportunity to have their loan(s) reinstated as active and to have other borrower benefits and privileges restored. To rehabilitate a loan, Direct Loan, FFEL, or Perkins Loan program borrowers must make nine on-time payments according to generally applicable procedures. Alternatively, a borrower may use the proceeds of a new Direct Consolidation Loan to pay off one or more defaulted Direct Loan, FFEL, and Perkins Loan program loans. To become eligible to do so, a borrower must make three consecutive, on-time, full monthly payments on a defaulted loan. \nED has stated that for specified periods, if a borrower of a defaulted Direct Loan, FFEL, or Perkins Loan program loan fails to make any of the consecutive monthly payments required to re-establish eligibility for Title IV federal student aid, to rehabilitate such defaulted loans, or to consolidate such defaulted loans out of default, the borrower shall not be considered to have missed any of those payments. \n\n\t\tReporting to Consumer Reporting Agencies\n\nInformation about a borrower's federal student loans is reported to nationwide consumer reporting agencies on a regular basis. Information reported includes items such as loan amount and repayment status (e.g., whether a borrower is current on making payments).\nThe CARES Act specifies that through September 30, 2020, ED shall ensure that any payment that has been suspended under the special administrative forbearance described above shall be reported to a consumer reporting agency as if it were a regularly scheduled payment made by the borrower.\n\n\t\tTeacher Loan Forgiveness\n\nThe Teacher Loan Forgiveness program provides loan forgiveness benefits to borrowers of qualifying Direct Loan and FFEL program loans. To qualify for benefits, a borrower must serve as a full-time teacher for at least five consecutive complete academic years in a qualifying school or public education service agency that serves children from low-income families.\nThe CARES Act specifies that ED shall waive the requirement that years of qualifying teaching service be consecutive if an individual's service was temporarily interrupted due to a qualifying emergency, and after such temporary disruption the borrower resumes teaching and ultimately completes a total of five years of qualifying service. Qualifying service may include service performed before, during, and after the qualifying emergency.\n\n\tAdditional Flexibilities\n\nIn addition to the above-described administrative and congressional actions that have been taken in response to COVID-19, further flexibility and authority is provided through the Higher Education Relief Opportunities for Students Act (HEROES Act). The HEROES Act can only be implemented, however, in connection with a war or other military action or a national emergency declared by the President. The HEROES Act provides the Secretary with authority to waive or modify statutory and regulatory requirements that apply to the HEA Title IV student aid programs in an effort to help affected individuals. There are three categories of affected individuals:\n1. those who are serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency; 2. those who reside or are employed in an area that is declared a disaster area by any federal, state, or local official in connection with a national emergency; and 3. those who suffered direct economic hardship as a direct result of a war or other military operation or national emergency.\nExamples of support that may be available to student loan borrowers under the HEROES Act include the following:\nFor borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who are in the 1 st or 2 nd categories of affected individuals, the initial grace period excludes any period, not to exceed three years, during which a borrower is an affected individual. Borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who were in an \"in-school\" status but left school because they became a 1 st or 2 nd category affected individual may retain their in-school status for up to three years. During this period, the Secretary will pay any interest that accrues on a FFEL Stafford Loan. Borrowers of loans made under the Direct Loan, FFEL, and Perkins Loan programs who were in an \"in-school\" deferment or a graduate fellowship deferment but left school because they became a 1 st or 2 nd category affected individual may retain their deferment for a period of up to three years during which they are affected. During this period, the Secretary will pay any interest that accrues on a FFEL Stafford Loan. For borrowers of Perkins Loans who are in the 1 st or 2 nd categories of affected individuals, any forbearance granted on the basis of their status as an affected individual is excluded from the usual three-year limit on forbearance. Also, for these categories of affected individuals, borrowers of Perkins Loans may be granted forbearance based on an oral request and without written documentation for a one-year period and an additional three-month transition period. Borrowers of FFEL program loans who are in the 1 st or 2 nd categories of affected individuals may be granted forbearance based on an oral request and without written documentation for a one-year period and an additional three-month transition period. For borrowers that may qualify for Teacher Loan Forgiveness (Direct Loan and FFEL program borrowers) or Perkins Loan Cancellation (Perkins Loan program borrowers) on the basis of continuous or uninterrupted qualifying service, such service will not be considered interrupted by any period during which they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period. For borrowers who defaulted on Direct Loan, FFEL, or Perkins Loan program loans and are seeking to rehabilitate their loans by making nine on-time payments according to generally applicable procedures, any payments missed during periods when they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for loan rehabilitation. For borrowers who defaulted on Direct Loan, FFEL, or Perkins Loan program loans and are seeking to reestablish eligibility for Title IV federal student aid by making six consecutive on-time payments, any payments missed during periods when they are in the 1 st or 2 nd categories of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for purposes of reestablishing Title IV eligibility. For borrowers who defaulted on Direct Loan or FFEL program loans and are seeking to consolidate loans out of default, any payments missed during the period when they are in the 1 st or 2 nd category of affected individuals or during a three-month transition period shall not be considered an interruption in the series of payments required for purposes of reestablishing Title IV aid eligibility. Borrowers who are repaying their Direct Loan or FFEL program loans according to an IDR plan and because of their status as 1 st or 2 nd category affected individuals are unable to provide information normally required annually to document their income and family size may maintain their current payment amount for a period of up to three years, including a three-month transition period. This flexibility is made in lieu of having their payment amount adjusted to be based on a standard 10-year repayment plan or an alternative repayment plan, as applicable.","output":null}
{"id":"gao_GAO-20-90","pid":"gao_GAO-20-90_0","input":"\tBackground\n\nAFSOC is the Air Force component of U.S. Special Operations Command  and is responsible for providing Air Force capabilities and forces to  support special operations activities. Special operations are operations  requiring unique modes of employment, tactical techniques, equipment,  and training often conducted in hostile, denied, or politically sensitive  environments. Demand for AFSOC capabilities, including those provided  by the ARC, is identified as part of the Department of Defense\u2019s (DOD)  Global Force Management process for assigning and allocating forces to  meet global requirements. This process allows the Secretary of Defense  to strategically manage forces\u2014including the military services,  conventional forces, and special operations forces\u2014to support strategic  guidance and meet combatant commander requirements. As part of this  process, the Joint Staff validates requirements for forces. U.S. Special  Operations Command, as the joint force provider, is responsible for  identifying and recommending forces to support special operations  requirements.\nU.S. Special Operations Command coordinates with its service  component commands, including AFSOC, to determine which capabilities  and specific units are best suited to meet validated requirements for  special operations capabilities. After receiving these requirements,  AFSOC considers its available options to provide the capabilities needed.  This consideration includes reviewing active duty and reserve component  units that provide specific sets of capabilities, such as intelligence,  surveillance, and reconnaissance; personnel recovery; and radio and  television broadcasting for psychological operations.\nIf AFSOC, in conjunction with Headquarters Air Force, determines that  the best solution to meet a requirement is to use capabilities from the  ARC, it can rely on either volunteerism or involuntary recall to active  duty\u2014referred to as involuntary mobilization\u2014to activate the needed  forces. These two types of activation are described below.\nVolunteerism. The Secretary of the Air Force is authorized to activate  ARC personnel on active duty with the consent of those individuals;  however, the consent of the state governor is required for the  voluntary activation of ANG personnel. According to Joint Publication  4-05, Joint Mobilization Planning (Feb. 21, 2014), volunteerism is  important because it enables a service to fill required positions with  reserve component personnel without its counting against the  statutory limits related to involuntary mobilization. However, the  guidance also states that volunteerism should be used judiciously,  because excessive use of volunteers removes personnel from reserve  component units, which could result in a reduction of the unit\u2019s  readiness in the event of unit mobilization. Another factor that  mobilization planners must take into account is dwell time policy in  relation to deployments. Furthermore, the Air Force has established  specific goals for managing the operational tempo of its forces, and  planners need to consider this factor as well.\nInvoluntary Mobilization. Any unit or individual of a reserve component  may be ordered to active duty under multiple mobilization statutory  authorities under Title 10 of the U.S. Code that vary regarding the  number of personnel who can be mobilized, the duration of the  mobilization, and the approval authority. For example, section 12304  of Title 10, U.S. Code, provides authority to the President to  involuntarily activate up to 200,000 members of the selected reserve  for up to 365 days to augment active forces for an operational mission  or in response to certain emergencies.\n\n\tAFSOC\u2019s Mobilization Process Does Not Fully Support ARC Needs for Timely and Reliable Information\n\n\t\tAir Force Has Established Guidance and Processes for Mobilizing the ARC\n\nAFSOC is required to follow Air Force guidance for accessing ARC units  and personnel. The Air Force guidance implements DOD Instruction  1235.12, Accessing the Reserve Components (RC), which establishes  the overarching policies and procedures for accessing the reserve  components for all military departments. When AFSOC officials  determine that ARC capabilities are the appropriate option for a given  special operation requirement, their access to the reserve component is  governed by Air Force Instruction 10-301, Managing Operational  Utilization Requirements of the Air Reserve Component Forces. This  instruction outlines roles and responsibilities for managing requirements  for reserve component capabilities accessed through both involuntary  mobilizations and volunteerism. Among other things, it establishes that  AFSOC use the reserve component in a cyclical or periodic manner that  provides predictability to ARC individuals, to the individual\u2019s employer,  and to the combatant command receiving the capabilities.\nThe process for accessing the reserve component through involuntary  mobilization is further outlined in Air Force Instruction 10-402,  Mobilization Planning. This guidance implements and expands on the  specific timelines for particular milestones during the mobilization process  established in DOD Instruction 1235.12, such as the identification of the  types of capabilities required and of the unit responsible for providing  them. These timelines vary, depending on whether the requirement for  capabilities is known well ahead of mobilization\u2014a rotational, or  preplanned, requirement\u2014or, conversely, is emergent.\nRotational or preplanned requirements: AFSOC must provide the  reserve component with a request for particular capabilities at least  330 days prior to the mobilization, to allow ANG or AFR officials to  identify the specific individuals who are available to support the  request. Air Force guidance communicates the time frames in which  reserve component personnel are to receive their mobilization orders.  Specifically, AFSOC is required to submit requests to mobilize the  ARC to Air Force headquarters to provide the Secretary of the Air  Force enough time to approve the request; and then to communicate  with ANG and AFR in sufficient time to provide personnel with their  mobilization orders at least 180 days prior the start date of rotational  or preplanned requirements.\nEmergent requirements: AFSOC is required to submit requests so  that personnel receive notification at least 120 days prior to the  mobilization date. In comparison, there are no specific time frames  in the guidance for accessing the reserve component through  volunteerism. The guidance generally discusses volunteerism as an  approach that allows for ARC personnel to quickly respond to  requests for forces.\nAFSOC officials told us that they have observed an increase in requests  from ARC units to use involuntary mobilizations rather than rely on the  use of volunteerism, and that they anticipate this trend to continue, since  involuntary mobilizations afford more predictability than do voluntary  deployments. As such, involuntary mobilizations help personnel manage  the frequency of time spent away from home and maximize their access  to military medical and retirement benefits. Specifically:\nManaging time away from home: Air Force guidance limits the  frequency of involuntary mobilizations for an individual to a standard  of five periods of time spent at home for every one period spent  involuntarily mobilized. For example, an individual involuntarily  mobilized for 90 days would not be available to AFSOC for involuntary  mobilization for another 450 days after the individual\u2019s return. This  provides ARC personnel with some assurance that they will not  deploy again for a specific window of time, unless they volunteer to do  so. We have previously reported on challenges faced by DOD in  setting policies to establish thresholds and track the total time  individual servicemembers may be away from home, including for  exercises, training, and deployment. We found that, with the  exception of the Navy and U.S. Special Operations Command, the  services either were not enforcing or had not established specific and  measurable thresholds in their policies. Additionally, we found that  DOD lacked reliable data for tracking the total time individual  servicemembers spent away from home. We recommended that DOD  clarify its policy to include specific and measurable department-wide  thresholds and take steps to emphasize the collection of complete  and reliable data. DOD concurred with our recommendation.\nMedical and retirement benefits: Involuntary mobilization can also  maximize the window during which personnel receive medical and  retirement benefits. All ARC personnel are eligible for benefits up to  180 days prior to their involuntary mobilization or voluntary  deployment. However, to receive these benefits the individual must  also have been issued mobilization orders identifying the mobilization  date or, for a volunteer, the deployment date. As previously  discussed, Air Force guidance identifies notification time frames  designed to provide ARC personnel involuntarily mobilized to support  rotational or preplanned requirements with their orders at least 180  days prior to the mobilization start date. This time frame allows  personnel to receive these benefits for the entire time they are  potentially eligible. By contrast, personnel who are involuntarily  mobilized for emergent requirements are supposed to receive their  orders with at least 120 days\u2019 notice, and, according to AFSOC  officials, volunteers can receive as little as one week\u2019s notice. As a  result, personnel may prefer involuntary mobilization, as it generally  results in their receiving military medical and retirement benefits for  more time than they would have received them if they had  volunteered to deploy.\n\n\t\tAFSOC Has Mobilization Processes but Faces Difficulties in Providing the ARC with Timely and Reliable Information about Requirements\n\nAFSOC has mobilization processes that follow Air Force guidance, but it  faces difficulties in implementing these processes. Specifically, we found  AFSOC faces challenges in (1) consistently providing ARC units and  personnel with timely notifications regarding anticipated demand for their  capabilities; (2) coordinating with ANG and AFR commands on potential  requirements for ARC capabilities; and (3) sharing reliable information  about mission requirements and resources with ARC units and personnel.\n\n\t\t\tAFSOC Has Not Always Provided Timely Notification to ARC Units and Personnel\n\nThe notifications that AFSOC gives ARC units or personnel of anticipated  demand for their capabilities generally do not meet the notification time  frames associated with involuntary mobilizations for non-emergent  requirements, thereby impeding ARC units\u2019 ability to prepare for  deployments. Officials at three of the four reserve component units we  spoke with told us that AFSOC routinely provides units with limited notice  of requirements for capabilities, even though they predominately support  preplanned requirements that are known to AFSOC well in advance of  their execution. Therefore, the officials stated, AFSOC should have  sufficient time to identify and communicate the requirement for ARC  capabilities to reserve component units to enable them to meet required  time frames (for example, no less than 180 days in the case of non- emergent requirements). However, according to these officials, they  routinely receive 90 or fewer days\u2019 notice of when they are expected to  provide capabilities for a given requirement. Due to this truncated time  frame, the requirement must either be staffed using volunteers or receive  approval from the Secretary of Defense to involuntarily mobilize reserve  component personnel with limited notice.\nReceiving limited notification can create challenges for the ARC unit  providing the capabilities for AFSOC requirements. For example, officials  at one unit we spoke with stated that they requested that AFSOC provide  at least 9 months\u2019 notice prior to a mobilization to ensure that personnel  received adequate training, because the unit provides a range of  specialized capabilities. However, officials stated that what they generally  received was 60 to 90 days\u2019 notice, and that within this time frame the unit  faced challenges in obtaining access to the equipment needed to train  personnel for specific missions. Officials at another unit we spoke with  stated that since 2015 they had received 60 or fewer days\u2019 notice for their  support of AFSOC requirements, one of which was an involuntary  mobilization supporting a non-emergent requirement. An official explained  that while AFSOC\u2019s communication of requirements and planning of  involuntary mobilizations has improved over time, the unit expects that  orders for its next mobilization will be provided with fewer than 180 days\u2019  notice. The official explained that in addition to limiting ARC personnel\u2019s  access to medical and retirement benefits, the abbreviated time frames  make it difficult for them to coordinate their absences with their civilian  employers. AFSOC officials acknowledged that they have been late to  notify units in the past and identified this as an area in which they are  working to improve. The officials explained that in some instances the late  notification is a result of factors outside of AFSOC\u2019s control, such as  instances in which the Secretary of Defense\u2019s process for approving  requirements is delayed.\n\n\t\t\tAFSOC Has Not Always Coordinated Directly with ANG and AFR Commands\n\nWe identified concerns regarding AFSOC\u2019s practice of communicating  directly with reserve component units, rather than formally coordinating  with ANG and AFR commands, to develop potential requests for ARC unit  capabilities. For example, AFR officials stated that geographic proximity  to AFSOC frequently results in one unit\u2019s receiving informal requests from  AFSOC for its capabilities. That unit provides remotely piloted aircraft  capabilities, which do not require personnel to deploy overseas. Officials  explained that AFSOC will contact that unit directly to request capabilities  to supplement the active duty personnel completing the same mission,  but commonly AFSOC will provide only a few days\u2019 notice prior to the  requirement. According to these officials, personnel generally respond to  these requests by volunteering with limited advance notice.\nAFSOC officials stated that communicating informally with the units to  determine the availability of their personnel and capabilities enables  AFSOC to expedite the identification of personnel potentially available to  meet a requirement. However, headquarters officials for both ANG and  AFR\u2014who are responsible for identifying the specific personnel available  to meet a requirement\u2014stated that these indirect communications  impede their ability to strategically manage and appropriately resource  units. For example, headquarters AFR officials identified an instance in  which changes to a unit\u2019s anticipated contribution to a mission were  arranged with the unit, but not with officials at their higher headquarters at  the AFR. The requirement was originally for the AFR unit to supplement  an active duty unit already providing the capability for AFSOC, but was  expanded to require the AFR unit to have sole responsibility for providing  part of the capability. The absence of direct communication and formal  coordination between AFR headquarters and AFSOC during this  expansion led to differing expectations regarding the number of AFR  personnel needed to provide the capability required. AFR officials stated  that as a result of limited transparency into future requirements for that  unit, AFR headquarters did not request the appropriate level of funding for  the unit, thereby limiting the resources available to support the  requirement. AFSOC officials acknowledged that their use of informal  communication with units instead of coordinating with ANG and AFR  headquarters is not an ideal approach and could be improved.\n\n\t\t\tAFSOC Does Not Always Share Reliable Information about Mission Requirements and Resources\n\nWe identified concerns regarding the frequency with which AFSOC has  changed the information it has communicated to ARC units about  anticipated requirements, thereby creating unpredictability and impeding  those units\u2019 ability to train for and ultimately provide the capabilities  needed to execute those requirements. While requirements may change  subject to combatant command needs, AFSOC\u2019s availability to proactively  coordinate with both the combatant command and the ARC has been  limited. AFSOC officials stated that, due to their limited capacity to  manage involuntary mobilizations, they are often dedicating time only to  those mobilizations that require urgent attention, as opposed to refining  the details of the requirement and coordinating with the units in advance  of the mobilization.\nARC officials stated that the unpredictability resulting from the changes  that occur can introduce challenges to the units\u2019 ability to execute  requirements. For example, officials at one unit stated that the location of  a previous requirement changed at least three times in the 60 days  preceding its involuntary mobilization. Officials explained that changes to  the location of the requirement meant that the capabilities required by  AFSOC also changed, because the unit provides intelligence,  surveillance, and reconnaissance capabilities that need to be supported  by specific communications equipment. Depending on the location, this  equipment may already be in place, or it may be that the unit must bring it  with them. In a different instance, the same unit arrived at a location to  provide its intelligence, surveillance, and reconnaissance capabilities and  found that the location lacked the communications equipment the unit  needed to effectively use its capabilities.\nFurther, ARC officials explained that changes regarding what capabilities  are needed can create training challenges unique to the reserve  component. ARC unit officials explained that while reserve component  personnel maintain a standard level of readiness at all times,  deployments may require them to train to a specific skill set to meet a  mission requirement. For example, special tactics squadrons supporting  AFSOC requirements can support three different mission sets, each of  which may require specialized training to prepare for a specific mission,  according to unit officials. Given the nature of the reserve component,  these personnel have to complete this training during the limited windows  of time in which they are called in from their full-time civilian jobs. As a  result, the ARC has limited flexibility in responding to changes in training  requirements. AFSOC officials acknowledged that the ARC can face  challenges in meeting training requirements and that the advanced  planning associated with involuntary mobilizations can help ensure that  units have enough time to meet training requirements.\n\n\t\tOther Air Force Entities Use Alternative Approaches to Planning, Coordinating, and Executing Involuntary Mobilizations, but AFSOC Lacks the Organizational Capacity\n\nOther Air Force entities that provide ARC capabilities to meet Air Force  requirements through mobilization have established alternative  approaches to initiating, planning, and coordinating their respective  requirements for reserve component capabilities. Specifically, officials  from Air Combat Command and Air Mobility Command, which are Air  Force components similar to AFSOC regarding mobilization of ARC units,  described entities established within their operations departments to  coordinate with the ARC when implementing the involuntary mobilization  process. These entities each consist of four to five individuals who are  tasked on a full-time basis with ensuring that the reserve components are  utilized in a predictable manner. The efforts of these entities include  coordinating with the ARC to create plans that cover at least 2 years of  anticipated rotational and preplanned requirements. While Air Combat  Command and Air Mobility Command officials stated that they are  responsible for coordinating a larger number of mobilizations than  AFSOC coordinates, they noted that all three follow the same Air Force  guidance with regard to the involuntary mobilization process.\nOfficials from an ARC personnel recovery unit that supports Air Combat  Command missions highlighted the benefits of the predictability that  comes from Air Combat Command\u2019s planning efforts. According to  those officials, anticipated mobilizations are communicated to them in a  schedule that covers a span of 5 years. More than a year before the unit  is scheduled to involuntarily mobilize, Air Combat Command  communicates the specifics of the requirement for the mission. The  officials stated that, in their experience, these details rarely change once  they have been communicated to the unit. By contrast, as previously  discussed, we spoke with officials from an ARC special tactics squadron  that provides AFSOC with capabilities similar to those of the personnel  recovery unit described above, who stated that they regularly receive  only 60-90 days\u2019 notice prior to being deployed. They stated that they  face difficulties in adequately training personnel to provide capabilities  within these time frames. AFSOC officials stated that this issue is driven  in part by the fact that units coordinate directly with requesting commands  to fill their desired requirements.\nAccording to AFSOC officials, AFSOC does not have a headquarters  entity dedicated to managing the planning, coordination, and execution of  reserve component capabilities because, until recently, AFSOC did not  use its reserve components to support ongoing missions to the extent that  they do today. As a result, it was not considered necessary to have an  organizational entity dedicated to managing involuntary mobilizations.  Instead, AFSOC assigned the roles and responsibilities associated with  initiating, planning, and coordinating ARC mobilizations within its overall  process for managing AFSOC\u2019s assignment and allocation of forces.  AFSOC and ARC officials stated that under this process, a single  individual at AFSOC is responsible for managing the involuntary  mobilizations as a secondary duty. AFSOC officials stated that, given the  scope of other assigned responsibilities, this individual focuses on  managing involuntary mobilizations about half of one day in a work week.\nAccording to the officials, having a limited staff dedicated to initiating,  planning, and coordinating involuntary mobilizations results in AFSOC\u2019s  responding to issues as they become urgent and impedes its ability to  utilize the ARC in a predictable and stable manner. AFSOC officials also  stated that the shift to using the ARC to support AFSOC\u2019s steady state  requirements, along with the increasing use of involuntary mobilizations to  access ARC capabilities, have exposed the limitations of their capacity to  manage involuntary mobilizations. These officials added that creating a  more robust organizational capacity to manage the involuntary  mobilization of the reserve component could counteract some of the  challenges they have experienced in providing timely notification to ARC  units, directly coordinating with ANG and AFR commands, and identifying  and communicating reliable information about requirements to ARC units.\nAFSOC officials attribute the challenges faced in implementing AFSOC\u2019s  involuntary mobilization processes to the absence of adequate capacity to  manage involuntary mobilizations. Specifically, they acknowledged that  with additional capacity they would be better positioned to undertake the  efforts needed to (1) provide more timely notification to ARC units, (2)  coordinate with ANG and AFR commands, and (3) increase  communication with the commands generating requirements. While  officials acknowledged that some last-minute changes are unavoidable,  they told us that having more personnel dedicated to AFSOC\u2019s  mobilization process could potentially lead to having more timely  notifications or better indications of imminent changes. Further, some  factors that can affect the involuntary mobilization process fall outside of  AFSOC\u2019s control, such as delays in the decision making process at the  Secretary of Defense level and changes in combatant commander  requirements. Although AFSOC cannot control all factors that affect  involuntary mobilization of the ARC, increasing its capacity to manage  involuntary mobilizations would improve its ability to anticipate and  proactively address the challenges introduced by external factors.\nAFSOC officials stated that in recognition of this need, the command\u2019s  operations center has submitted multiple requests for additional  resources to the headquarters in order to create a more robust  organizational capacity to manage the involuntary mobilization of the  reserve component. For example, the request submitted in January 2019  stated that AFSOC currently does not provide the support and guidance  that ARC units need to properly execute the involuntary mobilization  process. The request sought one additional full-time position dedicated to  managing involuntary mobilizations and coordinating involuntary  mobilizations with the ARC. Although AFSOC officials told us that the  request was validated by AFSOC leadership, the validation of a request  does not ensure that it will receive funding. After competing against other  funding requests from other Air Force components, the Financial  Management Board did not fund the position in fiscal years 2018 or 2019  because those other requests received higher priority. As an alternative  to the full-time position requested by the operations center, AFSOC  officials identified ongoing efforts to coordinate with the ANG that would  result in the ANG\u2019s allocating personnel to fill a temporary position at  AFSOC. The individual in this position would be responsible for  supporting the mobilization process. AFSOC officials stated that such an  arrangement would help address the capacity challenges they currently  face, but also noted that it would be a short-term solution, and highlighted  that the individual filling the position would need to be familiar with  AFSOC, ANG, and AFR processes to execute his or her duties. In  addition, AFSOC officials could consider realigning existing capacity  within the command to directly address the limited capacity to manage  involuntary mobilizations. However, AFSOC officials emphasized that the  command as a whole currently operates with limited capacity.\nIn the absence of the Air Force developing additional AFSOC  organizational capacity dedicated to the planning, coordination, and  execution of involuntary mobilizations, AFSOC will continue to be  impeded in its ability to manage involuntary mobilizations in accordance  with Air Force guidance, including providing the notice required to access  the ARC through involuntary mobilization in support of preplanned or  rotational requirements. Additionally, at its current capacity AFSOC will  likely face increasing challenges in providing timely notification to ARC  units, coordinating with ANG and AFR commands, and enhancing  communication with the commands generating requirements to help  solidify mission specifics, as the number of involuntary mobilizations  quadruple by 2021, as estimated by AFSOC officials. As a result, units  may not be fully prepared to support requirements or able to effectively  conduct their mission once in theater. Further, AFSOC will continue to be  impeded in coordinating with ANG and AFR commands in a manner that  enables the ARC to strategically manage and resource units in support of  AFSOC\u2019s requirements.\n\n\tThe ARC Does Not Provide Complete Information to AFSOC on Units Available for Mobilization or on Voluntary Deployments\n\n\t\tThe ARC Does Not Have Consolidated Information on Reserve Component Units Available to Support Special Operations Activities\n\nWhile the Air Force\u2019s force-generation model provides the ARC with a 24- month picture of the units it anticipates will be used to meet potential Air  Force-wide deployments, the ARC does not have a comparable model  with information on which ARC units could be used to support AFSOC  requirements for special operations activities. According to officials, the  ARC does not have a force-generation model for two reasons. First, while  the Air Force model works for Air Force-wide requirements, it does not  apply to special operations-specific requirements because they are  unique to the Air Force\u2019s special operations component, AFSOC.  According to AFSOC officials, their command deploys units and  personnel differently from typical Air Force units in order to maximize the  number of requirements they can support with a smaller force. Second,  the ARC has historically supported special operations activities using  volunteerism, which is much more flexible than involuntary mobilization  and requires less upfront planning or notification. As a result, ARC  officials did not feel the need to develop a force-generation model for  special operations requirements. ANG and AFR officials told us that ARC  units will sometimes keep a unit-level schedule of their potential  deployments, but that information is not available in a consolidated or  consistent format. AFSOC officials added that any force-generation model  for special operations should consider the limited capacity of some  special operations capabilities. Officials stated that some capabilities in  the ARC are limited to one unit, which results in AFSOC deploying parts  of units rather than the whole unit to cover more requirements.\nANG and AFR officials agreed that a force-generation model regarding  future deployments could help identify which ARC units would be  susceptible to deploy during a given period of time, which would be  beneficial for planning ARC deployments. Consolidated information on  potential unit deployments would provide units with advanced notification,  making it easier to accomplish deployment preparation activities and  helping ARC personnel make arrangements for their potential  deployments. For example, ANG officials told us that advanced  notification to units can give the ARC more time to incorporate needed  training into drill training. Furthermore, unit personnel would also have  more time to make arrangements with civilian employers or in their  personal lives, making their transition to active duty easier and making it  more likely that they will view mobilizations favorably in the future.\nAdditionally, these officials stated that, with such a model, ANG and AFR  could more easily identify and communicate which ARC units would be  available for mobilization to support special operations activities. AFSOC  officials stated that, in turn, this could provide AFSOC with more certainty  that it would have access to ARC forces when needed. According to ANG  and AFR officials, AFSOC officials have expressed some concerns about  whether their command will have access to ARC forces. Specifically,  since a substantial part of the total Air Force capability resides in the  ARC, AFSOC officials are not certain that the capacity of ARC units  supporting special operations will be able to meet future requirements.  The officials added that by identifying units or individuals susceptible for  deployment in advance, AFSOC would have more confidence in the  ARC\u2019s ability to support the command\u2019s requirements.\nAccording to Air Force guidance, a predictable force-generation model is  used to ensure proper force readiness and rapid responses to emerging  crises. Specifically, Air Force Instruction 10-401, Air Force Operations  Planning and Execution, calls for the Air Force and its components,  including the ANG and AFR, to manage the deployment of its forces in  order to meet global requirements while maintaining the highest possible  level of overall readiness. The instruction calls for the Air Force to  accomplish this task by establishing a force-generation model that can be  used to manage the rhythm of force deployments to meet global  combatant command requirements. The intent of the force-generation  model is to establish a predictable, standardized pattern to ensure that  forces are properly organized, trained, equipped, and ready to sustain  capabilities while rapidly responding to emerging crises.\nANG officials told us that they have taken some initial steps to create a  force-generation model and consolidate the various unit-level schedules  of ARC forces supporting special operations activities. Specifically, the  ANG advisor to AFSOC was developing a consolidated schedule of ARC  units intended for use by AFSOC to identify ANG units that could mobilize  to support AFSOC requirements. However, according to AFSOC officials,  the ANG advisor was expected to retire soon, and we found that ANG  headquarters officials were not aware of this effort, and there were no  plans to institutionalize it. AFR officials were likewise not aware of any  similar effort to consolidate schedules for their units\u2019 different capabilities  to support special operations activities. Without having a method for  providing consolidated information on reserve component units that are  available for deployment, the ARC will not have the information it needs  to successfully plan its deployments, or easily identify and communicate  to AFSOC which of its units are or will be available for mobilization.  Furthermore, AFSOC officials may continue to have concerns that they  will not have access to high demand ARC capabilities to deploy under a  mobilization.\n\n\t\tThe ARC Does Not Have Complete Information on Voluntary Deployments\n\nAccording to officials, although ANG and AFR units have a general  understanding as to how many volunteers they have supporting special  operations requirements at the unit level, the ANG and AFR lack a  mechanism for tracking volunteer deployment rates across the ARC.  Specifically, information on reserve components\u2019 volunteer deployments  is not available in a form that facilitates tracking in order to understand  rates of volunteering or the contributions made by the ARC in supporting  special operations activities, according to officials.\nThe Air Force requires the ANG and AFR to track key data to ensure  proper management of ARC utilization and mission execution.  Specifically, Air Force Instruction 10-301, Managing Operational  Utilization Requirements of the Air Reserve Component Forces, calls for  the Air Force to identify full mission requirements for ARC utilization by  collecting, tracking, and organizing relevant data and prioritizing  requirements. It also states that these data are intended to aid in  allocating funding, matching units to requirements, executing  requirements, assessing each step of the process, and forecasting future  requirements. Additionally, Standards for Internal Control in the Federal  Government establishes that management should obtain relevant data  from reliable internal and external sources in a timely manner to facilitate  effective monitoring.\nANG and AFR officials told us that voluntary deployments are more  difficult to track than are involuntary mobilizations. Specifically, the  statutory requirements for involuntarily mobilizing ARC units or personnel  make tracking them simpler. For example, according to officials the  Secretary of Defense is required to approve or be notified of involuntary  mobilizations, and ANG and ARC units receive specific orders, all of  which are tracked closely. Voluntary deployments, however, do not have  the same approval requirements.\nNevertheless, ANG and AFR officials told us that ARC units may have  some information, as detailed below, on the numbers of volunteer  deployments, although this information provides only a partial picture of  volunteerism.\nTravel System Data: Officials from a reserve component unit we  visited reported that some of the information on voluntary  deployments could be compiled from travel systems used to send  ARC units and personnel overseas. However, these officials added  that matching travel records to the volunteer status of individuals  could be time-consuming, because the travel systems are not  designed to perform this function. Furthermore, unit officials told us  that this travel information would be incomplete even if it were  compiled, because it would not include units and individuals  supporting operational requirements from their home stations\u2014that is,  not traveling outside their normal locations. For example, according to  unit officials, personnel supporting remote piloted aircraft would not be  included in the information collected from the travel systems because  they do no travel outside their normal duty stations to carry out their  missions. Without travel orders, the system would not show these  types of deployments. Unit officials told us that there could be several  cases like this one in which the information compiled from the travel  system or other sources could be incomplete.\nMan-Day Estimates: An AFSOC official told us that the system used  to track military personnel appropriation man-days could be another  source used to track volunteerism among ANG and AFR units.  According to this official, AFSOC uses a data system to transfer man- days to the volunteering ARC unit. This official stated that the  system used to make these transfers may contain the information  needed to track volunteerism, but acknowledged that no one at  AFSOC was using the system for this purpose. Furthermore, ANG  and AFR officials confirmed that the data system is not currently used  for tracking rates of volunteerism among ARC units.\nAccording to AFR officials, tracking volunteerism would allow them to  more easily document the ARC\u2019s contributions to support special  operations and evaluate whether ARC forces were being effectively  utilized. Specifically, ANG and AFR officials expressed concerns that  different rates of individual volunteerism within and across ARC units may  result in a misleading picture of overall unit utilization. In some cases,  incomplete data on volunteerism can result in overstating unit  contributions. For example, the unit-level figures regarding deployments  are actually averages of all the individuals in the unit. Officials expressed  concerns that as a result of using averages, units may appear to be more  highly utilized than they actually are, due to the high rates at which some  individuals from the unit volunteer to deploy. According to ANG and AFR  officials, some ARC personnel volunteer at high rates because they prefer  the additional income or benefits from these deployments, while other  personnel from the same units may prefer to deploy less often. ARC  officials expressed concerns that this disparity may not be immediately  visible to ARC and AFSOC leadership. AFSOC officials told us that they  share some of these concerns.\nOther officials expressed concerns that without good information on  volunteerism rates, the ANG and AFR could not effectively manage  operational tempo goals. To measure operational tempo, DOD has  established policies relating to how long military personnel are deployed  versus at home (referred to as dwell time, or dwell). For example, ARC  personnel who deploy for 7 months and are in dwell for 14 months would  have a deployment-to-dwell ratio of 1:2. For ARC units, DOD also tracks  the mobilization-to-dwell ratio, which is the ratio of how long ARC  personnel are involuntarily mobilized versus not mobilized. DOD guidance  establishes that the mobilization-to-dwell ratio for ARC units should be  1:5.\nAccording to ANG and AFR officials, ARC voluntary deployments are not  factored into the dwell calculations for either ratio, making it more difficult  to ensure that deployments do not fatigue ARC forces. Additionally,  Special Operations Command policy specifies that ARC units supporting  special operations should maintain the same deployment cycle as active  duty units, which as a goal should be no less than a 1:2 deployment-to- dwell ratio. ANG, AFR, and AFSOC officials agreed that tracking  volunteer deployment rates more comprehensively and consistently  would provide greater perspective on how ARC units are utilized and help  them more effectively manage their operational tempo goals.\nOfficials stated that an additional consequence of having incomplete data  on volunteerism is that the overall contributions of the ARC can be  understated, because the full range of support that ARC units and  personnel are providing is not being documented. For example, a report  used by the Air Force to track force contributions from its components,  including the ARC, shows that the AFR contributed forces to support  special operations activities for about 6 months of an approximately 4- year period. However, according to AFR officials, the command\u2019s  contribution to support special operations activities was much higher than  what is documented in the report. The officials stated that AFR also  provided volunteer support to AFSOC over the entire period but that its  contributions are not fully reflected in the report, because volunteers  supporting an AFSOC-assigned mission are counted among the  contributions made by other active duty forces, rather than by AFR.\nWithout complete information on volunteer deployment rates among  reserve component forces, the ANG and AFR may face difficulties in  ensuring the effective utilization of their forces to support special  operations activities, documenting force contributions from the ARC, and  managing operational tempo and deployment-to-dwell goals. Further, the  ARC will not have the information it needs to ensure effective  management of its force utilization and mission execution. Specifically, it  will not be able to determine whether units are being fully utilized,  because of the distorted or incomplete volunteerism information.\n\n\tConclusions\n\nWith a substantial part of the total Air Force capability residing in the  ARC, AFSOC relies on mobilized ARC forces to support its operations.  Furthermore, AFSOC\u2019s increasing use of ARC as an operational reserve  has highlighted the importance of the ARC\u2019s and AFSOC\u2019s planning and  information-sharing efforts. However, AFSOC\u2019s implementation of its  mobilization process impedes its ability to provide the ARC with timely  notification of mobilizations, coordinate with ANG and AFR commands,  and share reliable information about requirements with the ARC. Without  resolving AFSOC\u2019s organizational capacity challenge in managing  AFSOC requirements for reserve capabilities, AFSOC\u2019s implementation  of this process is unlikely to improve.\nAFSOC\u2019s use of the ARC is also affected by the unavailability of complete  information regarding both the units available to mobilize and voluntary  deployment rates. Specifically, while the ARC is able to identify the units  anticipated to be available to support non-special operations  requirements, it does not have a method for communicating consolidated  information on the availability of units for special operations requirements.  Without such a method, AFSOC and the ARC do not have easily  accessible information about the current and future availability of ARC  units to support special operations requirements. In addition, voluntary  deployments are a key piece of the ARC\u2019s support of AFSOC  requirements. However, the ARC has not developed a mechanism for  tracking the rate at which they occur. Without tracking volunteer  deployment rates, the ARC is limited in its ability both to ensure that its  forces are effectively utilized and to communicate the level of contribution  made by ARC volunteers in support of special operations requirements.\n\n\tRecommendations for Executive Action\n\nWe are making three recommendations to DOD:  The Secretary of the Air Force, in coordination with ANG and AFR, should  ensure that AFSOC has the organizational capacity to effectively initiate,  coordinate, and execute ARC mobilizations, to include ensuring timely  and reliable notification of requirements to those units. (Recommendation  1)\nThe Secretary of the Air Force should ensure that the ANG and AFR  develop a method for providing AFSOC with consolidated information  regarding units available for immediate and future mobilizations to  support special operations activities, such as the Air Force provides to its  units with its force-generation model. (Recommendation 2)\nThe Secretary of the Air Force should ensure that the ANG and AFR  develop a mechanism for tracking volunteer deployments to better  manage ARC force utilization. (Recommendation 3)\n\n\tAgency Comments\n\nIn written comments on a draft of this report, DOD concurred with one  recommendation and partially concurred with two recommendations.  DOD\u2019s comments are restated below and reprinted in appendix I. DOD  also provided technical comments, which we incorporated where  appropriate.\nDOD concurred with the first recommendation that the Secretary of the  Air Force, in coordination with ANG and AFR, should ensure that AFSOC  has the organizational capacity to effectively initiate, coordinate, and  execute ARC mobilizations, to include ensuring timely and reliable  notification of requirements to those units. In its response, DOD stated  that the Air Force continues to balance manning requirements across the  spectrum of operations. DOD also stated that fully manning AFSOC for  this staff function would be helpful, whether additional manpower is  programmed or AFSOC mitigates internally by reallocating manpower.  We believe that fully manning AFSOC for this staff function, if fully  implemented, would meet the intent of the recommendation. In its  comments on this recommendation, DOD also stated that the ARC has a  process in place to provide timely notification to ANG and AFR units once  requirements are known. The department added that the ANG  implemented the Agile ARC Mobilization Process on June 1, 2019, which  streamlined policy and procedural chokepoints and improved notification  timelines by an average of 60 days. We note that, while improvements in  the notification timelines would be beneficial, it is too soon to understand  the long-term effect of the implementation of this process.\nDOD partially concurred with the second recommendation that the  Secretary of the Air Force should ensure that the ANG and AFR develop  a method for providing AFSOC with consolidated information regarding  units available for immediate and future mobilizations to support special  operations activities, such as the Air Force provides to its units with its  force-generation model. In its comments, DOD stated that the AFR  currently provides AFSOC with information on units available, using  Reserve Component Periods, and that the AFR will assess whether re- posturing in multiple Reserve Component Periods will provide a portion of  capability with greater flexibility. We agree that this is a reasonable  approach. However, as we noted in our report, consolidated information  on reserve component units that are available for deployment could  provide ARC units with advanced notification, making it easier to  accomplish deployment preparation activities and help ARC personnel  make arrangements for their potential deployments. Additionally, DOD  stated that current information technology initiatives with the Air Force  Integrated Personnel and Pay System will eventually provide the Air  Force with functionality allowing a single, integrated system of software  suites. According to the department, Air Force Integrated Personnel and  Pay System will support a rapid and accurate information flow from the  first identification of a requirement through the processing and delivering  of orders, allowing the Air Force to start pay and benefits in an auditable  manner. However, DOD did not identify a timeline for when that system  would be available. We believe that improvements in the flow of  information regarding ARC unit availability are necessary and would help  to ensure that the ARC can successfully plan deployments, or easily  identify and communicate to AFSOC which of its units are or will be  available for mobilization. We believe that if this planned system is  implemented as described, it would meet the intent of the  recommendation.\nDOD partially concurred with the third recommendation that the Secretary  of the Air Force should ensure that the ANG and AFR develop a  mechanism for tracking volunteer deployments to better manage ARC  force utilization. In its response, DOD stated that tracking volunteer  deployments requires timely information from AFSOC to properly identify  the requirements, establish expeditionary ARC units, and document the  transaction when ARC members are activated. Further, it stated that in  the short term, the AFR will work with AFSOC on further developing use  of the Air Force Consolidated Planning Schedule to better define  requirements. While coordination with AFSOC could help improve the  tracking process, we believe that the ANG and AFR also need to develop  a mechanism for tracking volunteer deployments to better manage ARC  force utilization. Additionally, DOD noted that the planned information  technology initiative, which it described in its response to our second  recommendation, could also have benefits for tracking voluntary  deployments. We believe that if the planned system is able to fully track  voluntary deployments, it would meet the intent of the recommendation.\nWe are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Under Secretary for Personnel  and Readiness; the Chief of the National Guard Bureau; and the  Commanders of Special Operations Command, Air Force Special  Operations Command, and Air Force Reserve Command. In addition, the  report will be available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf 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  respective 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.\n\nAppendix I: Comments from the Department of Defense\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, individuals who made key  contributions to this report include Jim Reynolds, Assistant Director;  Adam Anguiano, Tracy Barnes, Adrianne Cline, Shylene Mata, Walter  Vance, and Cheryl Weissman.","output":null}
{"id":"gao_GAO-20-364","pid":"gao_GAO-20-364_0","input":"\tBackground\n\nCongress passed TRIA in 2002 to address some of the challenges the  insurance industry and businesses faced after the September 11 terrorist  attacks. For example, after the attacks, insurers left the market, excluded  terrorism risk coverage from policies, or steeply increased premiums. The  Real Estate Roundtable reported in 2002 that nearly $16 billion of real  estate projects in 17 states were stalled or cancelled because of the lack  of coverage for terrorism risk (because many businesses are required to  have coverage for terrorism risk as a condition for a mortgage loan).\nThe purpose of TRIA is to (1) protect consumers by addressing market  disruptions and ensuring the continued widespread availability and  affordability of commercial property\/casualty insurance for terrorism risk;  and (2) allow for a transitional period for private markets to stabilize,  resume pricing of such insurance, and build capacity to absorb any future  losses, while preserving state insurance regulation and consumer  protections.\nBy law, an insurer\u2019s coverage for terrorism losses must not differ  materially from the terms, amounts, and other coverage limitations  applicable to losses arising from other events. For example, an insurer  offering $100 million in commercial property coverage also must offer  $100 million in commercial property coverage for certified acts of  terrorism. Insurers may charge a separate premium to cover their  terrorism risk. TRIA requires insurers to make terrorism coverage on  certain lines of property\/casualty insurance (such as coverage for fire,  workers compensation, and liability) available to commercial policyholders  (such as businesses), although TRIA does not require commercial  policyholders to buy it.\nThe federal government does not collect an up-front charge from insurers  for the government\u2019s coverage of terrorism risk under TRIA. In a 2019  report, we noted that the federal government has multiple programs that  can provide compensation to specific third parties if they suffer certain  losses from future adverse events, and the federal government may not  always charge premiums for accepting this risk of loss. However, under  TRIA, the government must recoup at least some of its losses following a  certified act of terrorism, as discussed below. TRIA has not caused  financial liabilities to the federal government, but it could require large,  previously unbudgeted expenditures by the federal government if an  event occurred.\n\n\t\tCertification of an Act of Terrorism for Purposes of TRIA and Claims Processing\n\nFor insurers to start submitting claims and receiving payments to cover  terrorism losses, Treasury must first certify an event as an act of terrorism  under TRIA. Certification requires the Secretary of the Treasury to  evaluate the event based on two criteria:  1.  Did the event meet the nonmonetary definition established under  TRIA? Defining an event as an act of terrorism includes determining  whether it was \u201ccommitted by an individual or individuals as part of an  effort to coerce the civilian population of the United States or to  influence the policy or affect the conduct of the United States  Government by coercion.\u201d It also includes determining whether it was  a \u201cviolent act or an act that is dangerous\u201d to human life, property, or  infrastructure, and whether it resulted in damage within the United  States or certain areas outside the United States. As part of this  determination, the Secretary of the Treasury must consult with the  Attorney General and Secretary of the Department of Homeland  Security before certifying an event.  2.  Did the event cause at least $5 million in insurance losses in  TRIA-eligible lines? TRIA prohibits the Secretary of the Treasury  from certifying acts of terrorism unless insurance losses exceed this  threshold.\nIn 2004 Treasury issued regulations to implement TRIA\u2019s procedures for  filing insurer claims for payment of the federal share of compensation for  insured losses. Within 7 days after certification of an act of terrorism, a  Treasury contractor is to activate a web-based system for receiving  claims from insurers and responding to insurers that seek assistance.\n\n\t\tLoss Sharing under TRIA\n\nThe Terrorism Risk Insurance Program provides for shared public and  private compensation for insured losses resulting from certified acts of  terrorism. Under the current program, if an event were to be certified as  an act of terrorism and insured losses exceeded $200 million, an  individual insurer that experienced losses first would have to satisfy a  deductible before receiving federal coverage. An insurer\u2019s deductible  under TRIA is 20 percent of its previous year\u2019s direct earned premiums in  TRIA-eligible lines. After the insurer pays its deductible, the federal government would reimburse the insurer for 80 percent of its additional  losses and the insurer would be responsible for the remaining 20 percent.  Annual coverage for losses is capped\u2013\u2013neither private insurers nor the  federal government cover aggregate industry insured losses in excess of  $100 billion.\nAfter an act of terrorism is certified and once claims are paid, TRIA  requires Treasury to recoup part of the federal share of losses in some  instances. Under this provision, when insurers\u2019 uncompensated insured  losses are less than a certain amount (up to $41 billion for 2020),  Treasury must impose policyholder premium surcharges on commercial  property\/casualty insurance policies until total industry payments reach  140 percent of any mandatory recoupment amount. When the amount of  federal assistance exceeds this mandatory recoupment amount, TRIA  allows for discretionary recoupment.\nPrior TRIA reauthorizations decreased federal responsibility for losses  and increased private-sector responsibility for losses, but the 2019  reauthorization of TRIA made few changes to the program. For instance,  the 2015 reauthorization required incremental decreases in the federal  share of losses over 5 years (to 2020). The 2019 reauthorization  extended the program to December 31, 2027 and proportionately  adjusted the dates by which the Secretary must recoup policyholder  surcharges to the new reauthorized time frame, but it did not change the  federal share of losses.\n\n\t\tTRIA-Eligible Lines of Insurance\n\nTRIA covers insured losses in eligible lines that result from a certified act  of terrorism (see table 1). Many lines of commercial property\/casualty  insurance are eligible for TRIA, such as workers\u2019 compensation, fire, and  commercial multiple peril (multiperil) lines. States generally require that  workers\u2019 compensation insurance covers terrorism risk and do not permit  exclusions, including for terrorism, according to Treasury. Workers\u2019  compensation covers an employer\u2019s liability for medical care and physical  rehabilitation of injured workers and helps to replace these workers\u2019 lost  wages. TRIA also excludes certain lines (such as personal property and  casualty insurance and health and life insurance).\nTerrorism coverage typically is embedded in all-risk property policies but  also may be available in stand-alone policies, according to Treasury:\nEmbedded. Most policyholders have terrorism risk insurance  coverage embedded in a policy that covers other risks. Embedded  policies are subject to TRIA\u2019s \u201cmake available\u201d requirements. In the  event of a certified act of terrorism, policyholders would be covered if  they have not declined terrorism coverage.\nStand-alone. Stand-alone terrorism policies provide coverage only for  terrorism risks. Insurers may provide stand-alone terrorism coverage  through \u201ccertified\u201d policies that are subject to TRIA terms and  conditions and provide coverage only in the event of a certified act of  terrorism. Alternatively, insurers may provide terrorism coverage  through \u201cnoncertified\u201d policies that do not meet TRIA terms and  conditions. Such noncertified policies cover terrorism-related losses  regardless of whether Treasury certifies an event, but losses paid by  insurers would not be eligible for reimbursement under TRIA.\n\n\t\tNonconventional Coverage under TRIA\n\nNonconventional terrorism risks generally include nuclear, biological,  chemical, or radiological (NBCR) weapons, as well as cyber risks.  Predicting losses associated with nonconventional risks can be  particularly challenging because of the difficulty in predicting terrorists\u2019  intentions and the potentially catastrophic losses that could result.\nTRIA is silent on NBCR and cyber risks, but Treasury has clarified how  these nonconventional risks are covered under TRIA. In 2004, Treasury  issued an interpretive letter clarifying that the act\u2019s definition of insured  loss does not exclude losses resulting from nuclear, biological, or  chemical attacks, and does not preclude Treasury from certifying a  terrorist attack involving such weapons. According to Treasury\u2019s  interpretive letter, the program covers insured losses from NBCR events  resulting from a certified act of terrorism. However, for TRIA provisions to  apply, insurers must provide coverage for those perils. Most insurers are  not required to provide NBCR coverage and generally have attempted to  limit their exposure to NBCR risks by largely excluding NBCR events from  property and casualty coverage.\nIn December 2016, Treasury issued guidance clarifying that, to the extent  that insurers write cyber insurance in TRIA-eligible lines, the TRIA  provisions apply. We further discuss Treasury\u2019s guidance on cyber risk  later in this report.\n\n\t\tProgram Administration and Reporting Requirements\n\nTRIA authorizes Treasury to administer the Terrorism Risk Insurance  Program. The Secretary of the Treasury administers the program with the  assistance of Treasury\u2019s Federal Insurance Office, according to Treasury  officials.\nTRIA requires Treasury to conduct a biennial study of the effectiveness of  the program. The 2015 TRIA reauthorization added a requirement that  insurers submit information to Treasury about the coverage they write for  terrorism risk, including the lines of insurance with exposure to such risk,  the premiums earned on such coverage, and the participation rate for  such coverage. The 2019 reauthorization added a requirement that  Treasury report on the availability and affordability of terrorism risk  insurance, including an analysis specifically for places of worship. Since  2016, Treasury has completed annual assessments of the program,  including a report on the effectiveness of the program in June 2018.  Treasury\u2019s reports focused specifically on small insurers in June 2017  and June 2019.\nTreasury conducts an annual data call to collect information for the  required studies and for purposes of analysis and program administration.  Participation in the data call is mandatory for all insurers that write  commercial property and casualty policies in lines of insurance subject to  TRIA, subject to two exceptions. Treasury collects data separately for  the following four groups of insurers:\nSmall insurers have both a policyholder surplus and prior-year TRIA- eligible direct earned premium of less than five times the program  trigger.\nNonsmall insurers have policyholder surplus or the specified  premiums above the small threshold and are not classified as captive  or alien surplus line insurers.\nCaptive insurers are special-purpose insurance companies set up by  commercial businesses to self-insure risks arising from the owners\u2019  business activities.\nAlien surplus lines insurers are foreign insurers that are qualified to  do business in the United States through a process administered by  NAIC.\n\n\tThe Market for Terrorism Risk Insurance Is Currently Stable with the Support of TRIA\n\nThe market for terrorism risk insurance has been stable in recent years,  with coverage both available and generally affordable. According to our  reviews of policy language, reports from and interviews with Treasury,  researchers, insurers, and other industry stakeholders, the expiration of  TRIA and the absence of an alternative backstop to terrorism risk  insurance would cause disruptions to the market.\n\n\t\tTerrorism Insurance Generally Is Available and Affordable in the United States\n\nReports from Treasury and an industry risk-management firm generally  suggest there has been a stable market for terrorism risk insurance in  recent years, with the coverage available and generally affordable in the  United States. According to Treasury\u2019s reports analyzing industry data,  the majority of commercial policyholders in the United States purchase  terrorism risk insurance, and at a relatively small percentage of total  premiums. The market for terrorism risk insurance in the United States  continues to remain competitive for most buyers according to 2018 and  2019 reports by Marsh, an insurance risk-management firm. Marsh  attributed the competitive market for buyers to a steady decline in the  frequency of global terrorist incidents and minimal insurance claims.\n\n\t\t\tTake-up Rates\n\nSince all insurers must offer terrorism risk insurance, the availability of  such coverage can be measured in terms of take-up rates\u2014the rates at  which policyholders select terrorism risk insurance. These rates have  remained stable in recent years, according to Treasury. However, take-up  rates vary by line of insurance, industry sector of the policyholder,  geographic location, and type of insurer writing the policies. Terrorism risk  coverage is considered available when insurers offer coverage for losses  resulting from a terrorism event, and take-up rates are an indication of how insurers are complying with TRIA\u2019s \u201cmake available\u201d requirement,  according to Treasury. Treasury found take-up rates by insurer category  ranged from 62 to 78 percent in its 2018 report, depending on how the  rates were measured. According to Marsh\u2019s 2019 report, the take-up  rate for terrorism coverage embedded in policies that cover other risks  has been around 60 percent for the past several years.\nLines of insurance. According to Treasury\u2019s 2018 report, take-up rates  across lines of insurance ranged from 43 percent in the products liability  line to 83 percent in the boiler and machinery line in 2017, as measured  by direct earned premium (see fig. 1).\nThe take-up rate for cyber insurance coverage is in the middle of the  range, relative to other lines of coverage. Specifically, the take-up rate in  2018 for terrorism risk insurance under cyber policies (by TRIA-eligible  direct earned premium) was 69 percent for stand-alone policies, up from  50 percent in 2017, as reported by Treasury. For coverage that is part of  an embedded policy, the 2018 rate was 63 percent, up from 54 percent in  the prior year.\nIndustry sectors. Take-up rates across the industry sectors of the  policyholders varied widely and ranged from 7 percent in the information  sector to 76 percent in the finance and insurance sector in 2017,  according to Treasury\u2019s 2018 report (see fig. 2). Marsh found in its 2019  report that commercial policyholders in the education, media, financial,  and real estate sectors were the most frequent buyers of terrorism risk  insurance in 2018.\nGeographic location. Take-up rates varied by location, with the highest  rates in the Northeast. In Treasury\u2019s 2018 report, the rates ranged from  50 to 75 percent by state (see fig. 3). In its 2018 report, Marsh noted that  the Northeast had both the highest rate of purchase and the most  expensive coverage, and said that these trends were because of the  presence of major metropolitan areas (such as New York and Boston)  that have high-value targets for terrorism.\n\n\t\t\tPremiums\n\nAccording to Treasury\u2019s 2018 report, premiums associated with terrorism  coverage have remained relatively consistent in recent years and are a  small part of overall premiums for embedded policies. According to that  report, about 80 percent of the market (as measured by terrorism risk  direct earned premium) comprises embedded policies and 20 percent  stand-alone policies, and the price for each varies. Premiums for  terrorism risk insurance embedded in a property\/casualty policy are  priced at a relatively small percentage of the total premium charged for  the policy and typically range from 2.5 to 3.0 percent when a charge is  made. In about 30 percent of policies, insurers do not charge for providing  terrorism risk coverage. Stand-alone policies vary significantly in terms of  cost because of differences in the relative size or nature of exposures  covered under each policy, whether the policy was certified, and the type  of insurer providing the coverage, according to Treasury\u2019s data.\nPremiums also varied across lines covered and insurer types, with the  most premium collected for workers\u2019 compensation. According to  Treasury\u2019s 2018 report, about 36 percent of the total premium collected in  TRIA-eligible insurance lines was for workers\u2019 compensation. In stand- alone cyber policies an average 6.2 percent of the total premium was  allocated to terrorism risk. See table 2 for more information on how  premiums vary across lines of coverage.\n\n\t\t\tSmall Insurers and Captives\n\nTrends for small and captive insurers in many instances are different from  trends for nonsmall insurers.\nSmall insurers. Total market share for small insurers within TRIA-eligible  lines of coverage declined, relative to nonsmall insurers, over the past  decade. The small insurer market share, as measured by direct earned  premium, fell from 18.6 percent in 2009 to 12.6 percent in 2018. (Despite  that overall decline, there was an increase from 2016 to 2018 as more  insurers were defined as small because of the increased dollar amount of  the program trigger). In addition, take-up rates tended to be lower for  policies written by small insurers, compared to nonsmall insurers, both  within most individual lines and across the overall market.\nSmall insurers generally charged less premium for terrorism risk  insurance overall than nonsmall insurers, although they may charge  proportionally higher premiums in some lines of insurance, such as  commercial multiple peril (liability). According to Treasury\u2019s 2019 report,  small insurers allocated a lower percentage of direct earned premium for  terrorism risk than nonsmall insurers. Furthermore, small insurers also  were more likely to offer terrorism risk insurance for free. In addition,  small insurers earned a higher percentage of their total program direct  earned premium in commercial multiple peril and workers\u2019 compensation  lines than did nonsmall insurers. The workers\u2019 compensation market is  subject to very high loss amounts with no defined limits of liability and  significant potential aggregation risks.\nCaptive insurers. Like small insurers, captive insurers often have  premiums that are small, relative to other insurer categories. However,  captive insurers generally can offer broader coverage than commercial  policies, according to Marsh\u2019s 2019 report. The report states that a  captive insurer often offers policies that cost less than policies from  commercial insurers, which also often restrict coverage for NBCR or  cyber events. In addition, according to Treasury a highly concentrated  event affecting only captive insurers (or small insurers) carries a higher  likelihood that the affected insurers\u2019 losses would not meet the program  trigger, and therefore would not be reimbursed under the program. In this  case, captive insurers could incur significant losses.\n\n\t\tAbsence of Federal Program Could Disrupt Markets Based on Analysis of Policies and Selected Stakeholder Perspectives\n\nThere could be significant disruptions to the insurance market if no  federal terrorism risk insurance program existed, according to our reviews  of policy language, reports from and interviews with Treasury,  researchers, insurers, and other industry stakeholders. As Marsh noted  in its 2019 report, TRIA\u2019s federal backstop remains crucial to the  continued stability of the terrorism risk insurance market. In its 2018  report, Treasury concluded that TRIA had made the coverage available  and affordable, supporting a relatively stable market over the past  decade. According to NAIC, TRIA helps foster the existence of a broader  market for risks that otherwise would be either largely uninsured or borne  by taxpayers.\nIn the absence of a loss-sharing program, insurers likely would limit  coverage, exit certain markets, or attempt to increase capacity, according  to our review of reports from the federal government, researchers,  industry entities, and interviews with industry stakeholders. For example:  Limiting coverage. Most insurers begin the process to limit their  coverage more than a year before any TRIA expiration by filing  conditional exclusions, which, in effect, limits terrorism risk coverage in  the event TRIA expired. According to one industry association, insurers  have filed conditional exclusions before each of TRIA\u2019s reauthorizations,  although they are not commonly used for policies more than a year away  from a potential expiration of the law.\nOur analysis of several policy endorsements filed with conditional  exclusions suggests that, in the event of TRIA\u2019s expiration, insurers likely  would limit the total losses associated with an attack, and exclude certain  types of terrorist attacks. We reviewed a nongeneralizable sample of  conditional exclusions provided by the Insurance Services Office, which  representatives say are widely used in the industry, and several selected  conditional exclusions from individual insurers. These policies suggest  that insurers filing conditional exclusions cap coverage for losses  associated with an attack at $25 million, and entirely exclude losses  caused by NBCR weapons. One policyholder association said that TRIA\u2019s  potential expiration and the need to file conditional exclusions results in a  chaotic process, with insurers needing to file exclusions in each state in  which they operated.\nExiting markets. In the absence of a loss-sharing program, some  insurers likely would exit certain markets, no longer offering terrorism  coverage in specific geographic locations or lines of insurance, according  to federal and industry reports and interviews with stakeholders. Small  and midsize insurers in particular may withdraw from providing terrorism  risk coverage entirely, according to one industry association.\nFurthermore, insurers providing NBCR or workers\u2019 compensation  coverage may decide to limit the policy terms or stop providing coverage,  because of the risk of increased losses and potential exposures,  according to Treasury. In addition, workers\u2019 compensation risks are  greater in large, metropolitan, more densely populated areas, and there  are higher aggregation risks for insurers in large metropolitan areas,  particularly for events involving NBCR weapons. Small insurers tend to  operate on a regional basis in a smaller number of states than nonsmall  insurers, and thus have a significant presence in individual local markets,  according to Treasury.\nOptions for increasing capacity. Insurers told us that they also likely  would increase their premiums and purchase additional reinsurance for  terrorism coverage in the absence of a program, although their ability to  do so may be limited. One insurer said that premiums likely would go up  significantly, although rate increases are subject to state limits. According  to another insurer, reinsurance coverage for terrorism risk likely would  become more limited, and be provided at notably higher rates. Insurers  that are public companies may be able to increase capital through the  stock market to build loss-absorbing capacity to help mitigate their  increased loss exposures if TRIA expired. However, mutual insurers are  not owned by shareholders and therefore cannot raise capital through the  sale of shares; instead, they would have to rely on other ways of building  capital.\nSeveral industry stakeholders pointed to particular challenges for certain  insurers and lines of coverage if TRIA expired and Congress did not  establish another loss-sharing program.\nSmall insurers. Small insurers may be particularly vulnerable, facing  ratings downgrades or otherwise being forced to exit the market for  terrorism risk coverage, according to industry stakeholders. In May  2019, AM Best, a credit rating agency that focuses on the insurance  industry, said insurers that did not limit exposure to terrorism risk  losses before TRIA\u2019s potential expiration in 2020 could face negative  ratings pressure. AM Best identified 30 insurers (of about 230 with  significant terrorism risk exposure) that failed stress tests, but said in  October 2019 that implementation of plans established by these  insurers would mitigate concerns about insolvency in the event TRIA  expired and a terrorist attack occurred. The 30 insurers generally  were small or midsize insurers.\nCaptive insurers. Captives (entities that businesses set up to self- insure) generally require private reinsurance to insure against  terrorism risk, and it is unclear if there would be sufficient capacity in  the reinsurance market to obtain this coverage without TRIA. Captives  tend to insure against a broader range of risks, including NBCR and  cyber risks, when that coverage is unavailable or unaffordable in the  market. One industry association representing captive insurers noted  that captive insurance likely would become a more common way to  insure against terrorism risk without a federal loss-sharing program.  However, it warned that captive insurers may lack the capacity to  ramp up operations quickly enough or secure the necessary  reinsurance to fully absorb the risk of increased losses.\nNBCR coverage. Coverage for terrorism attacks involving NBCR  weapons, which is already limited, would be further limited without a  federal loss-sharing program, according to industry stakeholders. One  industry association of insurance agents said that insurers\u2019 capacity to  absorb losses from such an attack would be a challenge without a  backstop, as it was during the aftermath of the September 11 attacks,  when there was very little capital devoted to coverage for terrorism  risk. The representatives said this capacity would be even more  limited for an NBCR attack, as losses could be significantly greater  and few insurers offer NBCR coverage.\nWorkers\u2019 compensation coverage. The cost of coverage for  workers\u2019 compensation likely would increase significantly and  availability likely would decrease without a federal loss-sharing  program, according to researchers. Insurers have less flexibility to  control terrorism exposure in workers\u2019 compensation coverage,  relative to other TRIA-eligible lines, according to Treasury. As noted  earlier, state laws require employers to have the coverage and  prohibit insurers from excluding terrorism risk, including NBCR risks,  from workers\u2019 compensation policies, according to Treasury. Insurers  might respond to the absence of a federal loss-sharing program by  not providing workers\u2019 compensation coverage to employers,  particularly those near high-risk targets in major metropolitan areas,  according to a 2014 RAND Corporation policy brief issued before  TRIA\u2019s 2014 expiration. The brief added that this would force high-risk  employers in these areas to obtain the required coverage from the  residual market (state-run insurers or mechanisms of last resort), in  which premiums are higher.\nIn addition, the absence of a loss-sharing program could disrupt  policyholders and the greater economy by stalling new building projects.  Some stakeholders noted concerns that new building projects might be  stalled if the law expired, similar to concerns in the weeks and months  following the September 11 terrorist attacks. At that time, policymakers  were concerned that the reduction in coverage by insurers uncertain of  future losses would render commercial developers in high-risk areas  unable to finance their projects, according to a report by the  Congressional Budget Office. An insurance industry association told us  businesses might find it difficult to obtain terrorism risk insurance,  particularly for high-value projects in cities considered high-risk, such as  New York and Washington, D.C.\n\n\tTreasury Has Certification and Claims Processes but Communication on Certification Is Limited\n\nTreasury has a process to certify acts of terrorism. However, industry  stakeholders said Treasury does not publicly communicate information  about the process and the lack of timely information might negatively  affect the speed with which insurers respond to policyholder claims.  Additionally, Treasury is to consult with DOJ and DHS but DHS\u2019s  understanding of its role during the certification process appears  inconsistent with Treasury\u2019s purpose, and no agreements document  these roles. Treasury also has a process to pay insurer claims and has  issued guidance concerning how cyber insurance is treated under TRIA.\n\n\t\tTreasury Incorporated Flexibility into Its Certification Process\n\nTreasury has established a process for certifying an event as an act of  terrorism that provides the Secretary a flexible time period for gathering  information after an event. Before insurers may submit claims under  TRIA, the Secretary must certify an event as an act of terrorism.  Congress directed Treasury to study the certification process in the 2015  reauthorization of TRIA, including the establishment of a \u201creasonable  timeline\u201d for a certification determination. In response, Treasury sought  and received public comments on the process. Treasury issued its  conclusions in an October 2015 report. According to this report, seven of  the nine comments received recommended Treasury adopt a timeline  governing the certification decision. But Treasury concluded the  certification process must provide the Secretary with flexibility to gather  information after an event, and thus a \u201crigid\u201d timeline for certification  would not be appropriate. Instead, Treasury concluded that \u201cenhanced  public communication\u201d about the status of the Secretary\u2019s assessment of  an act may address commenters\u2019 concerns. Treasury established an  interim final rule for the certification process in December 2016.\nTreasury\u2019s process for certification decisions includes an internal review  phase and a public review phase before Treasury can make a  determination (see fig. 4).\nInternal review phase. During this phase, Treasury establishes and  convenes a certification management team and prepares a brief for  the Secretary, according to interviews with agency officials and our  review of Treasury documents. Treasury may conclude the internal  review of an event without progressing to the public review phase.\nPublic review phase. The public phase of the certification process  includes communication requirements set by Treasury\u2019s certification  regulations. TRIA regulations direct that within 30 days of the  Secretary commencing review of an event, Treasury must publish a  notice in the Federal Register informing the public that an act is under  review for certification. Treasury also may publish a notice that it is not  reviewing an act for certification. The regulation does not establish a  timeline by which the Secretary must begin reviewing an event, which  leaves the timeline for certification flexible. Treasury\u2019s public  announcement that an event is under review begins a series of  requirements for public notification and consultation with other  agencies, according to TRIA regulations. As of March 2020, Treasury  has not conducted the public review phase of its certification process.\nWhen the Secretary of the Treasury\u2019s review concludes that an act  satisfies the elements of certification, the Secretary then is to consult with  the Attorney General and the Secretary of Homeland Security within 30  days, or as soon as practicable. According to our review of Treasury  documents, this Secretary-level consultation is to occur immediately  before Treasury issues a certification decision. According to interviews  with officials and Treasury documents, Treasury engages with staff in  specific offices in DHS and DOJ much earlier in the process, during the  internal review phase. Coordination with officials in these offices  continues throughout both phases of the certification process. For  example, Treasury documents state it may hold conferences with DHS  and DOJ to discuss factors relevant to making a recommendation to  certify an event.\nNo later than 5 business days after the certification determination,  Treasury must publish a statement in the Federal Register notifying the  public.\nBy contrast, the UK\u2019s terrorism risk insurance program publicly  communicates clear timelines by which government entities must certify  potential events. The UK Treasury has 21 days to certify an event once  the program administrator requests a formal review. This deadline was  extended from 10 days in 2015 to allow the police enough time to  determine if an event met the definition of terrorism, according to UK  Treasury officials. This timeline was chosen to balance providing time for  certification with ensuring that businesses would see claims paid quickly.  Regular communication with industry stakeholders after an event  maintains confidence in the certification process, they said.\n\n\t\tTreasury\u2019s Internal Review Phase Generally Not Publicly Communicated\n\nTreasury\u2019s procedures for certifying an event do not include public  communication of its internal review phase. Steps Treasury is to take  during this internal review stage include establishing and convening a  certification management team and preparing a brief for the Secretary,  according to interviews with agency officials and our review of Treasury  documents.\nTo date, Treasury has not communicated to industry stakeholders  whether it was reviewing events as possible acts of terrorism. Treasury  officials told us that after events have occurred, they have looked into the  circumstances and the amount of insurance losses caused. These  considerations did not progress past the internal review phase of the  certification process, which meant Treasury did not publicly communicate  that it was reviewing these events for certification. For example, Treasury  conducted internal reviews after the Boston Marathon bombing in 2013,  but Treasury did not publicly communicate that it was looking into the  event or that it had decided not to formally review the event for  certification. Treasury ultimately did not certify the event because insured  losses from the bombing on TRIA-eligible lines of insurance totaled $2.1  million, which was under the $5 million certification threshold, according  to Massachusetts state insurance officials.\nIn interviews and formal public comments on Treasury\u2019s proposed  certification rule, some industry stakeholders said the Boston Marathon  bombing raised questions about the certification process because they  viewed the event as a clear terrorist attack. It was unclear to some  industry stakeholders if the event was not certified because it did not  reach the monetary loss threshold for certification, which was unknown at  the time, or because it did not meet TRIA\u2019s nonmonetary requirement for  establishing intent. Insurers and industry stakeholders told us they were  uncertain about the length of time Treasury would take after future events  to communicate that it was considering certification. All five insurers we  interviewed said they would like improved communication from Treasury  after an event like the Boston Marathon bombing.\nTreasury officials said that in response to the Boston Marathon bombing,  they documented procedures for certification. However, these procedures  do not include steps to communicate publicly during the internal review  phase, according to our review of Treasury documents. If a future event  analogous to the Boston Marathon bombing were to occur, under  Treasury\u2019s current procedures it would not communicate the status of its  internal review publicly, and public communication would not occur if it  chose to conclude its review before the public review phase began.\nImplication of Certification of an Act of  Terrorism for Terrorism Risk Insurance Act  (TRIA) Coverage   TRIA is designed to share losses from a  certified act of terrorism between insurers and  the government. For insurers to receive  support from this federal backstop, they must  offer insurance for \u201cacts of terrorism\u201d defined  in a manner consistent with the law, which  requires certification by the Secretary of the  Treasury. A certification determination affects  policyholders differently, depending on if they  purchased or declined terrorism coverage.  Specifically, insurers would pay claims from  policyholders that purchased terrorism  coverage in the event of a certified act of  terrorism, whereas insurers would not pay  claims from policyholders that declined  terrorism coverage. Insurers could face  uncertainty about whether to pay claims on  both policy types, however, if the Secretary of  the Treasury does not make a certification  determination. This is because the definition  of an act of terrorism in insurance policies for  both policy types is often linked to  certification.\nIndustry stakeholders and insurers we interviewed said they need to know  whether Treasury is considering certifying an event to help provide  certainty in paying policyholder claims and receiving reinsurance  payments (see sidebar).\nPolicyholder claims. Industry stakeholders and four of five insurers  we interviewed said Treasury\u2019s lack of communication about an  event\u2019s potential certification can lead to uncertainty about whether to  pay claims on policies\u2014both those that include and exclude terrorism  coverage. Delays in paying claims while waiting for communication  about certification put them at risk of violating their agreements with  policyholders and state laws, they said. Insurance policies typically  have timeline requirements for the insurer to investigate and pay  claims, and some state laws require insurers to pay claims by a  certain date, according to NAIC. Treasury officials said state  requirements to pay claims by a certain date may receive extensions  under state regulation when uncertainty requires that a claim  investigation continue. One insurer with which we met said that a  statement from Treasury when it was considering an event would help  them determine whether to pay claims or not.\nReinsurance. Industry stakeholders said uncertainty would delay  reinsurance coverage. If insurers delayed paying policyholder claims  because of uncertainty about certification of a terrorist attack,  reinsurers also might delay payments to insurers. Reinsurance  payments are often triggered by the insurer\u2019s payment of a claim to  the policyholder. Additionally, some reinsurance contracts may define  terrorism specifically as a Treasury-certified act of terrorism, and may  be contingent on Treasury making a certification determination.\nThe goals of TRIA are to foster market stability and to protect consumers  by addressing market disruptions. In addition, according to federal  standards for internal control, management should externally  communicate the necessary quality information to achieve the entity\u2019s  objectives, including communicating with external parties.\nTreasury officials said they have not chosen to set a deadline for public  communication after a potential terrorist event because they need  flexibility to collect accurate information about events whose  circumstances can vary widely. In the preamble to its interim final rule on  certification, Treasury concluded that public communication about the  certification process provides the public with necessary information while  avoiding the problems Treasury raised with establishing a strict timeline.\nHowever, Treasury\u2019s internal review phase includes no public  communication. Additionally, Treasury may conclude its review of an  event without progressing to the public review phase and therefore may  not issue any public communications on the event. Without public  communication about when it is considering certification, Treasury risks  contributing to market uncertainty rather than stability after an attack.\n\n\t\tTreasury Consults with DOJ and DHS, but No Agreements Document the Agencies\u2019 Roles\n\nTRIA requires cabinet-level consultation with DOJ and DHS in the public  review phase of the certification process, but Treasury officials also  conduct staff-level consultations. Treasury officials consult with DOJ\u2019s  National Security Division and DHS\u2019s Support Anti-terrorism by Fostering  Effective Technologies (SAFETY) Act office during the internal review  phase of the certification process and have identified a single point of  contact in each office (see sidebar).\nConsultation Agencies  The Department of the Treasury consults with  two other federal offices in the Department of  Homeland Security (DHS) and the  Department of Justice (DOJ), respectively,  that have the following responsibilities:   The Support Anti-terrorism by Fostering  Effective Technologies (SAFETY) Act  Office in DHS provides liability  protections to manufacturers and sellers  of specified anti-terrorism technologies.  The Office of SAFETY Act  Implementation reviews if an attack  meets the SAFETY Act definition of an  act of terrorism and if terrorists use such  technology in the course of an attack,  according to DHS officials. The  Secretary of Homeland Security then  determines whether an act has met the  size and intent definitions of the SAFETY  Act.\nDOJ\u2019s National Security Division also  makes recommendations for the  International Terrorism Victim Expense  Reimbursement Program, which  provides funds to compensate victims of  international terrorism occurring outside  the United States. The Assistant  Attorney General for National Security, in  consultation with the National  Counterterrorism Center, then  determines whether to certify an event  for the program, according to DOJ  officials. determine whether an event meets TRIA\u2019s definition of an act of  terrorism. Such information might include things like who claimed  responsibility for the event or evidence of the motivation for the attack.  Officials said they provide this information upon request within 24  hours after an event. DOJ officials said the process they use to review  events for TRIA purposes is similar to that used for DOJ\u2019s  International Terrorism Victim Expense Reimbursement Program.\nIn contrast, DHS officials said their office does not provide information  about an event to Treasury for purposes of certification, and that they  believed DOJ would have the majority of this information. They said  DHS informs Treasury about whether the event is being reviewed for  the purposes of the SAFETY Act and whether terrorists used SAFETY  Act-qualified technology (see sidebar). DHS officials said this is the  information Treasury has requested from them and they consult with  Treasury because many applicants for SAFETY Act designations  have insurance policies backed by TRIA.\nTreasury officials stated that that they expect these two DHS and DOJ  offices to serve as a single point of contact and coordinate with other  relevant offices in their agencies as needed. DOJ officials confirmed  they see this as their role, and said they would work with other offices  in DOJ, including the Federal Bureau of Investigation, to consult with  Treasury on certifying an act of terrorism. However, DHS officials said  they do not see this as their role.\nThe Secretary of the Treasury must consider, along with monetary  requirements, the nature and motivation behind a potential terrorist attack  to determine if it meets TRIA\u2019s definition of an act of terrorism, according  to TRIA regulations. Coordination among Treasury, DOJ, and DHS allows  the Secretary access to critical and timely information relevant to  certification, according to Treasury. In addition, according to federal  internal control standards, management should use quality information to  achieve the entity\u2019s objectives, which includes identifying information  requirements and obtaining relevant data from reliable sources in a timely  manner. The standards also state that agencies should use methods  such as written documentation to internally and externally communicate  the information needed to achieve their objectives.\nIn addition, our 2009 report on disaster planning provides an example of  the benefits of clearly defined roles among federal agencies. We reported  that defining the roles and responsibilities of stakeholders prior to a  disaster could help foster collaboration, and that effective recovery plans  should identify specific roles and responsibilities among various  stakeholders.\nHowever, Treasury has not documented DOJ\u2019s and DHS\u2019s roles in  certification consultations and instead relies on informal relationships with  agency staff. This may contribute to the different perspectives DHS  officials had on their role in the process. Treasury officials said although  they do not have a written agreement, each agency understands its  obligation to consult with Treasury in light of TRIA\u2019s provisions requiring it.  Although each agency told us it understood the certification process, DHS  officials and Treasury differed in their understanding of DHS\u2019s role in  certification.\nA documented agreement among the agencies would provide procedures  on roles and information sharing to which to refer during the potentially  chaotic aftermath of a terrorist attack. As agency staff change over time,  documenting these roles and information sharing among Treasury, DOJ,  and DHS could help ensure continuity of operations if future events  occurred. Furthermore, a written agreement would help Treasury access  quality information and help ensure a smooth and timely process for  certifying events under TRIA.\n\n\t\tTreasury Has Developed and Tested a Process for Fulfilling Insurer Claims for the Federal Share of Losses\n\nTreasury has a process for fulfilling claims that uses a web-based system  developed and operated by a contractor. Once the Secretary certifies an  act of terrorism, Treasury is to issue a task order to the contractor, which  is to make the claims website operational within 7 business days,  according to its contract. The claims process begins for insurers when  their total insured losses exceed 50 percent of their deductible within a  calendar year, at which point insurers must submit a form notifying  Treasury. An insurer may claim the federal share of compensation when  its total insured losses exceed its deductible for a calendar year,  according to TRIA regulations.\nThe responsibilities of Treasury\u2019s contractor include  reviewing and testing the web-based claims system; activating and providing ongoing operation of the claims system;  receiving and reviewing insurers\u2019 required documents for  completeness and accuracy; obtaining information from insurers as needed and answering  questions by email and telephone; and  recommending Treasury pay claims.\nTreasury\u2019s contractor has developed operating guidelines that detail work  flows and controls for how it will begin processing claims. The operating  guidelines include a plan to transfer existing staff from other  responsibilities to operate the claims process, as needed. According to  the contractor, staff responsible for processing claims in the event of a  certified terrorist attack participate in an annual training session.  Treasury\u2019s contractor also built quality checks within its web-based  system to automatically review submissions.\nMoreover, Treasury\u2019s contractor has tested the web-based claims  system. The contractor said it completed more than 40 rounds of  readiness testing since 2004. The contractor must conduct readiness  testing at least three times a year and test contingency plans and disaster  recovery procedures at least annually, according to the contract.\nIn addition, Treasury\u2019s contractor developed a demonstration website that  is publicly available (see fig. 5). Of the five insurers GAO interviewed, one said it used the demonstration website, two said they had not, and two  were unsure if anyone in the company had used the website. The  contractor said they previously have invited insurers to participate in  testing. The website outlines the general claims process and includes the  forms insurers would submit in the event of a certified terrorist attack.\nMost industry stakeholders who were familiar with the claims process told  us they found it to be clear. Those stakeholders who were unfamiliar with  the process said they had no concerns about it at present. Of the five  insurers we interviewed, three said the only concern they had regarding  the claims process is how quickly Treasury would certify an event and  pay insurers\u2019 claims. One insurer said the claims process was clear, and  one said it was unable to comment because it had not tested the process.\n\n\t\tGuidance on Cyber Coverage under TRIA Is Clear to Selected Industry Stakeholders\n\nIn December 2016 Treasury issued guidance clarifying that, to the extent  that insurers write cyber insurance under an embedded or stand-alone  policy in TRIA-eligible lines, the TRIA provisions apply. In our May 2014  report, we found insurers were uncertain about whether TRIA covered  risks from a cyberterrorism attack, and recommended that Treasury  clarify whether losses that may result from cyberterrorism were covered  under TRIA. Treasury\u2019s 2016 guidance included three elements:  1.  Treasury considers cyber policies that are reported under the \u201ccyber  liability\u201d line for state regulatory purposes to be \u201cproperty and  casualty\u201d insurance under TRIA, and therefore eligible for payment of  the federal share of compensation in the event of a certified terrorist  attack.  2.  Policies only would be eligible if insurers made the same required  disclosures to policyholders about the program as other TRIA-eligible  lines.  3.  Treasury requires insurers to provide disclosures and offers that  comply with TRIA and the program regulations on any new or renewal  policies reported under the cyber line.\nIndustry stakeholders said that Treasury\u2019s guidance about cyber  insurance coverage under TRIA was clear. Some industry stakeholders  said that there was some initial confusion about the guidance because it  indicated the NAIC created a new line for cyber liability on the property\/casualty annual statement, although this was not the case.  According to NAIC representatives, changes were made to how  insurance products were coded for rate-filing purposes, and these  changes did not affect the lines of business reported on the  property\/casualty annual statement state page. Treasury officials said  there may have been some ambiguity in how they communicated the  2016 guidance. NAIC representatives said despite this initial confusion,  the industry understood the guidance.\nIndustry stakeholders said that questions remain about what type of  cyberattack Treasury would certify as an act of terrorism. TRIA\u2019s definition  of an act of terrorism requires an act \u201cto have been committed by an  individual or individuals as part of an effort to coerce the civilian  population of the United States or to influence the policy or affect the  conduct of the United States government by coercion.\u201d However,  according to industry stakeholders and industry analysts, the nature of a  cyberattack means that tracing and attributing the event to an individual is  difficult. Additionally, generally the Secretary of the Treasury may not  certify an act if it is committed as part of a war declared by Congress. The  Advisory Committee on Risk-Sharing Mechanisms, which provides  recommendations to the Federal Insurance Office about risk sharing for  terrorism losses, has been researching issues related to cyberterrorism  insurance. According to this advisory committee, this group will provide  Treasury with recommendations regarding this and other issues in spring  2020.\n\n\tConclusions\n\nSince shortly after the attacks of September 11, 2001, the Terrorism Risk  Insurance Program has helped to ensure stability in the market for  terrorism risk insurance, with the coverage generally available and  affordable. However, insurers and policyholders are not aware of  whether, and through what process, Treasury considers certifying an  event as a terrorism event. Without public communication about when it is  considering certification, Treasury risks contributing to market uncertainty  rather than stability after an attack.\nThe purpose of Treasury\u2019s required consultation with DHS and DOJ in  certifying an event is to provide Treasury the necessary law enforcement,  intelligence, and homeland security information within the two agencies\u2019  authorities and jurisdictions. However, DHS\u2019s understanding of its role in  the internal review phase of the certification process appears to differ  from this stated purpose. Treasury has established and maintained  informal connections with both agencies, but it has not documented these  roles. By documenting agreements between Treasury and the two  consulting agencies, Treasury can obtain quality information to help  ensure a smooth and timely certification process.\n\n\tRecommendations for Executive Action\n\nWe are making the following three recommendations to Treasury:  The Director of the Federal Insurance Office should publicly communicate  information about when it is considering certifying an event as an act of  terrorism under TRIA. (Recommendation 1)\nThe Director of the Federal Insurance Office should document an  agreement with DHS about DHS\u2019s role, and how the agencies share  information, during the process of certifying an event as an act of  terrorism under TRIA. (Recommendation 2)\nThe Director of the Federal Insurance Office should document an  agreement with DOJ about DOJ\u2019s role, and how the agencies share  information, during the process of certifying an event as an act of  terrorism under TRIA. (Recommendation 3)\n\n\tAgency Comments\n\nWe provided a draft of this report to Treasury, DOJ, DHS, and NAIC for  review and comment. DOJ and NAIC did not have any comments.  Treasury provided written comments through the Federal Insurance  Office, which are reproduced in appendix II and discussed below.  Treasury and DHS provided technical comments, which we incorporated  as appropriate and discuss below. We also solicited and received  technical comments from the UK Treasury and incorporated them as  appropriate.\nIn its written comments, Treasury agreed with our three recommendations  and described how it would address them. In response to our first  recommendation, Treasury stated that it will consider potential changes to  the certification process in conjunction with the results of the review by  the Advisory Committee on Risk-Sharing Mechanisms of certification  procedures (due in spring 2020). In response to our second and third  recommendations, Treasury said that it will further coordinate with DOJ  and DHS on their respective roles and evaluate any additional steps to  clarify their roles in investigating potential events.\nIn technical comments, DHS questioned our characterization of its role  during the certification process. DHS reiterated that it would provide  Treasury with information on how DHS handles an incident in relation to  the DHS SAFETY Act process, and not information regarding any  possible investigation of a terrorist event. DHS stated that this is the  information Treasury requested from the office for potential events in the  past. However, we found that Treasury has not documented the type of  information it expects from each agency during its internal review phase  and maintain that information related to the DHS SAFETY Act process is  inconsistent with Treasury\u2019s purpose for consultation\u2014to obtain law  enforcement and intelligence information. We maintain that documenting  the information Treasury expects from each agency would ensure that  Treasury obtains the information it needs to make a certification decision.\nWe are sending copies of this report to the Secretary of the Treasury, the  Acting Secretary of Homeland Security, the Attorney General, and other  interested parties. In addition, the report is available at no charge on the  GAO website at https:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nIn this report, we use \u201cTRIA\u201d to refer to the Terrorism Risk Insurance Act  of 2002 and its subsequent reauthorizations. The objectives of our report  were to examine (1) the current market for terrorism risk insurance and  TRIA\u2019s role in the market; and (2) the Department of the Treasury\u2019s  (Treasury) certification and claims processes, and industry stakeholders\u2019  views on these processes, including guidance on cyber risk coverage.\nTo address these objectives, we reviewed the Terrorism Risk Insurance  Act of 2002; Terrorism Risk Insurance Extension Act of 2005; the  Terrorism Risk Insurance Program Reauthorization Acts of 2007, 2015,  and 2019; and implementing regulations, and congressional records. We  also reviewed prior GAO work on this topic. We interviewed officials from  the Treasury, National Association of Insurance Commissioners (NAIC),  and Congressional Research Service and reviewed relevant reports from  these entities. We also interviewed and reviewed reports from an  academic researcher and several industry participants to obtain  information for all our objectives, including insurers, representatives from  insurance trade associations (representing insurers, reinsurers, mutual  insurers, and captive insurers), risk modeling firms, and a rating agency.\nSpecifically, we obtained information from five insurers. In all interviews,  we asked participants about the potential effects of TRIA\u2019s expiration on  terrorism risk coverage, the effect of changes to the program from 2015 to  2020, and their views on Treasury\u2019s certification and claims process, and  guidance on coverage for cyberterrorism. We initially contacted eight  insurers\u2014four from among the largest U.S. commercial property and  casualty insurers in TRIA-eligible lines of business (according to SNL  Financial) and four smaller insurers previously recommended by  insurance brokers and trade associations during prior GAO work. Five of  these eight insurers, all of whom provided terrorism coverage to  businesses, responded to our request and agreed to meet with us.  Among these five insurers, two were large, two were small, and one was  a captive insurer; two provided workers\u2019 compensation and one provided  cyber risk coverage. We determined that the information we obtained  from these five insurers was sufficient for the purposes of obtaining a  range of views of the market, but it is not generalizable to the practices of  other insurers not included.\nTo describe the current status of the market for terrorism risk insurance  and how the market might be affected if TRIA were to expire, we  reviewed annual Treasury reports on the program from 2017, 2018, and  2019, as well as reports from Marsh, an insurance risk-management firm,  and other industry stakeholders. We reviewed these reports for  information on affordability and availability of terrorism risk insurance,  including data on take-up rates, premiums, geographic coverage, and  trends over time. We also reviewed language in insurance policies that  excluded some terrorism coverage in the event that TRIA was not  reauthorized.\nTo assess Treasury\u2019s certification and claims processes, we reviewed  documentation on the certification process, including Treasury\u2019s internal  policies and websites. We interviewed agency officials and the contractor  responsible for operating the claims process after a certified terrorist  attack, and we reviewed Treasury\u2019s contract with this operator and the  contractor\u2019s internal policies. We also interviewed officials from the  Departments of Homeland Security and Justice regarding their role in  consulting with the Secretary of the Treasury on certification decisions.  We reviewed relevant documents from the Organisation for Economic Co- operation and Development and relevant industry reports from four  foreign countries with terrorism risk insurance programs: Australia,  Belgium, Israel, and the United Kingdom (UK). We selected these  countries because their terrorism risk insurance programs require  certification by a government entity to pay claims. We interviewed the  terrorism risk insurance pool operator and the certification entity for the  UK because this program includes a short (21-day) timeline for certifying  terrorist events. Additionally, we interviewed and reviewed documentation  from a U.S. company that provides loss estimates, primarily to the  insurance-linked securities market, which investors use to determine if a  catastrophe bond has been triggered by an event. We compared  Treasury\u2019s certification and consultation process against criteria in federal  internal control standards on management communication.\nTo determine how cyber terrorism is covered under TRIA and in  commercial policies, we reviewed Treasury guidance. We also met with  Treasury officials and representatives of the Insurance Services Office, a  property\/casualty insurance industry association that develops  standardized policy language, and reviewed its standard policies for cyber  insurance. We also reviewed Treasury reports on cyberterrorism  coverage, including data on take-up rates and direct earned premiums for  cyberterrorism risks.\nWe conducted this performance audit from April 2019 to April 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Comments from the Department of the Treasury\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact:\n\n\tStaff Acknowledgments:\n\nIn addition to the contact named above, Jill Naamane (Assistant Director),  Nathan Gottfried (Analyst in Charge), Anna Blasco, William R. Chatlos,  Giselle Cubillos-Moraga, Kaitlan Doying, Karen Jarzynka-Hernandez,  May Lee, Barbara Roesmann, Jessica Sandler, Jena Sinkfield, and  Rachel Whitaker made significant contributions to this report.\n\nRelated GAO Products\n\nTerrorism Risk Insurance: Market Challenges May Exist for Current  Structure and Alternative Approaches. GAO-17-62. Washington, D.C.:  January 12, 2017.\nTerrorism Risk Insurance: Comparison of Selected Programs in the  United States and Foreign Countries. GAO-16-316. Washington, D.C.:  April 12, 2016.\nTerrorism Insurance: Treasury Needs to Collect and Analyze Data to  Better Understand Fiscal Exposure and Clarify Guidance. GAO-14-445.  Washington, D.C.: May 22, 2014.\nTerrorism Insurance: Status of Coverage Availability for Attacks Involving  Nuclear, Biological, Chemical, or Radiological Weapons. GAO-09-39.  Washington, D.C.: December 12, 2008.\nTerrorism Insurance: Status of Efforts by Policyholders to Obtain  Coverage. GAO-08-1057. Washington, D.C.: September 15, 2008.\nTerrorism Insurance: Implementation of the Terrorism Risk Insurance Act  of 2002. GAO-04-307. Washington, D.C.: April 23, 2004.","output":null}
{"id":"gao_GAO-20-162","pid":"gao_GAO-20-162_0","input":"\tBackground\n\n\t\tPhysician Shortages\n\nAccording to HRSA, the current demand for physicians in the United  States will likely continue, with a projected shortage of 23,640 primary  care physicians by 2025. While increasing physician supply is one way  to reduce physician shortages, some experts have also suggested  increasing the number of non-physician providers. For example, HRSA  predicted that, with health care delivery changes that would allow for NPs  and PAs to deliver a greater proportion of services than they do now, the  projected shortage of 23,640 primary physicians in 2025 could be  mitigated. According to the Bureau of Labor Statistics, in 2018, there were  756,800 physicians, over 189,100 NPs, and 118,800 PAs practicing in the  United States.\n\n\t\tGraduate Training for Physicians, NPs, and PAs\n\nPhysicians. Physician GME, also known as residency, provides the  clinical training required for a physician to be eligible for licensure and  board certification to practice medicine independently in the United  States. Specifically, after completing medical school and receiving a  medical degree, physicians enter a multi-year residency training program  during which they complete their formal education as a physician,  primarily in teaching hospitals. Completion of a residency can take from 3  to 7 years after graduation from medical school, depending on the  specialty or subspecialty chosen by the physician. In some cases,  physicians may choose to pursue additional training\u2014referred to as  fellowships\u2014to become a subspecialist, such as a cardiologist.\nNPs and PAs. Since the first NP and PA training programs in the United  States were founded in 1965, these professions and their educational  requirements have evolved to allow them to furnish more care that was  traditionally provided by physicians, such as diagnosing patients,  prescribing medication, and performing certain procedures. The extent to  which they can provide care independently from physician supervision  varies by state.\nThere are multiple pathways for students to become NPs. In general,  after completion of a bachelor\u2019s degree, a nurse may become an NP once  he or she achieves a master\u2019s or doctoral degree in nursing. Full-time  master\u2019s programs are generally 18 to 24 months and doctoral programs  are generally 3 to 5 years. Both programs include classroom and clinical  work. In addition, NP students may have varying amounts of hands-on  nursing experience before entering an NP program. NP programs  generally include the following focus areas: family practice, women\u2019s  health, acute care, adult\/geriatric health, child health, neonatal health,  and mental health. NPs are trained according to a nursing care model,  which emphasizes providing comprehensive care for patients that  encompasses their physical and other needs.\nAfter completion of a bachelor\u2019s degree, students become PAs once they  earn a master\u2019s degree in physician assistant studies. The average full- time PA program takes about 27 months to complete, which includes  classroom education followed by clinical work conducted through  rotations in internal medicine, family medicine, surgery, pediatrics,  obstetrics and gynecology, emergency medicine, and behavioral  medicine. In addition, PA students have varying amounts of hands-on  work experience in health care before entering a PA program. PAs are  trained to approach patient care according to a medical model focused on  assessing, diagnosing, and treating disease.\nBoth NP and PA students are required to complete clinical work as part of  their graduate programs by providing care to patients under the  supervision of a preceptor\u2014an experienced and licensed health care  provider who provides instruction and supervision to the student during  their clinical rotations. Upon graduation and after passing a national  certification exam and obtaining a license in the state in which they  choose to work, both NPs and PAs can begin practicing. NPs and PAs  may also complete an optional post-graduate residency training program,  but unlike physicians, they are not required to do so in order to obtain a  state license to practice. Figure 1 shows an example of education and  training paths for physicians, NPs, and PAs.\n\n\t\tFederal Funding for Physician, NP, and PA Training\n\nPhysicians. The vast majority of federal funding for physician GME  training is distributed by HHS through CMS\u2019s Medicare GME program. In  our 2018 report on GME funding, we found that Medicare GME payments  for physicians totaled more than $10.3 billion in 2015. CMS pays for a  hospital\u2019s costs associated with GME training through two mechanisms\u2014 direct graduate medical education and indirect medical education  payments\u2014both of which are formula-based payments set by statute.  Direct payments are for costs that include, for example, residents\u2019  salaries and benefits, compensation for faculty who supervise the  residents, and overhead costs. Indirect payments are for costs including  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. Payments to hospitals may also include funds for  training in nonhospital settings. Other sources of federal GME funding  for physicians include the Medicaid program, which is jointly administered  by CMS and the states, programs administered by HRSA, and other  federal agencies outside of HHS.\nNPs and PAs. HHS funding is available to train NPs and PAs, primarily  through HRSA grants authorized under titles VII and VIII of the Public  Health Service Act. Specifically, according to HRSA officials, funding for  programs that included NP and PA training totaled approximately $136.2  million in fiscal year 2019. (See table 2 for a description of these  programs.)\nIn recent years, CMS also provided funding for graduate training for  advanced practice registered nurses, including NPs, from fiscal years  2012 through 2018 as part of the Graduate Nurse Education  Demonstration. The Graduate Nurse Education Demonstration was  established by the Patient Protection and Affordable Care Act to  determine whether payments for clinical training provided to hospitals  would increase the number of advanced practice registered nurses,  including NPs, and whether these payments would affect the number of  advanced practice registered nurses by specialty.\n\n\tStakeholders Identified Benefits and Challenges of Expanding the Medicare GME Program to Include NP and PA Graduate Training\n\nOfficials from the stakeholder organizations we interviewed identified the  potential benefits and challenges of expanding the Medicare GME  program to include NP and PA graduate training.\n\n\t\tBenefits of Expanding the Medicare GME Program\n\nPredictability and stability of Medicare GME program funding.\nAccording to officials from five of the nine stakeholder organizations  we interviewed\u2014three NP and two PA organizations\u2014a benefit of  expanding the Medicare GME program is that it may create more  predictability and stability for training funding for NPs and PAs. This  would be beneficial by allowing NP and PA programs to do better  long-range planning such as planning for the number of NP and PA  students that can be admitted. Officials from two of these stakeholder  organizations noted that a benefit of the Medicare GME program for  physicians is that funding is historically more stable than the funding  available to NPs and PAs through HRSA. Specifically, Medicare GME  funding is mandatory, while funding for NP and PA training programs  administered by HRSA is discretionary. During the annual  appropriations process, Congress may choose to appropriate the  amount requested by HRSA, to increase or decrease those levels, or  to not appropriate any funds. For example, Congress appropriated  $28.5 million in fiscal year 2018 for HRSA\u2019s Nurse Faculty Loan  Program, but then decreased this appropriation to $13.5 million in  fiscal year 2019.\nPotential opportunity to pay preceptors. Officials from four of the  nine stakeholder organizations\u2014two NP and two PA organizations\u2014 noted that one benefit of expanding the Medicare GME program to  include NP and PA graduate training is that funding could be used to  pay preceptors as an incentive to supervise students. CMS and others  have also reported that schools of nursing have faced significant  challenges increasing enrollments, in part due to difficulty finding  preceptors willing to supervise students. Similarly, officials from two  PA organizations we interviewed noted that some programs may  choose not to fill their available enrollment slots because they are  concerned about finding enough preceptors to allow all their students  to graduate. Officials from four of the stakeholder organizations we  interviewed noted that supervising students can take time away from  the preceptor\u2019s productivity in seeing patients, and that some  practices and health care systems do not allow their health care  providers to serve as preceptors. Specifically, officials from two  stakeholder organizations we interviewed said that, historically, these  preceptors have volunteered as a way of \u201cgiving back\u201d to their  profession and have not been paid for their time. However, due to  difficulties finding a sufficient number of volunteer preceptors, some  graduate programs have begun reimbursing preceptors for their time  in order to encourage their participation. CMS\u2019s Graduate Nurse  Education Demonstration also included funding for preceptors.\n\n\t\tChallenges of Expanding the Medicare GME Program\n\nDifferences in training requirements. Officials from six of the nine  stakeholder organizations\u2014two NP, two PA, and two physician  organizations\u2014raised concerns about challenges that could occur  because NP and PA clinical training requirements do not align with  the current structure of the Medicare GME program. For example,  officials from some of these organizations noted that the Medicare  GME program is structured to fund physician residency training, which  is required in order for physicians to practice, but NPs and PAs are  not required to complete a residency after completing a graduate  program in order to practice. Specifically, CMS makes GME  payments to hospitals according to formulas outlined in statute based,  in part, on the number of physician residency positions. Therefore,  officials from some of these stakeholder organizations said that any  change to Medicare GME to include NPs and PAs would need to  consider how to allocate GME funding for NP and PA programs in  light of these differences in training requirements between physicians,  NPs, and PAs.\nPotential limitations on Medicare funding for physician training.\nOfficials from seven of the nine stakeholder organizations we  interviewed\u2014four NP, one PA, and two physician organizations\u2014 expressed concern that expanding the Medicare GME program to  increase the number of NPs and PAs without increasing overall  funding may negatively impact the funding available for physician  training. For example, officials from one stakeholder organization said  that reallocating available Medicare GME dollars could be problematic  and potentially diminish needed resources for others. An official from  one of these stakeholder organizations said that there is currently not  enough funding to provide residency training for all qualified  physicians, and adding NPs and PAs to the existing pool of  underfunded residency candidates would worsen the funding  shortage. Officials from another stakeholder organization echoed this  concern by noting that expanding the Medicare GME program could  force NPs to compete with physician residents for patients and space.\n\n\tAvailable Estimates of NP and PA Training Costs Were Limited and Incomplete\n\nThrough our review of the literature and our interviews with officials from  stakeholder organizations, CMS, and HRSA, we identified two estimates  of NP or PA graduate training costs. CMS\u2019s evaluation of its Graduate  Nurse Education Demonstration estimated the total cost of graduate  clinical NP training to be about $47,000 per student, based on the funds  paid to the demonstration sites from fiscal year 2012 through fiscal year  2018, and the Physician Assistant Education Association estimated the  total cost of graduate PA training to be about $45,000 per student, based  on the results of its 2018 survey. While these two estimates provide some  information about the costs of training NPs and PAs, they provide limited  and incomplete information on these costs.\nCMS Graduate Nurse Education Demonstration. CMS estimated  NP graduate training costs totaling $47,172 per graduate according to  its evaluation of the Graduate Nurse Education Demonstration, in  which CMS funded graduate clinical training for advanced practice  registered nurses\u2014a category that includes NPs\u2014over 6 years.  This estimate represents the cost to CMS (defined as the total funds  paid to the demonstration sites during the duration of the  demonstration) for the clinical training of each graduating student.  Part of the cost covered by the demonstration includes the costs of  clinical preceptors. Congress appropriated a total of $200 million for  the demonstration, which operated from fiscal years 2012 through  2018. The demonstration funded clinical training at five hospitals,  which partnered with 19 schools of nursing, and multiple community- based care settings.\nThe cost estimate underreports the total cost of NP graduate training  because, while both clinical and classroom training are required for  NP students to graduate, CMS\u2019s demonstration only provided funding  for clinical training, as specified by the Patient Protection and  Affordable Care Act. Specifically, CMS does not include the costs  associated with classroom training, certification, and licensure of  advanced practice registered nursing students. In addition, the  demonstration targeted advanced practice registered nurses, which is  a broader category that includes NPs in addition to other types of  specialty nurses such as certified nurse-midwives and certified  registered nurse anesthetists. However, according to CMS, the vast  majority of advanced practice registered nursing students enroll in NP  programs. CMS\u2019s evaluation also noted that the cost estimates are  not generalizable because they are only based on information from  the schools that participated in the demonstration. (See table 3.)\nPhysician Assistant Education Association survey data. The  Physician Assistant Education Association, whose members are  graduate PA programs, estimated PA graduate training costs totaling  $45,309 per student\u2014an estimate based on the results of a published  annual survey of its members in 2018. This represents the average  cost to the member PA programs for training a student in a 27-month  PA graduate program, based on expense data reported by programs  from the 2017-2018 fiscal year.\nThe Physician Assistant Education Association\u2019s data are self- reported by PA graduate programs. In addition, these data likely  underreport the total costs of graduate PA training because they  exclude in-kind contributions from clinical sites. These contributions,  such as the donated time from volunteer preceptors, are necessary  for clinical training. Officials estimated that paying for costs supported  by these in-kind contributions\u2014which the Physician Assistant  Education Association estimated to be about $11,300 per student\u2014 would likely add an additional 25 percent to the total estimated cost to  train PAs. (See table 4.)\n\n\tAgency Comments and Third-Party Views\n\nWe provided a draft of this report to HHS for review and comment. The  department provided technical comments, which we incorporated as  appropriate.\nWe also provided relevant draft portions of this report to the nine  professional associations that we interviewed and they provided technical  comments, which we incorporated as appropriate.\nWe 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.\nIf 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 I.\n\nAppendix I: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\nJames Cosgrove, (202) 512-7114 or cosgrovej@gao.gov.\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Kelly DeMots (Assistant  Director), Teresa Tam and Sarah-Lynn McGrath (Analysts-in-Charge),  and Margaret Fisher made key contributions to this report. Also  contributing were Leia Dickerson, Diona Martyn, Caitlin Scoville, Ethiene  Salgado-Rodriguez, and Jennifer Whitworth.","output":null}
{"id":"gao_GAO-19-715T","pid":"gao_GAO-19-715T_0","input":"\tBackground\n\nVA 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. 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.\nOnce the contractor accepts the exam request from VBA, 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.\nIn 2016, VBA established an exam program office to manage and  oversee contractors, monitor their performance, and ensure that they  meet contract requirements. For example, in 2018 we reported that the  contracts require that contractors develop plans outlining how they will  ensure examiners are adequately trained. We also reported that  contractors are 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.\nVBA awarded new contracts in 2018, in part, because it wanted to update  performance measures for its contractors and to change how contractors  were assigned to each region throughout the country, according to  agency officials. For example, officials said that the agency restructured  the service areas in its contracts from five U.S. geographic districts to four  to balance the number of rural and urban areas contained in each region.  In doing so, they said that VBA\u2019s goal was to distribute exams in rural  areas, where it can be more challenging to find examiners, more evenly  across all contractors.\n\n\tIncomplete Information on Quality and Timeliness Continues to Affect VBA\u2019s Oversight of Contractors\u2019 Performance\n\nVBA has not fully resolved issues in collecting information on contractors\u2019  quality and timeliness, which continues to hinder its ability to oversee  contractor performance. We previously reported that VBA\u2019s lack of  complete and accurate information on the quality and timeliness of exams  limited its oversight of contracted examiners and contributed to other  challenges in managing the contracts. For example, VBA officials had told  us that as of late June 2018, VBA was behind in completing quality  reviews for contracted exams that were completed in 2017, in part, due to  lack of staff to complete the quality reviews. Further, VBA officials had  acknowledged that they did not have accurate information on whether  contractors were completing veterans\u2019 exams in a timely manner as  outlined in the contracts. We reported in 2018 that VBA measured  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. However, we previously found that the exam  management system VBA used until spring 2018 did not retain the initial  exam completion date when VBA sent an initial exam report back to a  contractor for clarification or correction. In such cases, VBA\u2019s system  maintained only the most recent date an exam report was sent back to  VBA. In such a situation, according to agency officials, VBA would not  always be able to accurately assess a contractor\u2019s timeliness as outlined  in the contracts. Similar to our findings, the VA Office of Inspector  General\u2019s June 2019 report on VBA\u2019s oversight of contracted exam  cancellations also identified deficiencies due to staffing shortages and  exam management system limitations, among other reasons.\nAccording to VBA officials in 2018, because VBA did not have complete  and accurate information on contractor performance, it could not carry out  key oversight activities. For example, VBA officials acknowledged that  they were unable to track exams that needed corrections or clarifications,  which we reported is needed to determine if VBA should reduce payment  to a contractor. In 2018, we reported that the contracts required that  contractors correct these exams within a certain number of days and bill  VBA for these exams at half price. However, we found that VBA\u2019s lack of  complete and reliable information on insufficient exams hindered its ability  to ensure such requirements were met.\nFurther, in the absence of current and accurate quality and timeliness  information, we reported in 2018 that VBA officials told us that they had  not completed the quarterly reports that summarize how each contractor  performed. VBA\u2019s delay in completing these reports meant that it had not  administered other provisions of the contracts. For example, we reported  in 2018 that the contracts stated that VBA could use performance data to  help determine how to allocate exams within specified areas in the United  States that have two contractors; in particular, VBA could decide to  allocate more exams to the contractor with higher performance results.  However, VBA did not have performance data on which it could base its  allocation of exams. Rather, the agency based allocation on contractor  workload. Further, we reported that the contracts outlined how VBA  could use performance data to administer financial incentives linked to  performance targets. However, due to the lack of performance  information, VA had not yet administered these incentives at the time of  our review in October 2018.\nIn our 2018 report, we recommended that VBA take steps to address the  oversight issues we identified by developing and implementing a plan for  using data from the new exam management system to accurately assess  contractor timeliness, monitor time spent correcting exams, and verify  proper exam invoicing.\nVBA has taken steps to address issues with both the incomplete quality  information and inaccurate timeliness data. For example, to help resolve  the delays in completing quality reviews, VBA officials said in November  2018 that the agency had hired additional staff to assess quality of  contract exam reports. As of September 2019, officials said they have 16  out of 17 full-time positions filled in the quality review office because one  employee left and that they are in the hiring phase for the final position.  With the addition of quality review staff, officials stated that VBA is up-to- date on completing initial quality reviews. However, they said the agency  has not yet finalized any quality scores, or completed the quarterly  performance reports, under the new contracts. As such, according to  VBA, it has not yet administered financial incentives linked to  performance.\nTo address the inaccurate timeliness data, VBA officials stated that the  agency\u2019s new exam management system, implemented in spring 2018,  was designed to capture information that would allow VBA to accurately  calculate contractor timeliness. Officials also said that VBA revised its  performance measures to help it more fully assess contractors\u2019  performance. In its agency comment response to our draft report in  September 2018, VBA had a target completion date of December 2018  for implementing our recommendation. However, as of September 2019,  VBA reported that it has not been able to fully implement its plan for using  the new system to improve oversight of contractors and did not provide a  target completion date for fully implementing our recommendation. In  particular, VBA has not been able to implement an automated invoicing  system that it plans to use to validate the accuracy of contractors\u2019  invoices nor can it reconcile historical data in the exam management  system. As a result, according to VBA, it still cannot ensure that it is  paying contractors the correct amounts based on the terms of the  contracts. According to VBA, the delay in implementation is, in part, a  result of having to fix technical issues with exam scheduling requests and  an ongoing effort involving multiple VA offices to align VBA\u2019s systems with  those of multiple contractors. To address these issues, VBA stated that it  has completed testing of its invoice system with all of the contractors and  anticipates completing analysis of the results of those tests by October  2019 and will provide an updated target completion date at that time.\nWe also recommended that VBA regularly monitor and assess aggregate  performance data and trends over time to identify higher-level trends and  program-wide challenges. Without plans to conduct comprehensive  performance analyses, we stated that VBA is limited in its ability to  determine if the contract exam program is achieving its quality and  timeliness goals in a cost effective manner. VBA stated that as it makes  improvements to its exam management system data it will be able to  implement this recommendation, but did not provide a specific date. VBA  also noted that information collected in the new exam management  system has helped them to identify potential issues with the metrics that  they use to assess contractor performance and that the agency is in the  process of identifying the best way to analyze the data to make  improvements to the program.\n\n\tVBA Has Not Finalized System to Verify All Training Has Been Completed\n\nWe previously reported that VBA relies on contractors to verify that their  examiners complete required VA training and that VBA did not have  information on whether the training effectively prepares examiners to  conduct high quality exams. Specifically, we noted that 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. Further, VBA did not review contractors\u2019 self-reported  training reports for accuracy or request supporting documentation, such  as training certificates, or solicit feedback from contracted examiners on  the effectiveness of training or suggestions for improvement.\nSince VBA was without plans to verify completion of training, we noted  that VBA risked using contracted examiners who are unaware of the  agency\u2019s process for conducting exams. This could lead to poor-quality  exams that need to be redone and, thus, delays for veterans. Similarly,  without information on the effectiveness of training, VBA may not know  whether additional training courses are needed. To address these  concerns, we recommended that VBA document and implement a plan  and processes to verify that contracted examiners have completed  required training and that it collect feedback on training for the purpose of  assessing its effectiveness and making improvements as needed.\nAs of July 2019, after VBA determined that none of its contractors were  comprehensive in reporting all examiners\u2019 training, VBA reported that the  agency started conducting random audits of contractor training records.  Additionally, VBA said that contractors can submit feedback following the  completion of each VBA-developed training course and that it will use this  information to make improvements. However, VBA is still in the process  of developing a centralized training system to collect information on all  training completed by contracted examiners and to obtain participant  feedback on each course. VBA stated that it expects the system updates  that would allow it to verify that all examiners have completed required  training will be fully implement by the end of fiscal year 2020 and that it  will continue random audits until full implementation.\nIn conclusion, 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. Specifically, VBA needs to  ensure that (1) it has accurate and up-to-date information on individual  contractor performance to ensure veterans receive quality and timely  exams and that contractors are properly paid, as well as a mechanism to  asses overall performance of the contract; and (2) examiners are trained  to conduct these exams in a manner that results in accurate exam reports  that claims processors can use to make a disability ratings decision.  Without sustained oversight, VBA also runs the risk of causing undue  harm to veterans through delayed or inadequate exams.\nChair Luria, Ranking Member Bost, and Members of the Subcommittee,  this concludes my prepared statement. I would be happy to answer any  questions you or other members of the subcommittee may have at this  time.\n\n\tGAO Contact and Staff Acknowledgments\n\nFor questions about this statement, 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  statement. In addition to the contact above, Nyree Ryder Tee (Assistant  Director); Justin Gordinas (Analyst-in-Charge); Alex Galuten; and Jessica  Orr made key contributions to this testimony. Other staff who made key  contributions to the report cited in the testimony are identified in the  source product.\nThis 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.","output":null}
{"id":"gao_GAO-19-621T","pid":"gao_GAO-19-621T_0","input":"\tBackground\n\nResellers maintain large, sophisticated databases with consumer  information that can include credit histories, insurance claims, criminal  records, employment histories, incomes, ethnicities, purchase histories,  and interests. As shown in figure 1, resellers largely obtain their  information from public records, publicly available information (such as  directories and newspapers), and nonpublic information (such as from  retail loyalty cards, warranty registrations, contests, and web browsing).\nConsumer information can be derived from mobile networks, devices  (including smartphones and tablets), operating systems, and applications.  Resellers also may obtain personal information from the profile or public  information areas of websites, including social media sites, or from  information on blogs or discussion forums. Depending on the context,  information from these sources may be publicly available or nonpublic.\nIn 1973, a U.S. government advisory committee first proposed the Fair  Information Practice Principles for protecting the privacy and security of  personal information. While these principles are not legal requirements,  they provide a framework for balancing privacy with other interests. In  2013, the Organisation for Economic Co-operation and Development  (OECD) developed a revised version of the principles (see table 1).\nThe Fair Information Practice Principles served as the basis for the  Privacy Act of 1974\u2014which governs the collection, maintenance, use,  and dissemination of personal information by federal agencies. The  principles also were the basis for many Federal Trade Commission (FTC)  and Department of Commerce privacy recommendations and for a  framework for consumer data privacy the White House issued in 2012.\n\n\tSeveral Laws Apply in Specific Circumstances to Consumer Data That Resellers Hold\n\nAs we reported in 2013 and as continues to be the case, no overarching  federal privacy law governs the collection, use, and sale of personal  information among private-sector companies, including information  resellers. There are also no federal laws designed specifically to address  all the products sold and information maintained by information resellers.  Federal laws addressing privacy issues in the private sector are generally  narrowly tailored to specific purposes, situations, types of information, or  sectors or entities\u2014such as data related to financial transactions,  personal health, and eligibility for credit. These laws include provisions  that limit the disclosure of certain types of information to a third party  without an individual\u2019s consent, or prohibit certain types of data collection.  The primary laws include the following:  Fair Credit Reporting Act (FCRA). FCRA protects the security and  confidentiality of personal information collected or used to help make  decisions about individuals\u2019 eligibility for credit, insurance, or  employment. It applies to consumer reporting agencies that provide  consumer reports. Accordingly, FCRA applies to the three nationwide  consumer reporting agencies (commonly called credit bureaus) and to  any other information resellers that resell consumer reports for use by  others. FCRA limits resellers\u2019 use and distribution of personal data\u2014for  example, by allowing consumers to opt out of allowing consumer  reporting agencies to share their personal information with third parties for  prescreened marketing offers.\nGramm-Leach-Bliley Act (GLBA). GLBA protects nonpublic personal  information that individuals provide to financial institutions or that such  institutions maintain. GLBA sharing and disclosure restrictions apply to  financial institutions or entities that receive nonpublic personal information  from such institutions. For example, a third party that receives nonpublic  personal information from a financial institution to process consumers\u2019  account transactions may not use the information or resell it for marketing  purposes.\nHealth Insurance Portability and Accountability Act of 1996  (HIPAA). HIPAA establishes a set of national standards to protect  certain health information. The HIPAA privacy rule governs the use and  disclosure of an individual\u2019s health information for purposes including  marketing. With some exceptions, the rule requires an individual\u2019s  written authorization before a covered entity\u2014a health care provider that  transmits health information electronically in connection with covered  transactions, health care clearinghouse, or health plan\u2014may use or  disclose the information for marketing. The rule does not directly restrict  the use, disclosure, or resale of protected health information by resellers  or others not considered covered entities under the rule.\nChildren\u2019s Online Privacy Protection Act of 1998 (COPPA). COPPA  and its implementing regulations apply to the collection of information\u2014 such as name, email, or location\u2014that would allow someone to identify or  contact a child under 13. Covered website and online service operators  must obtain verifiable parental consent before collecting such information.  COPPA may not directly affect information resellers, but the covered  entities are potential sources of information for resellers.\nElectronic Communications Privacy Act of 1986 (ECPA). ECPA  prohibits the interception and disclosure of electronic communications by  third parties unless an exception applies (such as one party to the  communication consenting to disclosure). For example, the act would  prevent an internet service provider from selling the content of its  customers\u2019 emails to a reseller for marketing purposes, unless the  customers had consented to disclosure. However, ECPA provides more  limited protection for information considered to be \u201cnon-content,\u201d such as  a customer\u2019s name and address.\nFederal Trade Commission Act (FTC Act), Section 5. The FTC Act  prohibits unfair or deceptive acts or practices in or affecting commerce.  Although the act does not explicitly grant FTC the specific authority to  protect privacy, FTC has interpreted it to apply to deceptions or violations  of written privacy policies. For example, if a retailer\u2019s written privacy policy  stated customers\u2019 personal information would not be shared with resellers  and the retailer later sold information to such parties, FTC could bring an  enforcement action against the retailer for unfair and deceptive practices.\nSome states also have enacted laws designed to regulate resellers\u2019  sharing of personal information about consumers. For example, in 2018,  Vermont passed a law that contains, among other requirements,  consumer protection provisions related to data brokers. Among other  things, the law requires data brokers to register annually and prohibits the  acquisition and use of brokered personal information through certain  means and for certain uses.\n\n\tGaps Exist in the Consumer Privacy Framework\n\nThe scope of consumer privacy protections provided under federal law  has remained 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; (3) new  technologies; and (4) some regulatory authorities. The examples in the  following sections are drawn from our earlier reports and remain pertinent  today.\n\n\t\tFederal Law Provides Individuals Limited Ability to Access, Control, and Correct Their Personal Data\n\nIn our 2013 report, we found that no federal statute that we examined  generally requires resellers to allow individuals to review personal  information (intended for marketing purposes), control its use, or correct  it. The Fair Information Practice Principles state that individuals should be  able to know about and consent to the collection of their information and  have the right to access the information, request correction, and  challenge the denial of those rights.\nWe also reported in 2013 that no federal statute provides consumers the  right to learn what information is held about them and who holds it for  marketing or look-up purposes. FCRA provides individuals with certain  access rights, but only when information is used for credit eligibility  purposes. And GLBA\u2019s provisions allowing consumers to opt out of  having their personal information shared with third parties apply only in  specific circumstances. Otherwise, under federal law, individuals  generally cannot require that their personal information not be collected,  used, and shared. Also, no federal law we examined provides correction  rights (the ability to have resellers and others correct or delete inaccurate,  incomplete, or unverifiable information) for marketing or look-up  purposes.\n\n\t\tLaws Largely Do Not Address Data Collection Methods, Sources, and Types\n\nOur 2013 report also found that federal privacy laws are limited in  addressing the methods by which, or the sources from which, resellers  collect and aggregate personal information, or the types of information  collected for marketing or look-up purposes. The Fair Information Practice  Principles state that personal information should be relevant, limited to  the purpose for which it was collected, and collected with the individual\u2019s  knowledge or consent.\nFederal laws generally do not govern the methods resellers may use to  collect personal information. For instance, resellers, advertisers, and  others use software to search the web for information about individuals  and extract and download bulk information from websites with consumer  information. Resellers or retailers also may collect information indirectly  (by combining information from transactions).\nCurrent federal law generally allows resellers to collect personal  information from sources such as warranty registration cards and surveys  and from online sources such as discussion boards, social media sites,  blogs, and web browsing histories and searches. Current federal law  generally does not require disclosure to consumers when their  information is collected from these sources.\nThe federal laws that address the types of consumer information that can  be collected and shared are not comprehensive. Under most  circumstances, information that many people may consider very personal  or sensitive can be collected, shared, and used for marketing. This can  include information about physical and mental health, income and assets,  political affiliations, and sexual habits and orientation. For health  information, HIPAA rule provisions generally apply only to covered  entities, such as health care providers.\n\n\t\tPrivacy Framework Largely Has Not Kept Pace with Changes in Technology\n\nThe current privacy framework does not fully address new technologies  such as facial recognition technology, privacy issues raised by online  tracking and mobile devices, and activities by financial technology firms.  The original enactment of several federal privacy laws predates these  trends and technologies. But in some instances existing laws have been  interpreted to apply to new technologies. For example, FTC has taken  enforcement actions under COPPA and revised the statute\u2019s  implementing regulations to account for smartphones and mobile  applications.\n\n\t\t\tFacial Recognition Technology\n\nOne example of how privacy law has not kept pace with changes in  technology is the use of facial recognition technology, which involves the  collection of facial images and may be employed in a wide range of  commercial applications. In our 2015 report we concluded that the future  trajectory of this technology raised questions about consumer privacy.  We found that federal law does not expressly address the circumstances  under which commercial entities can use facial recognition technology to  identify or track individuals, or when consumer knowledge or consent  should be required for the technology\u2019s use. Furthermore, in most  contexts federal law does not address how personal data derived from  the technology may be used or shared. The privacy issues stakeholders  raised about facial recognition technology and other biometric  technologies in use at the time of our 2015 report served as yet another  example of the need to adapt federal privacy law to reflect new  technologies. As such, we reiterated our 2013 recommendation that  Congress strengthen the current consumer privacy framework to reflect  the effects of changes in technology and the marketplace.\n\n\t\t\tActivities by Financial Technology Firms\n\nThe rise of financial services provided by nonfinancial firms\u2014often  referred to as fintech\u2014is another example of how new technology may  create privacy concerns. For example, fintech lenders offer a variety of  loans such as consumer and small business loans and operate almost  exclusively online. In our 2018 report, we noted that while these lenders  may still assess borrowers\u2019 creditworthiness with credit scores, they also  may analyze large amounts of additional or alternative sources of data to  determine creditworthiness. We also found that some fintech firms may  collect more consumer data than traditional lenders. For example, fintech  lenders may have sensitive information such as consumers\u2019 educational  background or utility payment information, and according to certain  stakeholders, these data may contain errors that cannot be disputed by  consumers under FCRA.\nFurthermore, 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. Our 2018 report discussed that some fintech firms use new  technologies or mobile device features to mitigate data privacy risks and  that 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 also have  issued GLBA guidance to businesses, including fintech firms,  recommending that they adopt policies and procedures to prevent, detect,  and address privacy threats.\n\n\t\t\tInternet Privacy Issues\n\nOnline tracking. In our 2013 report, we found that no federal privacy law  explicitly addresses the full range of practices to track or collect data from  consumers\u2019 online activity. Cookies allow website operators to recall  information such as user name and address, credit card number, and  purchases in a shopping cart. Resellers can match information in cookies  and their databases to augment consumer profiles. Third parties also can  synchronize their cookie files with resellers\u2019 files. Advertisers can use  third-party cookies\u2014placed on a computer by a domain other than the  site being visited\u2014to track visits to the websites on which they advertise.  While current federal law does not, with some exceptions, explicitly  address web tracking, FTC has taken enforcement actions related to web  tracking under its authority to enforce the prohibition on unfair or  deceptive acts. For example, in 2011, FTC settled charges with Google  for $22.5 million after alleging that Google violated an earlier privacy  settlement with FTC when it misrepresented to users of Apple\u2019s Safari  web browser that it would not track and serve targeted advertisements to  Safari users. Google agreed to disable its advertising tracking cookies.\nMobile devices. In 2013, we also explained that no federal law  comprehensively governs applications software for mobile devices.  Application developers, mobile carriers, advertisers, and others may  collect an individual\u2019s information through services provided on a mobile  device. However, FTC has taken enforcement action against companies  for use of mobile applications that violate COPPA and FCRA. The  agency also has taken action under the FTC Act. We and others have  reported that the capability of mobile devices to provide consumer\u2019s  location engenders privacy risks, particularly if companies use or share  location data without consumers\u2019 knowledge. ECPA might not apply if  location data were not deemed content and would not govern entities that  are not covered by ECPA. But FTC could pursue enforcement action if a  company\u2019s collection or use of the information violated COPPA.\nMore recently, in January of this year, we issued a report on internet  privacy that reinforces what we reported in 2013. To varying extents,  internet content providers and internet service providers collect, use, and  share information from their customers to enable their services, support  advertising, and for other purposes. Consumers access such services  through mobile phones and tablets, computers, and other internet- connected devices. However, there is no comprehensive federal privacy  statute with specific standards. 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. We concluded that recent developments regarding  internet privacy suggest that this is an appropriate time for Congress to  consider comprehensive internet privacy legislation. To address such  privacy concerns, states and other countries have adopted privacy rules.  For example, the European Union\u2019s General Data Protection Regulation,  which came into force in May 2018, is a set of privacy rules that give  consumers control over the collection, use, and sharing of their personal  information, and California passed its own privacy law in June 2018 that  becomes effective in 2020.\n\n\t\tRegulatory Authorities under Current Law May Be Limited\n\nIn February of this year, we reported that FTC does not have civil penalty  authority for initial violations of GLBA\u2019s privacy and safeguarding  requirements, 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  (such as a data breach) 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 from violating  data security provisions of GLBA and its implementing regulations. We  recommended that Congress consider giving FTC civil penalty authority  to enforce GLBA\u2019s safeguarding provisions.\nAdditionally, in our January 2019 report, we found that FTC had not yet  issued regulations for internet privacy other than those protecting financial  privacy and the internet privacy of children, which were required by law.  FTC uses its statutory authority under the FTC Act to protect consumers  from unfair and deceptive trade practices. 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 addition, under this authority, FTC can  generally only levy civil money penalties after a company has violated an  FTC final consent order. In our recommendation that Congress consider  developing comprehensive internet privacy legislation, we also suggested  that such legislation consider providing rulemaking and civil money  penalty authorities to the proper agency or agencies.\nIn summary, new technologies have vastly changed the amount of  personal information private companies collect and how they use it. But  our current privacy framework does not fully address these changes.  Laws protecting privacy interests are tailored to specific sectors and uses.  And, consumers have little control over how their information is collected,  used, and shared with third parties for marketing purposes. As a result,  current privacy law is not always aligned with the Fair Information  Practice Principles, which the Department of Commerce and others have  said should serve as the foundation for commercial data privacy. Thus,  the privacy framework warrants reconsideration by Congress in relation to  consumer interests, new technologies, and other issues.\nChairman Crapo, Ranking Member Brown, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to any questions you may have.\n\n\tGAO Contacts\n\nFor further information on this statement, 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 statement. In addition to the contact above, Jason  Bromberg (Assistant Director), William R. Chatlos, Rachel DeMarcus, Kay  Kuhlman (Assistant Director), Christine McGinty (Analyst in Charge),  Barbara Roesmann, and Tyler Spunaugle contributed to this statement.  Other staff who made key contributions to the reports cited in the  testimony are identified in the source products.\nThis 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.","output":null}
{"id":"gao_GAO-20-460","pid":"gao_GAO-20-460_0","input":"\tBackground\n\nAlaska\u2019s location makes the United States an Arctic nation. Alaska has  over 6,000 miles of coastline, and is bordered by the Beaufort, Chukchi,  and Bering Seas; the Arctic Ocean; and the Bering Strait, whose  jurisdiction is divided between the United States and Russia (see fig. 1).  According to the 2010 Census, the U.S. Arctic coastal regions are home  to about 26,000 people, including the cities of Nome, located near the  Bering Strait, and Utqiagvik (formerly Barrow), the northernmost city in  the United States. The U.S. Arctic coastal region is sparsely populated  even by the standards of Alaska, which has the lowest population density  of any state in the nation. Specifically, this region accounted for about 4  percent of Alaska\u2019s total population of approximately 710,000 according  to the 2010 Census. Alaska is also the largest state in the nation, and\u2014 given its size, terrain, environment, and population distribution\u2014its  transportation system is unique. Much of Alaska\u2019s rail and highway  infrastructure is located in the south central part of the state, and many  U.S. Arctic cities and villages are accessible only by air or water.\nAs Arctic waterways become more accessible due to declining sea ice,  opportunities have increased to use maritime transportation to bring  natural resources to market. The U.S. Arctic remains a frontier economy;  many of its products and much of the value of commercial activities derive  from natural resources. According to an assessment of undiscovered but  technically recoverable oil and gas resources by the Bureau of Ocean  Energy Management, the outer continental shelf regions of the U.S.  Arctic\u2019s Chukchi and Beaufort Seas contain about 24 billion barrels of oil  and about 105 trillion cubic feet of natural gas. The U.S. Arctic also  contains $1 trillion worth of minerals, such as zinc, nickel, and lead. The  extraction of these natural resources presents technical challenges and  requires large financial investments given the Arctic environment.\nAlthough warming over the past decades has made trans-Arctic maritime  routes more accessible, Arctic sea ice extent remains seasonal, with most  shipping occurring during a narrow window extending from summer to  early fall. Arctic sea ice typically reaches its maximum extent in March  and its minimum in September each year; as a result, the shipping  season is typically from June through October. The minimum sea ice  extent in September 2019 was tied with 2007 and 2016 as the second  lowest on record since satellite observations began in 1979; the 13 lowest  extents in the satellite record have all occurred in the last 13 years. As  shown in figure 2, the September (minimum) sea ice extent in 2019 had a  much smaller coverage area than the median September extent from  1981 to 2010. This contraction of sea ice over time has increased  accessibility to the two key trans-Arctic maritime routes: the Northwest  Passage (NWP) through the Canadian archipelago, and the Northern Sea  Route (NSR) along the northern border of Russia. These two routes  enable shipments between non-Arctic destinations, such as between Asia  and Europe. However, most traffic in the U.S. Arctic is destinational,  meaning it transports goods to and from the U.S. Arctic. Such traffic  includes transporting natural resources extracted from the U.S. Arctic to  the global marketplace and shipping supplies to U.S. Arctic communities.\nMaritime shipping in the U.S. Arctic involves challenges, given that the  region lacks many of the typical elements of a maritime transportation  system. See table 1 for examples of the types of maritime infrastructure  gaps that CMTS and federal agencies have reported in the U.S. Arctic.\nMany federal agencies are involved with, and have a role in, U.S. Arctic  maritime shipping and infrastructure (see table 2). Although these  agencies\u2019 missions are not specifically tied to the U.S. Arctic, they extend  to the U.S. Arctic like any other geographic region of the country.\nOther state, local, and international organizations also play a role. For  example, the state of Alaska\u2019s Department of Environmental  Conservation is involved with oil spill response. In addition, the North  Slope Borough, a municipal government that encompasses an area of  nearly 95,000 square miles along Alaska\u2019s northern coast, has a search  and rescue department that provides airborne emergency response.  Alaska Native organizations represent communities that have inhabited  the Arctic region for thousands of years and have cultures that are  particularly sensitive to environmental changes, since they rely on hunting  animals such as whales, seals, and walruses. To represent local  concerns, the Arctic Waterways Safety Committee, which is comprised of  subsistence hunters and others, was created in October 2014 to develop  best practices for safe and efficient use of Arctic waterways. Alaska  Native Corporations are private entities that manage land and assets on  behalf of Alaska Natives. Lastly, international forums such as the Arctic  Council and international organizations such as the IMO also have a role  in establishing Arctic maritime policies and regulations.\nFor nearly 50 years the U.S. government has articulated its interest in the  Arctic through a series of strategies. For example, in 1971 a then- classified memo from National Security Council (NSC) under the Nixon  Administration called for the sound and rational development of the Arctic,  guided by the principles of minimizing adverse environmental effects,  promoting international cooperation, and protecting security interests,  including the preservation of the freedom of the seas. These same  priorities, along with promoting scientific research, were underscored by  the Reagan Administration in 1983. In January 2009, the George W.  Bush Administration issued an Arctic Region Policy, which outlined  priorities for maritime transportation in the Arctic including to facilitate  safe, secure, and reliable navigation and protect maritime commerce and  the environment. More recently, the Obama Administration issued a  National Strategy for the Arctic Region (National Strategy) in May 2013,  which identified three goals for the region: to advance U.S. security  interests, pursue responsible stewardship, and strengthen international  cooperation. Subsequent implementation plans for the National Strategy  indicated maritime shipping and infrastructure fell under all three of these stated goals. For example, \u201cpreparing for increased activity in the  maritime domain\u201d fell under advancing U.S. security interests, \u201ccharting  the Arctic region\u201d fell under pursuing responsible stewardship, and  \u201cpromoting waterways management\u201d fell under strengthening international  cooperation.\nAs federal strategies related to the Arctic region have evolved over the  years, so have the interagency groups to implement and guide these  efforts. Interagency activity in the U.S. Arctic has historically been  coordinated through the NSC, including the 1971 and 1983 strategies. In  1984, legislation established the U.S. Arctic Research Commission as  well as the Interagency Arctic Research Policy Committee (IARPC).  More recently, to enhance coordination of national efforts in the Arctic,  particularly those related to the 2013 National Strategy, a 2015 Executive  Order established the interagency Arctic Executive Steering Committee  (AESC). AESC is chaired by the Director of the Office of Science and  Technology Policy (OSTP), which is an office within the White House that  leads interagency science and technology policy coordination efforts.  AESC also includes NSC as a member, along with 20 other federal  departments and entities. The 2016 National Strategy Implementation  Framework assigned portions of the strategy\u2019s areas of focus to  interagency groups; specifically, NSC was assigned responsibility for  advancing national security interests, OSTP for pursuing responsible  stewardship, and the Department of State for strengthening international  cooperation.\nThe U.S. Committee on the Marine Transportation System (CMTS), which  was required in 2010 to coordinate the establishment of domestic  transportation policies in the Arctic to ensure safe and secure maritime  shipping, has issued several relevant reports, including a 10-year  projection of maritime activity in 2015, and a 10-year prioritization of  infrastructure needs in the U.S. Arctic in 2016\u2014both of which were  directed by the 2014 National Strategy implementation plan.  More  recently, CMTS issued a 2018 report revisiting its 2016 near-term  recommendations for prioritizing infrastructure needs in the U.S. Arctic  and a 2019 update to its projections of Arctic maritime shipping activity  from 2020 to 2030.  These and other reports addressing maritime  infrastructure in the U.S. Arctic are listed in appendix I.\n\n\tMaritime Shipping in the U.S. Arctic Generally Increased from 2009 through 2019 but Remains Limited and Was Affected by Several Factors\n\n\t\tMaritime Shipping in the U.S. Arctic Increased from 2009 through 2019 with a Range of Vessel Types Represented\n\nU.S. Coast Guard data indicate the number of vessels in the U.S. Arctic  increased from 2009 through 2019 (see fig. 3). The types of vessels the  U.S. Coast Guard tracks in the U.S. Arctic includes vessels conducting  marine scientific research; tugs that provide communities with supplies;  and adventurer vessels such as private yachts. U.S. Coast Guard data  also include bulk cargo vessels from the Red Dog mine, one of the largest  zinc mines in the world. The mine trucks its zinc ore to a facility on the  Chukchi Sea, where it is stored for maritime transport during the shipping  season. The U.S. Coast Guard District responsible for the U.S. Arctic  counts more types of vessels in its area of interest\u2014such as research,  tug, and adventurer\u2014than are typically counted for the purposes of  tracking commercial shipping.\nEven at its peak, maritime shipping in the U.S. Arctic remained limited  compared to global commercial shipping, although CMTS recently  reported that the number of flag states, or countries where vessels are  registered, has increased. Specifically, the 307 vessels in the U.S. Arctic  in 2019 represented a small portion of the total number of shipping  vessels operating globally. For comparison, according to the United  Nations Conference on Trade and Development, in 2015 the world fleet of  commercial shipping vessels was approximately 89,000. However, in its  2019 traffic projections report, CMTS analyzed U.S. Coast Guard data  and other data sources and found that between January 2015 and  December 2017, the number of flag states in the U.S. Arctic increased.  CMTS noted this indicates a shift away from regionally focused operators  toward a more diverse and international set of operators. CMTS found  that the majority of vessels were flagged to the United States (about 41  percent) or Russia (about 24 percent) over this time period, with the  remaining 35 percent from 35 other flag states, each with a considerably  smaller percentage than the United States or Russia.\nGiven that a single vessel can make multiple trips per shipping season,  U.S. Coast Guard also measures maritime activity by the number of  transits that vessels make per year through the Bering Strait, a key  convergence point for trans-Arctic routes that connects the NWP and  NSR to the Pacific Ocean. According to U.S. Coast Guard data, the  number of transits through the Bering Strait has ranged from as few as  280 in 2009, to as many as 514 in 2015 (see fig. 4). There were far fewer  transits through the Bering Strait than through some other convergence  points for established major maritime transportation routes that have  more developed maritime infrastructure. For example, the number of  transits through the Panama Canal, which like the NWP connects the  Atlantic and Pacific Oceans, was almost 14,000 in 2018 and the number  of vessels that transited the Suez Canal, which like the NSR enables  shipping between Asia and Europe, was over 18,000.\n\n\t\tFactors Affecting Arctic Maritime Shipping Included Changes in Domestic and International Demand and Unpredictable Conditions\n\nStakeholders told us that along with factors such as demand that shape  shipping trends worldwide, factors unique to the Arctic also play a role,  such as potential cost savings due to shorter routes; additional operating  costs incurred by Arctic-capable ships; environmental hazards like  unpredictable weather and sea ice; and a lack of maritime infrastructure  typically found along shipping routes. The 20 stakeholders we interviewed  representing the shipping industry, research institutions, and state, local,  and Alaska Native groups among others, described the following factors  that affect U.S. Arctic maritime shipping.\n\n\t\t\tDomestic and International Demand\n\nAs mentioned earlier, diminished sea ice has presented opportunities for  maritime shipping of natural resources extracted from the Arctic, such as  oil, gas, and minerals. However, such activities decreased domestically  after Royal Dutch Shell, PLC (Shell) discontinued its offshore oil and gas  exploration of the Burger prospect in Alaska\u2019s Chukchi Sea in 2015. As  shown in figure 4, the number of transits in the Bering Strait steadily  declined from 514 in 2015 to 369 in 2018. Specifically, CMTS reported  that Shell demobilized its drill ship, anchor handling vessels, and anti- pollution ships from the study area prior to the start of the 2016 shipping  season. One stakeholder said there was a reduction in the number of  seasonal transits after Shell suspended exploration activities, since Shell  had previously accounted for more than a hundred transits through the  Bering Strait. Other traffic related to domestic natural resource extraction  stayed at consistent levels. Specifically, representatives from the Red  Dog zinc mine reported that from 1999 to 2019 they consistently shipped  between 21 and 26 cargo vessels per year, averaging 24 vessels per  year over the 20-year period. Meanwhile, several stakeholders said  international activities related to natural resource development,  particularly in the Russian Arctic, have recently increased, and that  Russia has been investing heavily in Arctic infrastructure. The U.S. Coast  Guard attributed increased cargo traffic levels in 2016 to construction  projects in the Russian Arctic, particularly a liquefied natural gas (LNG)  facility on the Yamal peninsula (see fig. 3 above). In 2017, a Russian  LNG tanker, the Christophe de Margerie, became the first ship to transit  the NSR without being accompanied by an icebreaker.\nDemand for tourism cruises in the U.S. Arctic has increased slightly  recently. A representative from an Arctic cruise industry association told  us that the overall cruise industry worldwide grows 5 to 10 percent a year  and that there is growing demand for expedition cruises to farther-flung  areas like the Arctic. In both 2016 and 2017, the cruise ship Crystal  Serenity transited the NWP with over a thousand passengers on board.  Stakeholders noted that cruise ship voyages in the U.S. Arctic, such as  the Crystal Serenity voyages, raised concerns for passenger safety given  the lack of infrastructure, particularly for search and rescue. However,  according to an Arctic cruise industry association representative, the  number of smaller ships purpose-built for Arctic conditions is growing; the  association estimates 25 to 30 such vessels are under construction.\nDomestic and foreign research vessels have also increased in number in  the U.S. Arctic due to greater interest in the region\u2019s changing  environment. For example, according to National Science Foundation  officials, their polar-capable vessel Sikuliaq entered service in 2016.  Internationally, China has increased its activity in the Arctic since gaining  observer status on the Arctic Council in 2013 and now operates two  icebreaking research vessels. One stakeholder said that such  investments by countries such as China may be the first step towards  achieving longer-term economic goals for those countries.\n\n\t\t\tCost of Operations\n\nTrans-Arctic routes can reduce travel time between certain destinations  compared to traditional routes and may therefore reduce fuel and labor  costs. For example, the route from Shanghai, China, to Northwestern  Europe via the NSR is 27 percent shorter than via the Suez Canal. The  operators of the Russian LNG tanker that transited the NSR in 2017, the  Christophe de Margerie, reported they completed the journey in 19 days,  30 percent faster than the Suez Canal. For reasons such as these,  according to news reports, Russia has announced plans to develop the  NSR and ship 80 million tons of goods through the route by 2024.  Similarly, an official from a Canadian ship owner and operator told us  that, depending on the vessel\u2019s origin and destination, using the NWP can  be 10-15 days faster than using the Panama Canal, resulting in a cost  savings of $100,000 to $150,000.\nAlthough trans-Arctic routes have the potential for cost savings due to  shorter distances, they require additional investments not necessary for  traditional routes that may offset those savings. For example,  representatives of one carrier said Arctic-capable ships cost three to four  times more than ordinary ships because they require more steel and  higher power output to withstand ice conditions. The additional steel also  limits the amount of cargo the vessel can carry; representatives from  another carrier noted every ton of steel used to construct the ship is a ton  of cargo that the ship cannot carry in order to recoup expenses. The size  of vessels that can safely operate in the region is also constrained by  draft limitations that specify the maximum weight and size at which ships  can navigate the shallow waters of the Arctic. By contrast, the trend  among ocean carriers over the past decades, which have capitalized on  advances in fuel-efficient engine technology, is toward constructing  increasingly larger vessels to capture economies of scale. In addition,  stakeholders told us that shippers operating in the Arctic must invest in  special onboard equipment and prepare for contingencies due to the lack  of maritime infrastructure usually found in traditional routes, such as  deep-draft ports, harbors of refuge, reliable communications, and search  and rescue infrastructure. Stakeholders noted Arctic voyages also require  additional training for crew members on navigating in ice conditions.\nShippers must determine whether the cost savings obtained from shorter  trans-Arctic routes outweigh the additional operating expenses. For  example, although Maersk, one of the largest shipping companies in the  world, successfully completed a trial passage of a container ship through  the NSR in September 2018, the company emphasized at the time that  the transit was a \u201cone-off trial designed to gain operational experience in  a new area and to test vessel systems\u201d and that it did not view the route  as a commercially viable alternative to existing routes. In a press release,  Maersk noted that the NSR was only feasible for around 3 months a year  and required the use of more costly ice-classed vessels. Despite this,  news reports in June 2019 indicate Maersk is exploring sending more  goods through the NSR in cooperation with a Russian icebreaker  company in response to demand for the transport of goods from Asia to  West Russia.\n\n\t\t\tUnpredictable Conditions and Lack of Infrastructure\n\nAlthough diminished sea ice has prolonged the shipping season and  opened up shipping routes, environmental changes have also resulted in  less predictable conditions, such as more volatile weather and sea ice.  One stakeholder involved with Arctic research noted that the conditions  that have led to open waters can also lead to harsher conditions such as  strong low pressure systems, gale force winds, and storms. Such  conditions pose challenges for shipping\u2014one shipper representative said  that it is difficult to load barges in shallow waters and that typically loading  and unloading activities have to be suspended with swells above 3 feet.  In addition, stakeholders told us variation in ice conditions from year to  year makes planning Arctic voyages difficult to do with reasonable  accuracy. For example, while warming trends might suggest that overall  sea ice diminishes further each year, one carrier representative noted its  vessel encountered severe ice conditions in June 2018. This  representative noted that diminished overall ice coverage can lead to  localized conditions with more mobile and older ice migrating into  shipping lanes. The unpredictable and harsh weather and ice conditions,  combined with the vast distances and lack of maritime infrastructure,  pose safety risks. For example, according to stakeholders, the \u201ctyranny of  distance\u201d in the Arctic stretches the limited search and rescue  capabilities, resulting in slow incidence response. Furthermore, a lack of a  designated harbor of refuge means vessels do not have a place to moor  safely in case of emergency. As a result, a representative from the  International Union of Marine Insurance noted that in the Arctic even a  minor incident, such as a small engine failure, can result in substantial  damages and even loss of life.\n\n\t\t\tEnvironmental Concerns\n\nSome stakeholders we interviewed expressed concerns about impacts of  shipping on wildlife, including the species that Alaska Natives rely on for  food. One stakeholder noted that awareness has grown in the past 10  years of the environmental impact of shipping. Such impacts include  emissions containing sulphur oxide and black carbon from ships\u2019 engines  that could damage the fragile Arctic ecosystem. As a result of such  environmental concerns, the IMO is currently considering a ban on heavy  fuel oil in the Arctic. In addition, in 2019 several major carriers, including  CMA CGM, Hapag-Lloyd, and Mediterranean Shipping Company,  announced they would not pursue trans-Arctic shipping. Furthermore, in  2019 Nike and Ocean Conservancy launched the Arctic Corporate  Shipping Pledge, a voluntary commitment by consumer goods and  shipping logistics companies to not send ships through the Arctic. The  pledge also supports precautionary Arctic shipping practices to enhance  the environment and human safety, which may include a heavy fuel oil  ban and an evaluation of low impact shipping corridors that protect  important ecological and cultural areas. A representative of one carrier we  spoke with said a heavy fuel oil ban in the Arctic could increase the cost  of transporting cargo and, as a result, severely impact shipping in the  region.\n\n\tAgencies Have Taken Some Steps to Address Gaps in Maritime Infrastructure in the U.S. Arctic, but Federal Efforts Lack a Current Strategy and Consistent Leadership\n\nWhile agencies have taken actions to address maritime infrastructure  gaps, federal efforts lack (1) a government-wide assessment of risks  posed by gaps in maritime infrastructure, (2) a current government-wide  strategy for addressing maritime infrastructure that includes goals,  performance measures, and appropriate responses to prioritized risks,  and (3) an interagency mechanism and consistent leadership to guide  agency actions related to maritime infrastructure. Without these elements,  federal agencies may lack information on which to base decisions and  prioritize actions, assurance that their investments are directed to  prioritized risks, and the ability to demonstrate progress in addressing  maritime infrastructure. Furthermore, agencies may miss opportunities to  work together and leverage resources towards achieving broader  outcomes.\n\n\t\tAgencies Have Taken Actions to Address Navigation and Other Gaps in U.S. Arctic Infrastructure\n\nAgencies have taken some actions since 2013, when CMTS first reported  on gaps in U.S. Arctic infrastructure. For example, U.S. Coast Guard  reported that it has taken a flexible approach to addressing infrastructure  gaps by establishing seasonal, forward operating bases in the U.S. Arctic  as needed to provide search and rescue support in areas where major  shipping activity is occurring. See table 3 for selected examples of agency  actions.\n\n\t\tFederal Efforts Lack a Government-wide Risk Assessment to Inform Decisions in the U.S. Arctic\n\nAlthough federal agencies have taken some steps to address gaps in  U.S. Arctic infrastructure, those efforts are not based on a government- wide assessment of the economic, environmental, and safety risks posed  by maritime infrastructure gaps to inform investment decisions in the U.S.  Arctic. Rather, agency officials said that they currently base Arctic  infrastructure decisions on their agency-specific missions, strategies, and  collaborative efforts. Specifically, agency officials said that securing the  resources to address U.S. Arctic infrastructure is challenging because  such projects must compete with other established agency mission areas.  For example, officials told us that infrastructure investments may not  compete as well against other agency-established priorities in other parts  of the country, in part, because the Arctic is an emerging region and  because of the considerable costs of developing infrastructure in the  harsh Arctic environment.\nLeading management practices we reviewed note the importance of  assessing risks in order to select and prioritize countermeasures to  prevent or mitigate risks. A 2016 Office of Management and Budget  (OMB) circular emphasized the importance of risk assessment and called  for agencies to use a structured and systematic approach to identify risks  and assess the causes, sources, probability of the risk occurring, and  potential outcomes, and then prioritize the results of the analysis. Such  an approach can be used by decision makers to evaluate the  effectiveness of, and to prioritize, countermeasures relative to the  associated costs. Risk management is a widely endorsed strategy for  helping policymakers make decisions about allocating finite resources  and taking actions in conditions of uncertainty. Such a framework is  especially applicable to the U.S. Arctic given the uncertain conditions in  the region and safety and environmental risks described above.\nWithout a risk assessment, agencies lack assurance that their  investments are addressing the highest-priority risks. In particular, we  found that agencies\u2019 actions to address maritime infrastructure gaps were  not fully consistent with the areas that the stakeholders we interviewed  identified as the most critical (see fig. 5). For example, 11 of the 20  stakeholders we interviewed identified charting Arctic waters as the  highest priority to address, and in May 2019 NOAA reported that it had  acquired nearly 1,500 square nautical miles of hydrographic survey data  in the Arctic over the prior 3 years. This is, however, less than 1 percent  of the over 200,000 square nautical miles of waters NOAA has identified  as significant to navigation in the U.S. Arctic. In addition, nine  stakeholders identified addressing gaps in communications in the U.S.  Arctic as a key priority. However, CMTS reports indicate no change in the  status of communications capabilities in the U.S. Arctic between 2013  and 2018.\nCMTS has in the past noted the importance of conducting a risk  assessment to inform Arctic decision-making. Specifically, CMTS\u2019s 2013  report noted that greater access to the U.S. Arctic and increased activity  presents additional risks for people, vessels, and the environment in the  fragile region and that managing that risk requires an in-depth  understanding of the issues and trade-offs associated with key decisions.  Although CMTS reported that developing an assessment tool that  provides a quantifiable level of risk and that accounts for the unique risk  elements in the Arctic was a challenge for the nation, it proposed a model  for determining risk that considered the likelihood of adverse events  actually occurring, vulnerability to damage, and potential consequences.  CMTS further stated that, given the rate at which other nations are  progressing with Arctic shipping and development, the United States  should decide the acceptable degree of risk for Arctic operations.\nAlthough CMTS has provided useful information on maritime  infrastructure gaps to decision makers and described possible risks to the  U.S. Arctic, it has not systematically assessed the risks posed by these  gaps. For example, in 2016, CMTS made near-, mid-, and long-term  recommendations for addressing maritime infrastructure needs, but noted  this ordering was not intended to create a hierarchy of infrastructure  needs from most to least important. CMTS officials told us that they have  not systematically assessed risks posed by maritime infrastructure gaps  in the U.S. Arctic because CMTS\u2019s priorities are established by its  member agencies, and that CMTS has not been directed to conduct such  an assessment by its members. However, CMTS is required by statute to,  among other things, coordinate the establishment of domestic  transportation policies in the Arctic to ensure safe and secure maritime  shipping and make recommendations with regard to federal policies that  impact the marine transportation system. Furthermore, according to  CMTS officials, there is nothing in CMTS\u2019s authority that would prevent it  from doing a risk assessment.\nGiven its previous reports and work in the U.S. Arctic and its coordinating  role with its member agencies, CMTS is well suited to conduct a  government-wide assessment of the risks posed by gaps in maritime  infrastructure in the U.S. Arctic. For example, CMTS published a traffic  projections report in September 2019 that aimed to provide decision  makers with a wide-ranging portrait of potential changes in vessel activity  in the U.S. Arctic over the next decade. To inform its risk assessment,  CMTS can draw on the expertise of its member agencies, such as U.S.  Coast Guard and NOAA. For example, U.S. Coast Guard officials told us  that they have responded to the unpredictable economic changes in the  U.S Arctic\u2014including fluctuations in the level and type of maritime activity  in the region\u2014by investing in icebreakers and seasonal forward operating  bases, rather than developing permanent infrastructure. In addition,  CMTS can also draw on numerous reports discussing maritime  infrastructure in the U.S. Arctic that have been published since 2013, as  detailed in appendix I. For example, in 2019 the University of Alaska\u2019s  Arctic Domain Awareness Center held a series of workshops on the  factors that impact the ability of the U.S. Coast Guard and other  stakeholders to conduct safe, secure, and effective operations in the  Arctic environment.\nA government-wide risk assessment could better enable agencies to  evaluate potential U.S. Arctic infrastructure expenditures and assess the  extent to which these expenditures will mitigate identified risks. For  example, a report on the U.S. Coast Guard\u2019s Arctic capabilities suggested  that a systematic analysis of needs and risks in the U.S. Arctic could help  the agency generate momentum for closing Arctic capability gaps. By  conducting such a risk assessment, agencies would have better  information on which to base decisions for agency expenditures in the  U.S. Arctic and prioritize appropriate actions in response to risks.\n\n\t\tFederal Interagency Efforts Lack a Current Strategy and Consistent Interagency Leadership to Guide Agency Actions Related to Maritime Infrastructure\n\nWe found that the federal interagency efforts to address U.S. Arctic  maritime infrastructure lack a current strategy and consistent interagency  leadership to guide agencies\u2019 actions. Although several agencies have  developed strategies to guide their own agencies\u2019 efforts, these do not  provide government-wide direction or establish current government-wide  goals, objectives, and performance measures as leading management  practices call for. Moreover, the federal agencies lack clarity on which  interagency entity is responsible for guiding federal efforts and providing  consistent leadership to ensure government-wide objectives are met.\n\n\t\t\tCurrent Strategy\n\nThe federal government lacks a current government-wide strategy for  addressing U.S. Arctic maritime infrastructure gaps that includes key  characteristics, such as goals, objectives, and performance measures,  and appropriate responses to risks. Agency officials and stakeholders  said the 2013 National Strategy is outdated because conditions in the  U.S. Arctic have changed since 2013. In particular, agency officials said  national security is a growing concern in the Arctic. OSTP officials agreed  that conditions had changed in the Arctic, but could not state whether the  2013 National Strategy was still current. Our past work on interagency  collaboration found that written agreements documenting how  participating agencies collaborate, such as strategies, are most effective  when they are regularly updated and monitored. The changing  conditions in the Arctic described above make a current government-wide  strategy for maritime infrastructure in the U.S. Arctic particularly  important.\nIn our past work, we have reported that complex interagency efforts\u2014 such as those to address maritime infrastructure in the U.S. Arctic\u2014can  benefit from developing a national strategy. Our prior work has identified  key characteristics of national strategies, which we refer to in this report  as a government-wide strategy, including: (1) problem definition and risk  assessment which addresses the threats the strategy is directed towards;  and (2) goals, objectives, and performance measures to gauge and  monitor results. Furthermore, our prior enterprise risk management work  has noted that risk assessment should include a ranking of risks based on  priorities in relation to strategic objectives, and that senior leaders should  determine if a risk requires treatment or not based on risk tolerance or  appetite. Leaders then review the prioritized list of risks and select the  most appropriate response to address the risk. These key  characteristics help managers determine the extent of investment needed  and facilitate effective targeting of federal resources; this is especially  important when multiple agencies are involved, as is the case with  maritime infrastructure in the U.S. Arctic.\nAlthough several federal agencies have recently updated their Arctic  strategies, these agency-specific Arctic strategies are not linked to a current government-wide strategy for the Arctic region and are not  specifically focused on addressing Arctic maritime infrastructure gaps.  Specifically:\nU.S. Coast Guard. In April 2019, U.S. Coast Guard published its  Arctic Strategic Outlook, which supersedes its 2013 Arctic Strategy.  The updated strategy established three lines of effort: (1) enhance  capability to operate effectively in a dynamic Arctic domain, (2)  strengthen the rules-based order, and (3) innovate and adapt to  promote resilience and prosperity. We recommended in 2016 that  the U.S. Coast Guard develop measures for assessing how its actions  have helped to mitigate Arctic capability gaps and design and  implement a process to systematically assess its progress.  However, as of February 2020, the U.S. Coast Guard has not  implemented these recommendations. U.S. Coast Guard officials  state that they are currently developing an implementation plan and  Strategic Metrics Framework for the Arctic Strategic Outlook.\nU.S. Navy. In January 2019, the U.S. Navy published its Arctic  strategy, which updated its previous strategy from 2014. The  updated strategy included the following strategic objectives: defend  U.S. sovereignty and the homeland from attack; ensure the Arctic  remains a stable, conflict-free region; preserve freedom of the seas;  and promote partnerships to achieve the above objectives.\nDepartment of Defense. In June 2019, Department of Defense  updated its 2016 Arctic strategy which included the following as part  of its approach: (1) building Arctic awareness, (2) enhancing Arctic  operations, and (3) strengthening the rules-based order in the Arctic.\nNOAA. NOAA officials originally told us that they were working to  complete an update to NOAA\u2019s strategic plan for the Arctic in 2019.  However, as of February 2020, officials told us that this update is  currently on hold pending the completion of a new government-wide  National Strategy. As mentioned previously, OSTP staff said they  could not state whether the 2013 National Strategy was still current,  and OSTP provided no additional information as to whether a new  strategy was in development. NOAA officials told us that the agency\u2019s  current three priorities in the Arctic are (1) weather and water  (including weather and water research, observations, and Arctic  contributions to global weather monitoring); (2) blue economy  (including ocean mapping, seafood competitiveness, tourism, and  coastal resilience); and (3) innovative partnerships in Alaska and the  Arctic.\nCMTS has taken some steps to monitor agencies\u2019 progress in addressing  maritime infrastructure, but the current lack of performance measures  makes it difficult to monitor agencies\u2019 progress over time. We reported in  2014 that CMTS was developing a process to monitor such progress and  noted that such monitoring would help agencies develop a shared  understanding of current priorities and actions needed. However, while  CMTS did issue reports that described the status of maritime  infrastructure in the U.S. Arctic in 2016 and 2018, the reports did not  include goals or performance measures to assess agencies\u2019 progress.  According to officials, CMTS did not develop or include performance  measures to monitor agencies\u2019 progress because it does not have the  authority to designate agencies\u2019 priorities, and that agencies are best  situated to identify priorities in pursuit of their individual missions.\nPriorities in the U.S. Arctic are currently based on each agency\u2019s mission,  which makes it difficult to take a government-wide approach to  responding to risks. To improve unity of effort, the U.S. Coast Guard has  expressed support for a national approach to Arctic planning in both its  2013 and 2019 Arctic strategies. Without a current government-wide  strategy that includes goals and objectives, agencies lack assurance that  their investments are directed to prioritized risks. Furthermore, without  performance measures, agencies are not able to demonstrate, and  decision makers are unable to monitor, the extent to which agency  actions have addressed maritime infrastructure gaps.\n\n\t\t\tInteragency Leadership\n\nWe have previously reported that federal agencies use a variety of  mechanisms, including interagency groups, to implement interagency  collaborative efforts and that such mechanisms benefit from key features  such as sustained leadership and inclusion of all relevant participants,  such as stakeholders. We also reported that leadership should be  sustained over time to provide continuity for long-term efforts and that  having top-level commitment from the President, Congress, or other high- level officials can strengthen the effectiveness of interagency  collaborative groups. We also found that lack of continuity is a frequent  issue with interagency mechanisms that are tied to the Executive Office of  the President, particularly when administrations change, and that  transitions and inconsistent leadership can weaken a collaborative  mechanism\u2019s effectiveness. In addition, our prior work has noted the  importance of ensuring that all relevant participants are included in the  collaborative effort, such as participants with the appropriate knowledge,  skills, and abilities to contribute.\nThere are many interagency groups involved in the U.S. Arctic, including:\nAESC was established by Executive Order in 2015 to shape national  priorities and set strategic direction in the Arctic.\nNSC Arctic Policy Coordinating Committee (PCC) is the current  interagency forum for executive-level Arctic collaboration, according to  agency officials.\nCMTS is the main forum for collaboration regarding maritime  infrastructure according to agency officials.\nThese interagency groups vary in the extent to which they meet the key  features noted above. Specifically:\nSustained leadership: Both the NSC, which, as mentioned  previously, has traditionally played a role in Arctic collaboration dating  back to 1971, and the AESC, which was chaired by the OSTP within  the White House, would have top-level commitment given their  proximity to the White House. However, according to agency officials,  the AESC has not met in the past 2 years and is now dormant. OSTP  staff told us that they are not aware of any current AESC activities.  Meanwhile, although CMTS has been active in the area of U.S. Arctic  maritime infrastructure for the past decade, CMTS officials said CMTS  does not sit within the Executive Office of the President. As a result,  CMTS officials note their role is to facilitate an interagency  partnership, share information among member agencies, and provide  information to decision-makers to support agencies\u2019 efforts. CMTS\u2019s  statutory authority addresses, among other things, the coordination of  federal policies that impact the maritime transportation system,  including in the U.S. Arctic, rather than the development and  execution of government-wide policies.\nInclusion of relevant stakeholders: The AESC, when it was active,  included a wide range of over 20 federal departments and entities,  including those less associated with maritime infrastructure such as  the Department of Agriculture. For the NSC Arctic PCC, we were  unable to verify the participants, so it is unclear whether relevant  stakeholders are involved. However, agency officials noted the PCC\u2019s  focus is on national security rather than on maritime infrastructure,  which may indicate not all maritime infrastructure stakeholders are  included. Lastly, CMTS includes stakeholders involved directly with  maritime transportation. For example, officials from the U.S. Army  Corps of Engineers noted that they actively participate in CMTS,  including its Arctic Integrated Action Team, but do not participate in  other interagency groups, where they are often represented by higher- level Department of Defense officials.\nThe Executive Office of the President has not designated an interagency  group as responsible for developing or executing the administration\u2019s  strategy for maritime infrastructure in the U.S. Arctic. We have previously  reported that interagency efforts can benefit from the leadership of a  single entity to provide assurance that federal programs are well  coordinated and based upon a coherent strategy. Agency officials said  priorities in the U.S. Arctic have shifted to national security under the  current administration, which may have led executive-level interagency  collaboration efforts to move from AESC to the NSC Arctic PCC.  However, it is unclear whether the NSC Arctic PCC includes the relevant  stakeholders. Moreover, the shift in Arctic priorities to security issues  does not diminish the importance of Arctic maritime infrastructure. As  indicated in the 2013 National Strategy, maritime shipping and  infrastructure are a key component of overarching goals in the region like  advancing U.S. security interests, pursuing responsible stewardship, and  strengthening international cooperation.\nWithout an interagency mechanism with sustained leadership and  inclusion of relevant stakeholders to direct federal efforts related to U.S.  Arctic maritime infrastructure, agencies may miss opportunities to  leverage resources toward achieving a broader outcome. For example, as  noted earlier, stakeholders we spoke to identified communications as a  key infrastructure gap. According to U.S. Coast Guard officials,  communications is a whole-of-government effort, requiring partnerships  across agencies including the Department of Defense. Without an  interagency collaboration mechanism designated to lead these efforts, it  is unclear who has responsibility for such whole-of-government efforts to  address maritime infrastructure in the U.S. Arctic.\n\n\tConclusions\n\nThe U.S. Arctic, including the Bering Strait, is an essential part of the  increasingly navigable Arctic and a key convergence point for maritime  transportation routes connecting the Pacific and Atlantic oceans. The  risks inherent to Arctic shipping\u2014including vast distances, extreme ice  conditions, and unpredictable weather\u2014are exacerbated by gaps in  maritime infrastructure in the U.S. Arctic. While agencies have taken  some actions to address these gaps, without a government-wide  assessment of risks posed by maritime infrastructure gaps in the U.S.  Arctic and a current strategy to address those risks, agencies lack  assurance that their actions are effectively targeting priority areas.\nWithout a strategy that includes goals, objectives, and performance  measures, agencies cannot demonstrate the results of their efforts, and  decision makers cannot gauge the extent of progress in addressing  maritime infrastructure gaps. In addition, without a designated  interagency group to provide sustained leadership, agencies lack the  ability to leverage resources to address maritime infrastructure and  achieve government-wide priorities in the complex and changing U.S.  Arctic.\n\n\tRecommendations for Executive Action\n\nThe U.S. Committee on the Marine Transportation System should:\nComplete a government-wide assessment of the economic,  environmental, and safety risks posed by gaps in maritime  infrastructure in the U.S. Arctic to inform investment priorities and  decisions. (Recommendation 1)\nThe appropriate entities within the Executive Office of the President,  including the Office of Science and Technology Policy should:\nDevelop and publish a strategy for addressing U.S. Arctic maritime  infrastructure that identifies goals and objectives, performance  measures to monitor agencies\u2019 progress over time, and the  appropriate responses to address risks. (Recommendation 2)\nDesignate the interagency group responsible for leading and  coordinating federal efforts to address maritime infrastructure in the  U.S. Arctic that includes all relevant stakeholders. (Recommendation  3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Executive Office of the  President\u2019s Office of Science and Technology Policy (OSTP); the U.S.  Committee on the Marine Transportation System (CMTS); and the  Departments of Homeland Security, Commerce, Defense, Interior, State,  and Transportation for comment. With the exception of the Department of  Defense, all of these entities provided technical comments, which we  incorporated as appropriate. Only CMTS provided written comments,  which were transmitted via letter from the Department of Transportation,  and are reprinted in appendix II.\nIn its technical comments, the Department of Homeland Security\u2019s U.S.  Coast Guard provided Arctic traffic data for the 2019 shipping season. As  stated in our report, we originally selected the decade of 2009 through  2018 for our analysis when designing our review, as 2018 was the most  recent year for which data were available at that time. In response to the  U.S. Coast Guard\u2019s comments submitted in April 2020, we revised our  report to include data from the 2019 shipping season on (1) the number of  vessels in the U.S. Coast Guard District 17 Arctic area of interest and (2)   the number of transits in the Bering Strait, to ensure the report contained  the most current information available.\nIn its written comments, CMTS partially concurred with our  recommendation that CMTS complete a government-wide assessment of  the economic, environmental, and safety risks posed by gaps in maritime  infrastructure in the U.S. Arctic to inform investment priorities and  decisions. However, CMTS also noted several areas of disagreement  with our conclusions, which we address here:  First, CMTS noted that GAO\u2019s draft report contained dated information  and that the 2019 data contradicts GAO statements that suggest a  decrease in vessel activity since 2015. CMTS noted that the 2019 data  shows that vessel traffic has increased steadily over the last decade, and  that although growth slowed between 2015 and 2017, \u201cit did not stall.\u201d  However, we dispute this characterization. The 2019 shipping data  included in this report emphasizes the finding from our draft report that  maritime shipping activity generally increased over the time period of our  review. However, this trend does not reflect a steady increase throughout  the entire timeframe or \u201cslowed growth\u201d between 2015 and 2017 as  CMTS indicates. Specifically, the data show year-to-year decreases in the  number of vessels from 2015 to 2017 in the U.S. Coast Guard District 17  Arctic area of interest (see fig. 3) and in the number of transits in the  Bering Strait from 2015 to 2018 (see fig. 4). CMTS\u2019s own 2019 report  indicated that the number of vessels had decreased from a peak in 2015,  after Shell\u2019s decision in 2015 to not pursue further exploratory drilling  efforts. As such, we stand by our description of the overall growth in  maritime activity in the U.S. Arctic since 2009, as well as the pattern of  declining traffic within that period from 2015 through 2018.\nSecond, CMTS also noted in its written comments that our use of data  from 2009 to 2018 in the draft report do not lead to the conclusions and  recommendation to assess infrastructure risks and prioritize future  investment in the Arctic. We dispute this characterization. Our decision to  include the 2019 data further emphasizes the finding in our draft report of  a general increase in maritime activity in the U.S. Arctic and the need for  an assessment of risks posed by gaps in maritime infrastructure. As we  note in the report, CMTS has reported that the U.S. Arctic does not have  the typical elements of a maritime infrastructure system such as a deep- draft port or robust communications infrastructure. These infrastructure  gaps exacerbate the inherent challenges of maritime activity in the  Arctic\u2014vast distances, dangerous weather, and extreme ice conditions\u2014 that can pose safety risks to mariners and environmental risks to the  fragile Arctic ecosystem. While agencies have taken some steps to  address infrastructure gaps, without a risk assessment, agencies lack  assurance that their investments are addressing the highest-priority risks.  As such, we stand by our conclusion and recommendation that increasing  maritime traffic poses risks, and a government-wide assessment of those  risks would inform federal decisions on investments to appropriately  address risks.\nThird, CMTS disagreed with GAO\u2019s statement that a government-wide  risk assessment could better enable agencies to evaluate potential U.S.  Arctic infrastructure expenditures. Although CMTS agreed that  understanding infrastructure gaps is critical to improving the Arctic marine  transportation system, CMTS contends that such risk assessments are  the responsibility of each agency as directed by the Office of  Management and Budget (OMB). As we note in the report, many  agencies have a role in U.S. Arctic maritime shipping and infrastructure  and although agencies and others have conducted many reviews of  maritime infrastructure in the U.S. Arctic (see appendix I), agency-by- agency assessments do not reflect or analyze risks from a government- wide perspective.\nCMTS itself has previously noted the importance of evaluating risks on a  government-wide basis. Specifically, in 2013 CMTS noted that increased  activity in the U.S. Arctic presents additional risks for the people, vessels,  and the environment and that managing that risk requires an in-depth  understanding of the issues and trade-offs associated with key decisions,  such as how to prioritize investments. As our report states, CMTS stated  that developing a tool to assess the unique risk elements in the Arctic was  a challenge for the nation, and it proposed a model for determining risk  that considered the likelihood of adverse events actually occurring,  vulnerability to damage, and potential consequences. This model is  similar to the 2016 OMB circular, which called for agencies to, among  other things, assess the causes, sources, probability of the risk occurring,  and potential outcomes. As stated in our report, given its previous work  in the U.S. Arctic and its coordinating role with its member agencies,  CMTS is well suited to conduct a government-wide assessment of the  risks posed by gaps in maritime infrastructure in the U.S. Arctic. As such,  we stand by our recommendation.\nBased on these items, CMTS did not agree to perform and lead a  government-wide risk assessment. Instead, as an \u201calternate action\u201d to  address GAO\u2019s recommendation, CMTS noted it plans to update a table  of information published in its past reports on infrastructure gaps in the  U.S. Arctic and provide an inventory of existing risk assessments and  their criteria, which agencies can then use to improve their own  assessments to inform decisions. In our view, the proposed action  described by CMTS would not provide the same level of information  proposed by CMTS itself in 2013 and by OMB\u2019s 2016 circular, which calls  for, among other things, assessing the causes, sources, probability of the  risk occurring, and potential outcomes.\nAs stated in our report, CMTS is uniquely positioned as a federal  interagency coordinating committee focused on the maritime  transportation system to draw on the expertise of its member agencies,  such as U.S. Coast Guard and the National Oceanic and Atmospheric  Administration, to complete this risk assessment. Moreover, CMTS is  required by statue to coordinate the establishment of domestic  transportation policies in the Arctic to ensure safe and secure maritime  shipping and make recommendations with regard to federal policies that  impact the marine transportation system. Furthermore, according to  CMTS officials, there is nothing in CMTS\u2019s authority that would prevent it  from doing a risk assessment. As such, we stand by our recommendation  as written and do not believe CMTS\u2019s alternate action is sufficient to  address the recommendation.\nIn comments provided via email, OSTP neither agreed nor disagreed with  the report\u2019s recommendations. OSTP acknowledged the Arctic is of  critical national importance and noted interagency coordination can be  implemented through the entities of the National Science and Technology  Council, which is located within OSTP. OSTP noted the need for, and role of additional federal coordination, such as the Arctic Executive Steering  Committee, is under consideration by OSTP. We continue to believe that  the appropriate entities within the Executive Office of the President,  including OSTP, should designate the interagency group responsible for  leading and coordinating federal efforts to address maritime infrastructure  in the U.S. Arctic that includes all relevant stakeholders. As we note in our  report, without an interagency collaboration mechanism designated to  lead these efforts, it is unclear who has responsibility for whole-of- government efforts to address U.S. Arctic maritime infrastructure.\nIn addition, we stand by our other recommendation to OSTP and other  entities within the Executive Office of the President to develop and  publish a strategy for addressing U.S. Arctic maritime infrastructure that  identifies goals and objectives, performance measures to monitor  agencies\u2019 progress over time, and the appropriate responses to address  risks. As we note in the report, without such a strategy agencies lack  assurance that their actions are effectively targeting priority areas and  decision makers cannot gauge the extent of progress in addressing  maritime infrastructure gaps.\nWe are sending copies of this report to the appropriate congressional  committees; the Executive Office of the President; the U.S. Committee on  the Marine Transportation System; the Secretaries of Homeland Security,  Commerce, Defense, Interior, State, and Transportation; and other  interested parties. In addition, this report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf 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 key contributions to this report  are listed in appendix III.\n\nAppendix I: Reports Relevant to Maritime Infrastructure in the U.S. Arctic Published Since 2013\n\nNational Ocean Council. National Ocean Policy Implementation Plan.  Washington, D.C.: April 2013.\nWhite House. National Strategy for the Arctic Region. Washington, D.C.:  May 10, 2013.\nU.S. Coast Guard. United States Coast Guard Arctic Strategy.  Washington, D.C.: May 2013.\nU.S. Committee on the Marine Transportation System. U.S. Arctic Marine  Transportation System: Overview and Priorities for Action. Washington,  D.C.: 2013.\nThe White House. Implementation Plan for the National Strategy for the  Arctic Region. Washington, D.C.: January 30, 2014.\nU.S. Navy. The United States Navy Arctic Roadmap for 2014 to 2030.  Washington, D.C.: February 2014.\nGAO. 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.\nU.S. Department of Commerce. National Oceanic and Atmospheric  Administration. NOAA\u2019s Arctic Action Plan: Supporting the National  Strategy for the Arctic Region. Silver Spring, M.D: April 2014.\nGAO. 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.\nBrigham, L. W. Alaska and the New Maritime Arctic Executive Summary:  Executive Summary of a Project Report to the State of Alaska  Department of Commerce, Community and Economic Development.  Fairbanks, A.K.: February 1, 2015.\nThe International Council on Clean Transportation. A 10-Year Projection  of Maritime Activity in the U.S. Arctic Region. Washington, D.C.: January  2015. This report was contracted and coordinated under the U.S.  Committee on the Marine Transportation System.\nExecutive Order No. 13689. Enhancing Coordination of National Efforts in  the Arctic. 80 Fed. Reg. 4191. January 26, 2015.\nThe White House. Arctic Executive Steering Committee. National  Strategy for the Arctic Region Implementation Report. Washington, D.C.:  January 30, 2015.\nAlaska Arctic Policy Commission. Final Report of the Alaska Arctic Policy  Commission.  Anchorage and Bethel, A.K.: January 30, 2015.\nU.S. Army Corps of Engineers. Alaska District. Alaska Deep-Draft Arctic  Port System Study:  Draft Integrated Feasibility Report, Draft  Environmental Assessment (EA), and Draft Finding of No Significant  Impact (FONSI). Nome, AK: February 2015.\nGAO. 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.\nArctic. Status on Implementation of the AMSA 2009 Report  Recommendations. Troms\u00f8, Norway: April 2015.\nWorld Economic Forum. Global Agenda Council on the Arctic. Arctic  Investment Protocol: Guidelines for Responsible Investment in the Arctic.  Geneva, Switzerland: November 2015.\nU.S. Coast Guard. Arctic Strategy Implementation Plan. Washington,  D.C.: December 2015.\nArctic Economic Council, Telecommunications Infrastructure Working  Group. Arctic Broadband: Recommendations for an Interconnected Arctic.  Troms\u00f8, Norway: Winter 2016.\nCopenhagen Business School and Arctic Institute. Arctic Shipping:  Commercial Opportunities and Challenges. CBS Maritime, January 2016.\nThe White House. Arctic Executive Steering Committee. 2015 Year in  Review:  Progress Report on the Implementation of the National Strategy  for the Arctic Region. Washington, D.C.:  March 2016.\nThe White House. Arctic Executive Steering Committee. 2015 Year in  Review:  Progress Report on the Implementation of the National Strategy  for the Arctic Region; Appendix A, Implementation Framework for the  National Strategy for the Arctic Region. Washington, D.C.:  March 2016.\nU.S. Committee on the Marine Transportation System. Arctic Marine  Transportation Integrated Action Team. A Ten-Year Prioritization of  Infrastructure Needs in the U.S. Arctic. Washington, D.C.: April 15, 2016.\nGAO. 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.: June 15, 2016.\nDepartment of Defense. Report To Congress On Strategy To Protect  United States National Security Interests In The Arctic Region.  Washington, D.C.: December 2016.\nRAND Corporation. Maintaining Arctic Cooperation with Russia: Planning  for Regional Change in the Far North. RR-1731-RC. Santa Monica, CA:  2017.\nU.S. Committee on the Marine Transportation System. Recommendations  and Criteria for Using Federal Public-Private Partnerships to Support  Critical U.S. Arctic Maritime Infrastructure. Washington, D.C.: January  2017.\nArctic Council, Emergency Prevention, Preparedness and Response.  Circumpolar Oil Spill Response Viability Analysis: Technical Report.  March 7, 2017.\nCouncil of Foreign Relations. Arctic Imperatives: Reinforcing U.S.  Strategy of America\u2019s Fourth Coast, New York, N.Y.:  March 2017.\nOcean Conservancy. Navigating the North: An Assessment of the  Environmental Risks of Arctic Vessel Traffic.  Anchorage, A.K.:  June 28,  2017.\nCenter for Strategic and International Studies, Maritime Futures: The  Arctic and the Bering Strait Region.  Washington, D.C.: November 2017.\nRAND Corporation. Identifying Potential Gaps in US Coast Guard Arctic  Capabilities.RR-2310-DHS. Santa Monica, CA: 2018.\nU.S. Committee on the Marine Transportation System. Revisiting Near- Term Recommendations to Prioritize Infrastructure Needs in the U.S.  Arctic. Washington, D.C.: 2018.\nDepartment of Defense. Report to Congress on Assessment of  Requirement for a Strategic Arctic Port. Washington, D.C.: January 2018.\nDepartment of Homeland Security, Office of the Chief Financial Officer.    Arctic Search and Rescue:  Fiscal Year 2017 Report to Congress.  Washington, D.C.: March 13, 2018.\nInternational Union of Marine Insurance. IUMI Position Paper: Arctic  Sailings. Hamburg, Germany: August 2018.\nU.S. Coast Guard Acquisition Directorate, Research & Development  Center. Alaska AIS Transmit Prototype Test, Evaluation, and Transition  Summary Report for the Near Shore Arctic Navigational Safety  Information System (ANSIS). New London, C.T.: October 2018.\nGAO. Arctic Planning: Navy Report to Congress Aligns with Current  Assessments of Arctic Threat Levels and Capabilities Required to  Execute DOD\u2019s Strategy. GAO-19-42. Washington, D.C.: November 8,  2018.\nAlaska Federation of Natives. Indigenous Engagement with Their  Countries\u2019 Military and Civilian Services\/ Government on Maritime Arctic  Issues. Anchorage, A.K.: December 2018.\nRAND Europe. The Future of Arctic Cooperation in a Changing Strategic  Environment, PE-268-RC. Cambridge, United Kingdom: 2018.\nU.S. Navy. Strategic Outlook for the Arctic. January 2019.\nU.S. Coast Guard. Arctic Strategic Outlook. April 2019.\nDepartment of Defense. Office of the Secretary of Defense. Annual  Report to Congress on Military and Security Developments Involving the  People\u2019s Republic of China 2019. Washington, D.C.: May 2, 2019.\nPompeo, Michael, R. Secretary of State. U. S. Department of State.  Looking North: Sharpening America\u2019s Arctic Focus. Remarks. Rovaniemi,  Finland, May 6, 2019.\nPompeo, Michael R. Secretary of State. U.S. Department of State.  Remarks. Arctic Council Ministerial Meeting. Rovaniemi, Finland, May 7,  2019.\nDepartment of Defense. Office of the Under Secretary of Defense for  Policy. Report to Congress on Department of Defense Arctic Strategy.  Washington, D.C.: June 2019.\nU.S. Committee on the Marine Transportation System. A Ten-Year  Projection of Maritime Activity in the U.S. Arctic Region. 2020-2030:  Washington, D.C.: September 2019.\nCongressional Research Service. Changes in the Arctic: Background and  Issues for Congress. Washington, D.C.: November 27, 2019.\nU.S. Army Corps of Engineers, Alaska District. Port of Nome Modification  Feasibility Study:  Draft Integrated Feasibility Report and Supplemental  Environmental Assessment. Nome, A.K.: December 2019.\nCongressional Research Service. Changes in the Arctic: Background and  Issues for Congress. Washington, D.C.: January 23 2020.\n\nAppendix II: Comments from the U.S. Committee on the Marine Transportation System\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Susan Fleming, Director; Matt  Barranca, Assistant Director; Emily Larson, Analyst in Charge; Chuck  Bausell; Geoff Hamilton; Georgeann Higgins; Ned Malone; John Mingus;  Jan Montgomery; Kaleb Mount; Fatima Sharif; Curtia Taylor; Sarah  Veale; and Laurel Voloder made key contributions to this report.","output":null}
{"id":"gao_GAO-19-557","pid":"gao_GAO-19-557_0","input":"\tBackground\n\n\t\tMedicare\u2019s Physician Fee Schedule\n\nCMS uses the Medicare Physician Fee Schedule to pay physicians and  other providers for services delivered to beneficiaries. Physicians and  other providers bill Medicare for their services using various five-digit  billing codes based in part on codes developed by an AMA panel. Each  year, the panel receives proposals from provider groups and others to  revise existing billing codes or create new codes. The panel requires  those who submit proposals to develop a clinical vignette that describes  the typical patient who would receive the service, the diagnosis and  relevant conditions, and estimates of time that physicians might spend in  providing the service for the typical patient. The panel applies several  criteria in reviewing these proposals. For example, a new code  should represent a unique, well-defined procedure or service clearly  identified and distinguished from existing procedures and services;  should not fragment an existing procedure or service represented by  one or more existing codes;  should reflect the typical (not extraordinary) circumstances related to  the delivery of the service;  should be performed by many physicians or other qualified health  care professionals across the United States; and  should be consistent with current medical practice.\nCMS pays providers a fixed amount known as the Medicare fee for each  code. The fees are based on relative values\u2014estimates of resources for  the physician\u2019s work (time, skill, and level of training), and practice  expenses (the costs of running a practice such as salaries of non- physician employees, rent, and overhead) required to provide a service  relative to all other services. In setting fees, CMS also does not allow  certain codes to be billed together if it deems that payment for one code  is already included in another. CMS establishes and updates relative  values annually. By law, the effect of any changes to its payment rates  generally must be budget neutral. That is, if total spending increases by  more than $20 million each year, including due to the creation of new  billing codes, fees for all services would have to be reduced accordingly.\nServices billed under the physician fee schedule may be provided in a  variety of settings, including physicians\u2019 offices and institutional settings  such as hospitals, skilled nursing facilities and hospices. Non-physicians  may also bill or be reimbursed by Medicare for services under certain  circumstances. For example, some types of non-physicians practicing  independently\u2014such as physician assistants and nurse practitioners\u2014 may bill Medicare for certain services that they are legally authorized to  perform under their respective state laws. In other instances, physicians  may bill as if they had furnished services that were provided by non- physician staff that they employ or with whom they have a contractual  relationship as long as the physician has an established relationship with  the beneficiary, and is on the premises to provide supervision if  necessary.\n\n\t\tCare Planning Services in Medicare\n\nProviders and other stakeholders have noted that they care for an elderly  population with increasingly complex medical conditions who receive care  from multiple providers across different sites of care including physicians\u2019  offices, hospitals, nursing homes, and hospices. As such, the focus of  primary care has shifted from treating specific medical conditions to  increased care coordination and planning. CMS also noted that a new  trend in care planning is the use of shared care plans between the  beneficiary and the provider rather than those created solely by the  provider. These jointly developed care plans can be particularly important  to improving overall beneficiary outcomes for beneficiaries with serious  illnesses and also allow other providers involved in the beneficiary\u2019s care  access to timely information that supports planned care.\nHowever, stakeholders have suggested that Medicare\u2019s payment system  does not fully reimburse providers for such care planning services. For  example, some note that the E\/M billing codes that primary care  physicians generally use to bill for their services were developed at a time  when care coordination and planning was not part of the standard  practice of medicine; as such, these codes do not reflect time spent on  activities that do not require a face-to-face encounter with the beneficiary,  including medical conferences with other physicians, or telephone calls to  coordinate care with other providers. Some primary care physicians have  requested that CMS conduct a comprehensive review of existing E\/M  codes to ensure they account for time spent on these services, or develop  new codes that primary care physicians may exclusively use to bill for  these services. However, others have noted that E\/M codes have been  reviewed and valued by the AMA, and the codes account for the time  spent on these services. Moreover, they have stated that care  coordination and planning services are delivered by multiple specialties,  not just primary care physicians.\n\n\tMedicare\u2019s Physician Fee Schedule Contains at Least 58 Billing Codes That Providers May Use to Bill for LCCP-Type Services\n\nOur analysis identified at least 58 Medicare Physician Fee Schedule  billing codes that providers may use to bill for LCCP-type services.  These 58 billing codes generally contain components we determined to  be equivalent to the five key components of the LCCP service as defined  in the 2018 BBA. For example, all 58 codes included a provision for the  development of a care plan that addresses the beneficiary\u2019s goals,  values, and preferences, and a provision for coordination with other  providers, which is equivalent to the LCCP component related to  interdisciplinary care. Providers may choose a single code or a  combination of these codes to account for the time, skill, and resources  needed to deliver the service based on the unique health needs of each  patient. (See app. IV for more information on the 58 codes and the LCCP  components they contain as defined in the 2018 BBA.)\nThe 58 billing codes for LCCP-type services include 45 longstanding,  broadly-defined codes and 13 narrowly-defined codes that were more  recently introduced starting in 2013.\nBroadly-defined codes. Of the 45 broadly-defined codes, 39 are E\/M  codes that have existed for decades. E\/M codes are broadly defined to  include services provided to treat a variety of illnesses (for example,  treatment of a particular medical complaint), but they may also be used to  bill for LCCP-type services. In general, the E\/M codes range in complexity  from low to high depending on the amount of time the provider spends  with a patient as well as the complexity of the medical condition(s) being  treated. E\/M codes may also be billed if more than 50 percent of the time  allotted for the service is spent on counseling and care coordination\u2014for  example, explaining treatment options and ways to mitigate the patient\u2019s  health risks\u2014which are key components of the LCCP service as defined  in the 2018 BBA.\nThe E\/M codes we identified as representing LCCP-type services were  the more complex codes that had estimates of time that may be spent  providing the service to a typical patient ranging from 30 to 120 minutes  of physician time and 3 to 71 minutes of non-physician time. While the  majority of E\/M codes have existed for decades, CMS added six new E\/M  codes starting in 2008\u2014referred to as \u201cprolonged\u201d E\/M codes\u2014allowing  payment for additional time for care planning and care management  services for complex conditions.\nNarrowly-defined codes. Starting in 2013, CMS added 13 narrowly- defined LCCP-type codes to better account for the time spent  coordinating care for patients with complex treatment needs. CMS  implemented these more narrowly-defined care planning codes largely in  response to provider complaints that E\/M codes did not sufficiently  account for extensive care management\/coordination of care that was  required across multiple providers and settings. Unlike broadly-defined  codes, these narrowly-defined codes can only be used for LCCP-type  services.\nThe 13 narrowly-defined LCCP-type codes fall into four types: transitional  care management (TCM), chronic care management (CCM), advance  care planning (ACP), and behavioral health integration (BHI). (See table  1.) While some pertain to patients with specific types of health conditions  or in certain settings, others are more general and may be used for a  range of health conditions.\nThe estimates of physician and non-physician time that may be spent on  the broadly-defined and narrowly-defined codes vary, as does Medicare\u2019s  2019 fees for these billing codes\u2014see examples of commonly used  LCCP-type billing codes in table 2 and see appendix IV for related  information on all 58 LCCP-type billing codes. For example, some  stakeholders told us they might bill a complex E\/M code (99214) along  with a CCM code (99487). As our analysis shows, this combination could  result in the provider spending 66 minutes of physician time and 113  minutes of non-physician time for a typical beneficiary, and receiving total  Medicare fees of about $203 in 2019.\n\n\tMedicare Spending Increased for All LCCP-Type Services and Increased More Rapidly for New Narrowly-Defined Services That Were Furnished to More Beneficiaries by More Providers\n\n\t\tMedicare Spending on All LCCP-Type Services Increased by 11 Percent from 2013 through 2017, While Spending on Narrowly-Defined Services Grew More Rapidly\n\nOverall Medicare spending on LCCP-type services represented by the 58  billing codes we identified increased from $26 billion in 2013 to $29 billion  in 2017, an 11 percent increase. The vast majority of this spending\u2014 about $28.3 billion in 2017\u2014was on services represented by the 45  broadly-defined codes we identified earlier (henceforth we refer to these  services as \u201cbroadly-defined services.\u201d) By comparison, Medicare  spending on LCCP-type services represented by the 13 narrowly-defined  codes (henceforth referred to as \u201cnarrowly-defined services\u201d) was about  $467 million in 2017.\nThough smaller in terms of total dollars, spending on narrowly-defined  services grew at a higher rate than spending on broadly-defined services,  from about $2 per beneficiary in 2013 to $14 per beneficiary in 2017. This  higher rate in growth can mostly be attributed to these four new types of  services being introduced during this 4 year period. For example, as  Table 1 shows, two TCM codes were introduced in 2013 and four CCM  codes were introduced from 2015 to 2017. In contrast, spending growth for broadly-defined services was much smaller, increasing from about  $785 per beneficiary in 2013 to $844 per beneficiary in 2017. For all other  Medicare Physician Fee Schedule services combined, per-beneficiary  spending decreased from about $1,488 in 2013 to $1,426 in 2017.\nSpending on CCM and TCM services accounted for most of the total  spending on narrowly-defined LCCP-type services from 2013 to 2017.  (See fig. 1.) For example, in 2017, TCM services accounted for almost  half ($213 million of the total spending of $467 million), while spending on  CCM services accounted for over a third ($162 million of the $467  million).\nThe growth in spending on narrowly-defined services was driven by  increased utilization\u2014that can be attributed in part to the development of  new codes for these services\u2014rather than increases in Medicare fees for  these services. Specifically, utilization of narrowly-defined services  increased from about 9 services per 1,000 beneficiaries in 2013 to about  177 services per 1,000 beneficiaries in 2017. Average Medicare fees for  these services remained flat during this period.\n\n\t\tMore Beneficiaries Received and More Providers Billed for Narrowly-Defined LCCP- Type Services, with a Small Share of Beneficiaries and Providers Accounting for Most of the Services\n\nThe number of beneficiaries receiving narrowly-defined LCCP-type  services increased substantially from 2013 to 2017, as more of these  Medicare billing codes were added and began to be utilized during this  time. Specifically, in 2017, about 2.5 million beneficiaries received  narrowly-defined LCCP-type services, representing an 839 percent  increase from about 267,000 beneficiaries in 2013. (See fig. 2.)\nWhile the overall number of beneficiaries receiving narrowly-defined  services increased, these services were concentrated among a relatively  small share of Medicare beneficiaries. Specifically, one-quarter of  beneficiaries who received any of the narrowly-defined services in 2017  received 62 percent of the approximately 6 million services that were  provided that year. (See fig. 3.)\nIn 2017, of the total 2.5 million beneficiaries that received narrowly- defined services, 90 percent received only one type of narrowly-defined  LCCP-type service. (See fig. 4.) In contrast, only 10 percent of  beneficiaries received multiple types of narrowly-defined LCCP-type  services, the most common combination being CCM and ACP.\nMirroring beneficiary trends, the number of Medicare providers billing for  narrowly-defined LCCP-type services also increased significantly from  2013 through 2017, as these Medicare billing codes were established and  began to be utilized during this time. In 2017, a total of about 100,000  providers billed for narrowly-defined services, representing a 227 percent  increase from about 31,000 providers in 2013. (See fig. 5.)\nAs with beneficiary trends, while the overall number of providers billing  narrowly-defined services grew from 2013 to 2017, billing for these  services was also increasingly concentrated among a small share of  providers. Specifically, in 2017, 10 percent of providers who billed for any  narrowly-defined services billed about 76 percent of the approximately 6  million services that were provided in that year. (See fig. 6.)\nEach year from 2013 through 2017, physicians specializing in internal  medicine accounted for the largest share of spending on narrowly-defined  LCCP-type services. In 2017, internal medicine accounted for 45 percent  of the $467 million in total Medicare spending on narrowly-defined  services. (See fig. 7.) Family practice and nurse practitioners were the  other specialties accounting for the greatest shares of spending.\nIn terms of the setting in which narrowly-defined LCCP-type services  were provided, the majority were provided in nonfacility settings such as  physicians\u2019 offices. Specifically, in 2017, 94 percent of narrowly-defined  services were provided in nonfacility settings. This trend was consistent  over each of the 5 years from 2013 to 2017.\n\n\tStakeholders Had Mixed Views on Whether a New Billing Code for an LCCP Service Is Needed\n\n\t\tSix Stakeholders Did Not Support Creating a New Billing Code for an LCCP Service\n\nSix of the 19 stakeholders we interviewed did not support the creation of  a new billing code for an LCCP service as defined in the 2018 BBA. Two  of these\u2014representing physician specialties that together accounted for  almost one-fifth of total spending on LCCP-type services in 2017\u2014stated  that the existing billing codes were sufficient for them to provide and bill  for the full range of the LCCP service. They stated that billing either a  single code or a combination of an E\/M code and one or more of the 13  narrowly-defined LCCP-type codes we identified allowed them to account  for the full range of the LCCP service as defined in the BBA. As such, the  two stakeholders said, there was no need for a new billing code.\nThe remaining four stakeholders expressed concerns about creating a  new billing code for an LCCP service. These concerns included the  following:\nOverlap with existing codes that require the development of care  plans: While not explicitly stating that existing codes were sufficient,  some stakeholders said that if a new billing code were created for the  LCCP service as defined in the 2018 BBA, it would overlap with or  duplicate existing billing codes. For example, three stakeholders  noted potential overlap with existing billing codes, such as the ACP  and CCM. Three stakeholders said that the care plan that would be  required under the new LCCP code would duplicate existing care  plans that are required by law for beneficiaries in hospices or skilled  nursing facilities. In addition, two stakeholders noted that providers  in their specialty already prepare detailed care plans as a standard  practice of care when evaluating their patients and billing for these  services using existing E\/M billing codes. They stated that these care  plans exceed the components of the care plan specified in the 2018  BBA. Stakeholders noted that the existence of multiple overlapping  codes that include the development of a care plan could create  confusion for providers in choosing the most appropriate billing code.\nConcerns about code proliferation or code fragmentation: Several  stakeholders were concerned that adding another code to Medicare\u2019s  billing system could result in increased Medicare spending and less,  rather than more, care coordination. Specifically, two stakeholders  stated that having multiple billing codes for care planning and care  management, respectively, would have the potential to increase  spending because multiple providers could start billing the new codes  even though one provider may have primary responsibility for the  beneficiary. (In contrast, under the existing billing codes a single  code that encompassed both types of services could be billed.) For  example, one of these stakeholders said that primary care physicians  generally referred beneficiaries with complex treatment needs to a  surgeon or specialist who then both planned and managed the  beneficiary\u2019s care, yet the primary care physician might also bill the  care planning billing code. In addition to the potential for increased  Medicare spending, three stakeholders said that code  fragmentation\u2014splitting existing billing codes into multiple codes for  services that were previously bundled together\u2014was contrary to the  comprehensive patient-centered model of care that Medicare was  moving towards. Specifically, one provider stated that under such a  model, rather than billing multiple different codes for care planning  and coordination, a primary care practice is paid a monthly  management fee to (among other things) improve care coordination  for patients who receive most of their primary care services from that  practice.\n\n\t\tThirteen Stakeholders Stated That a New LCCP Code Could Address Concerns Regarding Interdisciplinary Care Reimbursement and Other Limitations They Identified in Existing Billing Codes\n\nWhile six of the stakeholders we interviewed did not support creating a  new LCCP code, the remaining 13 stakeholders told us that such a billing  code is needed. According to the stakeholders, a new LCCP code as  defined in the 2018 BBA could address several concerns they identified in  Medicare\u2019s existing billing codes related to the provision of the LCCP  service. However, some of these concerns could be addressed under the  current Medicare billing framework, as shown by our analysis of available  data. For example, stakeholders identified the following limitations that  could be addressed by a new LCCP code:  Inadequate reimbursement for time spent on interdisciplinary care:  The 13 stakeholders stated that Medicare\u2019s existing billing codes  either did not require or did not sufficiently reimburse them for the time  spent on interdisciplinary care. They stated there should be a  separate code to reimburse this type of care. However, stakeholders  representing two specialties told us they had proposed such a code to  the AMA but the AMA had rejected their proposals because  interdisciplinary care is already accounted for in the existing billing  codes. Moreover, as our analysis of the 58 billing codes shows, the  majority of these codes include a provision for consultation and  coordination among providers that is equivalent to input from an  interdisciplinary team. With regard to inadequate reimbursement, as  another stakeholder noted, providers may bill a complex E\/M service  along with a narrowly-defined LCCP-type service such as CCM. The  total reimbursement for such a combination of codes would be about  $203 as of 2019. (See table 2.)\nInsufficient physician time for care planning: Six stakeholders  representing a mix of primary care and medical specialties stated the  existing billing codes (including the more complex E\/M codes) had  insufficient physician time to provide both care planning and care  management, which they maintained are separate and distinct  activities. They stated a new code could include the appropriate time  needed. One stakeholder said that care planning requires at least 30  minutes of time, and the complex E\/M codes do not allow providers to  bill for the time it takes to provide both the care management of a  complex patient as well as care planning for the patient. According to  the stakeholder, for example, if a provider bills a complex E\/M code  that allows for 40 minutes of physician time, that is insufficient to  provide both types of services. While CMS has recently established  new prolonged E\/M codes (which allow for an additional 60 minutes of  time), the stakeholder noted that they do not address the problem of  insufficient time because a prolonged E\/M code may only be billed  with a companion E\/M code, and the threshold of time needed to bill  the two codes together is now too high\u2014specifically 40 minutes for  the complex E\/M code plus 60 minutes for the prolonged E\/M code.  However, our review of CMS guidance on billing of prolonged E\/M  codes shows that providers do not have to meet the full 60 minutes of  time in order to bill a prolonged E\/M code; they may bill it as long as  the total time spent on the visit exceeds the typical time for the E\/M  visit plus 30 minutes.\nDocumentation requirements: Three stakeholders, largely  representing primary care and medical specialties, stated that  burdensome documentation requirements for the more complex E\/M  codes hampered their ability to bill these codes. They suggested  that a new billing code could be structured similar to the new ACP or  CCM codes which do not have the same documentation  requirements. While these stakeholders expressed concern regarding  documentation as a discouraging factor, our analysis of 2017  Medicare claims data showed that certain specialties, including some  that had expressed this concern, billed the more complex codes at a  significantly higher rate than the average across all specialties. This  may indicate that these documentation requirements do not  necessarily preclude providers from billing these codes. For example,  83 percent of all the E\/M new patient visits billed by geriatricians in  2017 were billed using the more complex E\/M codes, compared to 48  percent on average. Similarly, 80 percent of all the E\/M established  patient visits billed by clinical psychologists in 2017 were billed using  the more complex E\/M codes compared to 50 percent on average.  See appendix V for details on billing patterns for all medical  specialties.\nInability of non-physician staff to independently bill for care planning:  Seven stakeholders expressed concerns that non-physician staff such  as nurses and social workers cannot independently bill the existing  Medicare billing codes that we identified as being LCCP-type  services. As one stakeholder explained, non-physician staff may  spend time providing coordination and care planning services  separately rather than concurrently with the physician, but they cannot  bill for this time independently because the physician was not present.  These stakeholders stated that a new LCCP code that could be billed  by physicians and non-physicians that participated in the care  planning process could address this issue. However, other  stakeholders expressed concerns about the effect on Medicare  spending if multiple providers billed for an LCCP service. Moreover,  reimbursement for non-physicians is built into Medicare fees.  Specifically, Medicare\u2019s fee for each billing code includes  reimbursement for physician\u2019s time as well as their practice expenses  (which cover the costs of non-physician staff), and when the AMA  panel develops resources estimates for each billing code (upon which  Medicare fees are based), it considers the amount of non-physician  time spent on that code. Certain non-physician practitioners, such as  nurse practitioners and physician assistants, may also independently  bill services under the Medicare Physician Fee Schedule subject to  certain requirements, and as specified in their scope of practice under  state law.\nStakeholders generally concurred that if a new LCCP code were  implemented, the definition of interdisciplinary care should be flexible and  not require a social worker. Currently, the LCCP billing code as defined in  the 2018 BBA requires that the interdisciplinary team providing care  planning services include a social worker. However, 13 stakeholders  stated that a typical practice did not include a social worker, but rather  included a nurse who might perform the functions of a social worker. They  stated that smaller office-based medical practices could not afford to hire  a social worker. The stakeholders concurred that social workers were  generally available in larger integrated practices (such as a single or  multiple groups aligning with each other or with a larger hospital system)  and in facility settings such as hospitals or skilled nursing facilities.  (Stakeholders also provided other comments on the structure of a  potential new billing code for the LCCP service should such a code be  established by CMS, which we summarize in app. VI.)\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS for review and comment. HHS  provided technical comments, which we incorporated as appropriate.\nWe 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.\nIf 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 major contributions to this report are  listed in appendix VII.\n\nAppendix I: Example of an American Medical Association Vignette\n\nAppendix II: Longitudinal Comprehensive Care Planning Service Components in the Balanced Budget Act of 2018\n\nAppendix II: Longitudinal Comprehensive Care  Planning Service Components in the Balanced  Budget Act of 2018 Pub. L. No. 115-123, \u00a7 50342(c)(4), 132 Stat. 211.\n\nAppendix III: Stakeholder Groups Interviewed by GAO\n\nAppendix IV: Medicare Physician Fee Schedule Billing Codes for Longitudinal Comprehensive Care Planning (LCCP)-Type Services\n\nWe identified 58 billing codes in Medicare\u2019s physician fee schedule that  may be used to bill for LCCP-type services as defined in the Balanced  Budget Act of 2018 (2018 BBA). Figure 9 shows relevant information on  these billing codes including the short descriptor, beneficiary eligibility  criteria, our analysis of whether the billing code\u2019s components are  equivalent to the components of an LCCP service as defined in the 2018  BBA, and Medicare\u2019s 2019 fee.\n\nAppendix V: Specialty Billing of Complex Evaluation and Management Codes in 2017\n\nMedicare\u2019s physician fee schedule contains evaluation and management  (E\/M) codes that providers may use to bill for face-to-face visits in their  offices or other settings such as hospitals. These codes range in  complexity from low to high depending on the amount of time the provider  spends with a patient as well as the complexity of the medical decision-  making and the medical condition(s) being treated. Table 4 shows the  percentage of each specialty\u2019s E\/M visits that were billed as complex  visits (moderate or high complexity). In general, primary care and medical  sub-specialties tended to bill complex visits at a higher rate than the all- specialty average, while surgical specialties tended to bill complex visits  at a lower rate than the all-specialty average.\n\nAppendix VI: Longitudinal Comprehensive Care Planning (LCCP) Services: Stakeholder Perspectives on Potential New Billing Code\n\nWe interviewed 19 stakeholders including national umbrella groups of  physicians and other providers to obtain their perspectives on the  structure of a new billing code for LCCP-type services as defined in the  Balanced Budget Act of 2018 (2018 BBA), regardless of whether they  supported the creation of a new code. Stakeholders were generally in  agreement that a new billing code for LCCP-type services as defined in  the 2018 BBA, if implemented, should be broadly defined. Specifically,  stakeholders stated that it should not be tied to a specific condition,  should allow for both in-person and non-face-to-face services performed  when the beneficiary was not present, should be billable more than once,  should be available for billing by both primary care physicians and  specialists, and should have restrictions to avoid duplicative billing with  existing billing that provided overlapping services. However,  stakeholders had more mixed views about what these specific restrictions  should be. Stakeholder views about the various structural components or  restrictions included the following:\nApplicable medical conditions: The majority of stakeholders (13 of the  17 who responded to this question) stated that the new code should  be broadly defined although they differed in their opinions of what  broadly-defined meant; one stakeholder cautioned against an overly  broad definition, and one suggested pilot testing with a discrete list of  conditions.\nOf the 13 stakeholders in favor of a broad definition, 12 stated that  the new billing code should not be tied to any particular specific  illness or medical condition but should be flexible in structure.  Three stakeholders stated that the extent of beneficiaries\u2019 daily  functioning or quality of life should also be considered when  defining applicable medical conditions. For example, a beneficiary  who is not necessarily suffering from a life-threatening illness but  is unable to perform the functions of daily living (such as bathing  and eating) needs extensive care planning and should therefore  be covered under the new LCCP-type service. Three stakeholders  stated that the new code should be billable if a beneficiary\u2019s  existing diagnosis of a serious illness changed. Three  stakeholders stated that a potential new code could be modeled  along the lines of existing billing codes\u2014specifically the advance  care planning (ACP) or chronic care management (CCM) codes\u2014 which do not specify any particular medical condition.\nTwo stakeholders said that a new code should not be so broad  that it could apply to a vast majority of beneficiaries. For example,  one stakeholder stated that the American Medical Association  would likely not approve a code for a generic serious condition  because it would be difficult to differentiate that code from an  existing billing code, such as an evaluation and management  (E\/M) code, which may be used for any medical condition  including serious, life-threatening conditions.\nOne stakeholder suggested pilot testing the code with a discrete  list of conditions, with the intention of expanding the list  afterwards.\nIn-person or non-face-to-face: The majority of stakeholders (12 of the  15 that responded to this question) stated that a potential new code  should allow for both in-person and non-face-to-face activities (such  as virtual or telehealth\u2014providing clinical care remotely by two-way  video, phone calls with the beneficiary or to arrange referrals or  coordinate care with other providers when the beneficiary was not  present); three said it should only include face-to-face activities.\nTwelve stakeholders stated that the visit should include both types  of activities. For example, one stakeholder said the initial visit for  LCCP-type services should be in-person, and follow up activities  such as updating a care plan or remote patient monitoring  (monitoring of patients outside of conventional settings) could be  non-face-to-face.\nThree stakeholders said it should only include face-to-face  activities either because of concerns about the potential for  overbilling if the new code included non-face-to-face activities  which might be difficult to verify or because other existing codes,  such as CCM, already cover non-face-to-face activities.\nFrequency of billing: All of the 16 stakeholders responding to this  question concurred that the new code should be billable more  frequently than on a one-time basis, although opinions varied on the  exact frequency.\nNine stakeholders said the code should be billable on an ongoing  basis as the beneficiary\u2019s condition changes. For example, one  said that the new code should be on-going because the care  planning and treatment would continue to evolve over time as the  beneficiary\u2019s condition changes.\nSeven other stakeholders said that while it should not be an  ongoing service, it should be billable more frequently than once.  For example, one stakeholder specified that it could be billed once  per month or over every three months, but that a target end date  must be specified; otherwise, it would be too similar to existing  billing codes such as the CCM code that may be billed monthly.  Two other stakeholders said it could be billed up to 4-5 times a  year.\nOther billing restrictions: All 12 stakeholders responding to this  question indicated that restrictions would be necessary to avoid  overlap with existing billing codes. For example, three stakeholders  suggested that the new code could be billed along with an E\/M code  for additional services not covered by the E\/M code as long as it does  not overlap with other existing codes that account for additional time  beyond an E\/M visit (such as the prolonged E\/M visit billing codes).  One suggested that it should not be billed along with any of the  existing narrowly-defined LCCP-type codes, including CCM,  transitional care management, or the ACP codes. One did not specify  any particular code with which the new code should not be billed, but  cautioned that care should be taken to ensure that time spent with the  beneficiary was reported only once.\nProviders eligible to bill the code: The majority of stakeholders (13 of  the 15 that responded to this question) stated that both primary care  physicians and specialists should be eligible to bill the new code. Two  of these stakeholders said that there should also be a requirement  that the billing physician has an established relationship with the  beneficiary. Two stakeholders said that only specialists should bill  since they are generally the ones attending to the beneficiary\u2019s  serious illness. Two stakeholders stated that non-physicians  (including social workers) should also be able to bill the code as long  as they are currently allowed to bill separately under the Medicare  Physician Fee Schedule.\n\nAppendix VII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Karen Doran, Assistant Director;  Iola D\u2019Souza, Analyst-in-Charge; Sarah Belford; Krister Friday; John  Lalomio; and Daniel Ries made key contributions to this report. Also  contributing were George Bogart and Muriel Brown.","output":null}
{"id":"crs_R45985","pid":"crs_R45985_0","input":"\tIntroduction\n\nFully autonomous vehicles, which would carry out many or all of their functions without the intervention of a driver, may someday bring sweeping social and economic changes and \"lead to breakthrough gains in transportation safety.\" Motor vehicle crashes caused an estimated 36,560 fatalities in 2018; a study by the National Highway Traffic Safety Administration (NHTSA) has shown that 94% of crashes are due to human errors.\nLegislation that would encourage development and testing of autonomous vehicles has faced controversy in Congress. In the 115 th Congress, the House of Representatives passed an autonomous vehicle bill, H.R. 3388 , by voice vote in September 2017. The Senate Committee on Commerce, Science, and Transportation reported a different bill, S. 1885 , in November 2017, but after some Senators raised concerns about the preemption of state laws and the possibility of large numbers of vehicles being exempted from some Federal Motor Vehicle Safety Standards, the Senate bill did not reach the floor. No further action was taken on either bill before the 115 th Congress adjourned.\nAlthough some Members of Congress remain interested in autonomous vehicles, no legislative proposals have become law. Several fatal accidents involving autonomous vehicles raised new questions about how federal and state governments should regulate vehicle testing and the introduction of new technologies into vehicles offered for sale. A pedestrian was killed in Arizona by an autonomous vehicle operated by Uber on March 18, 2018, and three Tesla drivers died when they failed to respond to hazards not recognized by the vehicles. These accidents suggest that the challenge of producing fully autonomous vehicles that can operate safely on public roads may be greater than developers had envisioned, a new outlook voiced by several executives, including the Ford Motor Co. CEO. However, with the authorization of federal highway and public transportation programs set to expire at the end of FY2020, a surface transportation reauthorization bill could become a focus of efforts to also enact autonomous vehicle legislation.\n\n\tAdvances in Vehicle Technology\n\nWhile fully autonomous vehicles may lie well in the future, a range of new technologies is already improving vehicle performance and safety while bringing automation to vehicular functions once performed only by the driver. The technologies involved are very different from the predominantly mechanical, driver-controlled technology of the 1960s, when the first federal vehicle safety laws were enacted. These new features automate lighting and braking, connect the car and driver to the Global Positioning System (GPS) and smartphones, and keep the vehicle in the correct lane. Three forces are driving these innovations:\ntechnological advances enabled by new materials and more powerful, compact electronics; consumer demand for telecommunications connectivity and new types of vehicle ownership and ridesharing; and regulatory mandates pertaining to emissions, fuel efficiency, and safety.\nManufacturers are combining these innovations to produce vehicles with higher levels of automation. Vehicles do not fall neatly into the categories of \"automated\" or \"nonautomated,\" because all new motor vehicles have some element of automation.\nThe Society of Automotive Engineers International (SAE), an international standards-setting organization, has developed six categories of vehicle automation\u00e2\u0080\u0094ranging from a human driver doing everything to fully autonomous systems performing all the tasks once performed by a driver. This classification system ( Table 1 ) has been adopted by the U.S. Department of Transportation (DOT) to foster standardized nomenclature to aid clarity and consistency in discussions about vehicle automation and safety.\nVehicles sold today are in levels 1 and 2 of SAE's automation rating system. Although some experts forecast market-ready autonomous vehicles at level 3 will be available in a few years, deployment of fully autonomous vehicles in all parts of the country at level 5 appears to be more distant, except perhaps within closed systems that allow fully autonomous vehicles to operate without encountering other types of vehicles. Testing and development of autonomous vehicles continue in many states and cities.\nTechnologies that could guide an autonomous vehicle ( Figure 1 ) include a wide variety of electronic sensors that would determine the distance between the vehicle and obstacles; park the vehicle; use GPS, inertial navigation, and a system of built-in maps to guide the vehicle's direction and location; and employ cameras that provide 360-degree views around the vehicle. To successfully navigate roadways, an autonomous vehicle's computers, sensors and cameras will need to accomplish four tasks that a human driver undertakes automatically: detect objects in the vehicle's path; classify those objects as to their likely makeup (e.g., plastic bag in the wind, a pedestrian or a moving bicycle); predict the likely path of the object; and plan an appropriate response. Most autonomous vehicles use dedicated short-range communication (DSRC) to monitor road conditions, congestion, crashes, and possible rerouting. As 5G wireless communications infrastructure is installed more widely, DSRC may evolve and become integrated with it, enabling vehicles to offer greater interoperability, bandwidth, and cybersecurity. Some versions of these autonomous vehicle technologies, such as GPS and rear-facing cameras, are being offered on vehicles currently on the market, while manufacturers are studying how to add others to safely transport passengers without drivers.\nManufacturers of conventional vehicles, such as General Motors and Honda, are competing in this space with autonomous vehicle \"developers\" such as Alphabet's Waymo. In addition, automakers are aligning themselves with new partners that have experience with ride-sharing and artificial intelligence:\nFord and Volkswagen have announced that they expect to use autonomous vehicle technology in a new ride-sharing service in Pittsburgh, PA, as early as 2021; GM acquired Cruise Automation, a company that is developing self-driving technology for Level 4 and 5 vehicles. GM has also invested $500 million in the Lyft ride-sharing service; Honda, after breaking off talks about partnering with Waymo, purchased a stake in GM's Cruise Automation; Volvo and Daimler have announced partnerships with ride-sharing service Uber; and BMW partnered with the Mobileye division of Intel, a semiconductor manufacturer, to design autonomous vehicle software.\n\n\t\tCybersecurity and Data Privacy\n\nAs vehicle technologies advance, the security of data collected by vehicle computers and the protection of on-board systems against intrusion are becoming more prominent concerns. Many of the sensors and automated components providing functions now handled by the driver will generate large amounts of data about the vehicle, its location at precise moments in time, driver behavior, and vehicle performance. The systems that allow vehicles to communicate with each other, with roadside infrastructure, and with manufacturers seeking to update software will also offer portals for possible unauthorized access to vehicle systems and the data generated by them.\nProtecting autonomous vehicles from hackers is of paramount concern to federal and state governments, manufacturers, and service providers. A well-publicized hacking of a conventional vehicle by professionals demonstrated to the public that such disruptions can occur. Hackers could use more than a dozen portals to enter even a conventional vehicle's electronic systems ( Figure 2 ), including seemingly innocuous entry points such as the airbag, the lighting system, and the tire pressure monitoring system (TPMS). Requirements that increasingly automated vehicles accept remote software updates, so that owners do not need to take action each time software is revised, are in part a response to concerns that security weaknesses be rectified as quickly as possible.\nTo address these concerns, motor vehicle manufacturers established the Automotive Information Sharing and Analysis Center (Auto-ISAC), which released a set of cybersecurity principles in 2016. DOT's autonomous vehicle policies designate Auto-ISAC as a central clearinghouse for manufacturers to share reports of cybersecurity incidents, threats, and violations with others in the vehicle industry.\nAside from hackers, many legitimate entities would like to access vehicle data, including vehicle and component manufacturers, the suppliers providing the technology and sensors, the vehicle owner and occupants, urban planners, insurance companies, law enforcement, and first responders (in case of an accident). Issues pertaining to vehicle data collection include vehicle testing crash data (how is it stored and who gets to access it); data ownership (who owns most of the data collected by vehicle software and computers); and consumer privacy (transparency for consumers and owner access to data). At present, no laws preclude manufacturers and software providers from reselling data about individual vehicles and drivers to third parties.\n\n\tPathways to Autonomous Vehicle Deployment Abroad\n\nAutonomous vehicles are being developed and tested in many countries, including those that produce most of the world's motor vehicles. Several analyses have evaluated the factors that are contributing to the advancement of autonomous vehicles in various countries:\nInnovation . Benchmarks in this area include the number and engagement of domestic automakers and technology developers working on automation, the partnerships they forge with academic and related businesses, the prevalence of ride-sharing services, and autonomous vehicle patents issued. V ehicle infrastructure . Autonomous vehicles will need new types of infrastructure support and maintenance, including advanced telecommunications links and near-perfect pavement and signage markings. Planning and implementing these highway improvements may enable autonomous vehicles to be fully functional sooner. In addition, many test vehicles are currently powered by electricity, so the availability of refueling stations could be a factor in their acceptance. Wo rkforce training. The increased reliance on autonomous vehicle technologies may require different workforce skills. Many traditional mechanical parts may disappear, especially if autonomous vehicles operate entirely on battery power, while the arrangement and function of dashboards and seating may be reinvented. Components suppliers that are already addressing this new product demand and reorienting their workforces will assist in the transition to autonomous vehicles. G overnment laws and regulations that encourage development and testing . Fully autonomous vehicles may not have standard features of today's cars, such as steering wheels and brake pedals, as there will not be a driver. By law or regulation, motor vehicles built today are required to have many of these features. Some governments are taking a lead by modifying vehicle requirements for purposes of pilot programs and tests. Permanent changes in standards will most likely be necessary if autonomous vehicle technologies are to be commercialized. L evel of consumer acceptance . Markets are more likely to embrace autonomous vehicles if many residents in cities see autonomous vehicles on the road, a high level of technology is in use (including internet access and mobile broadband), and ride-hailing services are more widely used.\nSeveral surveys have been conducted analyzing many of these factors. For example, a 2018 Harvard University report highlights plans in China, South Korea, Japan, and the United States to \"seize the benefits\" of autonomous vehicles. In a report on innovation policies in four Asian countries (China, Japan, South Korea, and Singapore), the United Nations Economic and Social Commission for Asia and the Pacific ranked Singapore first in autonomous vehicle readiness because of its policies and new laws governing their deployment and its high consumer acceptance. The report also notes that South Korea's K-City facility is \"intended to be the world's largest testbed for self-driving cars.\"\nA more detailed comparison of factors affecting autonomous vehicle development and deployment has been conducted by KPMG International, which has developed an index to measure how 25 countries are guiding autonomous vehicles ( Table 2 ).\nThe Netherlands ranked first overall in the KPMG report, where it was cited as \"an example of how to ready a country for AVs by performing strongly in many areas , \" as well as first in infrastructure. Singapore came in first on policy and legislation because it has a single government entity overseeing autonomous vehicle regulations, it is funding autonomous vehicle pilots, and it has enacted a national standard to promote safe deployment. Contributing to its rank was a World Economic Forum (WEF) report that ranked it first among 139 countries in having an effective national legislature and efficient resolution of legal disputes. Singapore also scored first place on the consumer acceptance metric, primarily because its extensive autonomous testing is being conducted throughout the island nation, thereby familiarizing residents with autonomous passenger vehicles and buses.\nTwo other major auto-producing countries\u00e2\u0080\u0094Germany and Japan\u00e2\u0080\u0094fall just below the United States on technology and innovation, according to KPMG, while Japan ranks higher on autonomous vehicle infrastructure ( Table 3 ).\n\n\tIssues in Federal Safety Regulation\n\nVehicles operating on public roads are subject to dual regulation by the federal government and the states in which they are registered and driven. Traditionally, NHTSA, within DOT, has regulated auto safety, while states have licensed automobile drivers, established traffic regulations, and regulated automobile insurance. Proponents of autonomous vehicles note that lengthy revisions to current vehicle safety regulations could impede innovation, as the rules could be obsolete by the time they take effect.\nIn 2016, the Obama Administration issued the first report on federal regulations affecting autonomous vehicles. Since then, DOT has issued two follow-up reports and has said it anticipates issuing annual updates to its regulatory guidance. In addition, the Federal Communications Commission (FCC) is reconsidering the allocation of electromagnetic spectrum currently reserved for motor vehicle communications, and its decisions may affect how autonomous vehicles evolve.\n\n\t\tObama Administration Policy Direction\n\nDOT's 2016 report proposed federal and state regulatory policies in these areas:\nA set of guidelines outlining best practices for autonomous vehicle design, testing, and deployment. DOT identified 15 practices and procedures that it expected manufacturers, suppliers, and service providers (such as ridesharing companies) to follow in testing autonomous vehicles, including data recording, privacy, crashworthiness, and object and event detection and response. These reports, called Safety Assessment Letters, would be voluntary, but the report noted that \"they may be made mandatory through a future rulemaking.\" A m odel s tate p olicy that identifies where new autonomous vehicle-related issues fit in the current federal and state regulatory structures. The model state policy, developed by NHTSA in concert with the American Association of Motor Vehicle Administrators and private-sector organizations, suggests state roles and procedures, including administrative issues (designating a lead state agency for autonomous vehicle testing), an application process for manufacturers that want to test vehicles on state roads, coordination with local law enforcement agencies, changes to vehicle registration and titling, and regulation of motor vehicle liability and insurance. A streamlined review process to issue DOT regulatory interpretations on autonomous vehicle questions within 60 days and on regulatory exemptions within six months. Identification of new tools and regulatory structures for NHTSA that could build its expertise in new vehicle technologies, expand its ability to regulate autonomous vehicle safety, and increase speed of its rulemakings. Two new tools could be expansion of existing exemption authority and premarket testing to assure that autonomous vehicles will be safe. Some of the new regulatory options cited would require new statutory authority, while others could be instituted administratively. The report noted that \"DOT does not intend to advocate or oppose any of the tools.\u00e2\u0080\u00a6 [I]t intends \u00e2\u0080\u00a6 to solicit input and analysis regarding those potential options from interested parties.\"\n\n\t\tTrump Administration Policy Guidelines and Proposed Safety\u00c2 Rules\n\nThe two follow-up reports issued by the Trump Administration describe a more limited federal regulatory role in overseeing autonomous passenger vehicle deployment, while also broadening the scope of DOT oversight by addressing the impact of autonomous technology on commercial trucks, public transit, rail, and ports and ships. The policies described in these reports replace those recommended by the Obama Administration in several ways, including the following:\nEncouraging integration of automation across all transportation modes , instead of just passenger vehicles. The October 2018 report Automated Vehicles 3.0 outlines how each of DOT's agencies will address autonomous vehicle safety within its purview. Establishing six automation principles that will be applied to DOT's role in overseeing passenger cars, trucks, commercial buses, and other types of vehicles. These include giving priority to safety; remaining technology-neutral; modernizing regulations; encouraging a consistent federal and state regulatory environment; providing guidance, research, and best practices to government and industry partners; and protecting consumers' ability to choose conventional as well as autonomous vehicles. Reiterating the traditional roles of federal and state governments in regulating motor vehicles and motorists, respectively. The reports cite best practices that states should consider implementing, such as minimum requirements for autonomous vehicle test drivers, and discuss how DOT can provide states with technical assistance. Recommending voluntary action in lieu of regulation. This could include suggesting that manufacturers and developers of autonomous driving systems issue and make public voluntary safety self-assessments to demonstrate transparency and increase understanding of the new technologies and industry development of \"voluntary technical standards\" to \"advance the integration of automation technologies into the transportation system.\" The NHTSA Voluntary Safety Self-Assessment web page lists 17 companies that have filed self-assessment reports, including three major automakers. To provide a perspective, 64 companies have been issued autonomous vehicle testing permits by the State of California alone. Accelerating NHTSA decisions on requests for exemptions from federal safety standards for autonomous vehicle testing. Promoting development of voluntary technical standards by other organizations, such as the Society of Automotive Engineers, the government's National Institute of Standards and Technology, and the International Organization for Standardization. \nDOT has indicated that it wants to revise regulations pertinent to autonomous vehicles, such as redefining the terms \"driver\" and \"operator\" to indicate that a human being does not always have to be in control of a motor vehicle. It also said it plans to require changes in standards for the inspection, repair, and maintenance of federally regulated commercial trucks and buses. Along these lines, NHTSA issued a Notice of Proposed Rulemaking in May 2019, requesting comments on testing and verifying how autonomous vehicle technologies may comply with existing federal safety standards.\n\n\t\tNational Transportation Safety Board Investigation and Recommendations\n\nOn November 19, 2019, the National Transportation Safety Board (NTSB) issued its report on the probable cause of a 2018 fatality involving an autonomous vehicle in Tempe, AZ. In that accident, a pedestrian was fatally injured by a test vehicle operated by Uber Technologies with an operator in the driver's seat. The NTSB investigation determined that the probable cause of the crash \"was the failure of the vehicle operator to monitor the driving environment and the operation of the ADS [automated driving system] because she was visually distracted throughout the trip by her personal cell phone.\" Though the vehicle detected the pedestrian 5.6 seconds before the crash, the NTSB reported that \"it never accurately classified her as a pedestrian or predicted her path.\"\nBeyond the immediate cause of this accident, NTSB reported that an \"inadequate safety culture\" at Uber and deficiencies in state and federal regulation contributed to the circumstances that led to the fatal crash. Among the findings were the following:\nUber's internal safety risk-assessment procedures and oversight of the operator were inadequate, and its disabling of the vehicle's forward collision warning and automatic emergency braking systems increased risks. The Arizona Department of Transportation provided insufficient oversight of autonomous vehicle testing in the state. NHTSA provides insufficient guidance to developers and manufacturers on how they should achieve safety goals, has not established a process for evaluating developers' safety self-assessment reports, and does not require such reports to be submitted, leaving their filing as voluntary.\nNTSB recommended that Uber, the Arizona Department of Transportation, and NHTSA take specific steps to address the issues it identified. It also recommended that the American Association of Motor Vehicle Administrators inform all states about the circumstances of the Tempe crash, encouraging them to require and evaluate applications by developers before granting testing permits.\n\n\tConnected Vehicles and Spectrum Allocation\n\nFederal regulation of the spectrum used in vehicle communications may affect how automation proceeds. Autonomous vehicles, whose artificial intelligence and technology are generally self-contained in each vehicle, are part of a larger category of connected vehicles and infrastructure. Federal, state, and industry research and testing of vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications has been under way since the 1990s. Together, these two sets of technologies, known as V2X, are expected to reduce the number of accidents by improving detection of oncoming vehicles, providing warnings to drivers, and establishing communications infrastructure along roadways that would prevent many vehicles from leaving the road and striking pedestrians. These technologies fall within the broad category of intelligent transportation systems, which have received strong support from Congress due to their potential to improve traffic flow and safety.\nFor vehicles to communicate wirelessly, they use radio frequencies, or spectrum, which are regulated by the Federal Communications Commission (FCC). In 1999, the FCC allocated the 5.9 gigahertz (GHz) band solely for motor vehicle safety purposes for vehicles using DSRC. Over the past two decades, industry and government agencies have collaborated to develop, test, and deploy DSRC technologies. States have invested in DSRC-based improvements, and this technology is operating in dozens of states and cities.\nAs industry has continued to explore vehicle automation, an alternative, cellular-based technology has recently emerged, known as C-V2X. In December 2019, the FCC proposed rules that would reallocate the lower 45 MHz of the 5.9 GHz band for unlicensed use (e.g., Wi-Fi), and allocate the remaining 30 MHz for transportation and vehicle-related use. Of the 30 MHz, the FCC proposed to grant C-V2X exclusive use of 20 MHz of the segment. It is seeking comment on whether the remaining 10 MHz should remain dedicated to DSRC or be dedicated to C-V2X. The FCC commissioners noted that DSRC has evolved slowly and has not been widely deployed, and the rules are intended to ensure the spectrum supports its highest and best use. This decision has competitive implications for the automotive, electronics, and telecommunications industries, and may affect the availability of safety technologies and the path toward vehicle automation. DOT has called for retaining the entire 5.9 GHz band for exclusive transportation use.\n Figure 3 shows that these two technologies facilitate somewhat different types of vehicle and infrastructure communications. In light of their different characteristics, the European Commission has approved DSRC use for direct V2V and V2I communications, while endorsing cellular-based technology for vehicle access to the cloud and remote infrastructure.\nIndustry groups in the United States took varying positions in the FCC proceedings. DSRC advocates argued that this technology has been proven by years of testing and is already deployed in many areas. They generally supported retaining the 5.9 GHz band for exclusive use for DSRC. C-V2X supporters contended that its cellular-based solution is aligned with international telecommunications standards for 5G technologies and should be allowed to use the 5.9 GHz band alongside DSRC. A group of technology companies, including device makers, argued that additional spectrum is needed to accommodate the increasing number of interconnected devices, and that the 5.9GHz band can safely be shared among transportation and non-transportation uses.\n\n\tCongressional Action\n\nDuring the 115 th Congress, committees in the House of Representatives and the Senate held numerous hearings in 2017 on the technology of autonomous vehicles and possible federal issues that could result from their deployment. Initially, bipartisan consensus existed on major issues: H.R. 3388 , the SELF DRIVE Act, was reported unanimously by the House Committee on Energy and Commerce, and on September 6, 2017, the House of Representatives passed it without amendment by voice vote.\nA similar bipartisan initiative began in the Senate. Prior to markup in the Committee on Commerce, Science, and Transportation, the then-chairman and ranking member issued a set of principles they viewed as central to new legislation:\nprioritize safety , acknowledging that federal standards will eventually be as important for self-driving vehicles as they are for conventional vehicles; promote innovation and address the incompatibility of old regulations written before the advent of self-driving vehicles; remain technology - neutral , not favoring one business model over another; reinforce separate but complementary federal and state regulatory roles ; strengthen cybersecurity so that manufacturers address potential vulnerabilities before occupant safety is compromised; and educate the public through government and industry efforts so that the differences between conventional and self-driving vehicles are understood.\nLegislation slightly different from the House-passed bill emerged: S. 1885 , the AV START Act, was reported by the Committee on Commerce, Science, and Transportation on November 28, 2017. It was not scheduled for a floor vote prior to adjournment in December 2018 because of unresolved concerns raised by several Senators. To address some of those concerns, a committee staff draft bill that would have revised S. 1885 was circulated in December 2018 that could form the basis of future legislation.\nThe House and Senate bills addressed concerns about state action replacing some federal regulation, while also empowering NHTSA to take unique regulatory actions to ensure safety and encouraging innovation in autonomous vehicles. The bills retained the current arrangement of states controlling most driver-related functions and the federal government being responsible for vehicle safety. The House and Senate bills included the following major provisions. Where the December 2018 Commerce Committee staff draft proposed significant changes, they are noted in this analysis.\nP reemption of state laws . H.R. 3388 would have barred states from regulating the design, construction, or performance of highly autonomous vehicles, automated driving systems, or their components unless those laws are identical to federal law. The House-passed bill reiterated that vehicle registration, driver licensing, driving education, insurance, law enforcement, and crash investigations should remain under state jurisdiction as long as state laws and regulations do not restrict autonomous-vehicle development. H.R. 3388 provided that nothing in the preemption section should prohibit states from enforcing their laws and regulations on the sale and repair of motor vehicles.\nS. 1885 would also have preempted states from adopting laws, regulations, and standards that would regulate many aspects of autonomous vehicles, but would have omitted some of the specific powers reserved to the states under the House-passed bill. States would not have been required to issue drivers licenses for autonomous-vehicle operations, but states that chose to issue such licenses would not have been allowed to discriminate based on a disability. The bill provided that preemption would end when NHTSA establishes standards covering these vehicles.\nThe Senate staff draft sought to clarify that state and local governments would not lose their traditional authority over traffic laws. It also would have added provisions that state common law and statutory liability would be unaffected by preemption, and would have limited use of arbitration in death or bodily injury cases until new federal safety standards are in effect.\nExemption authority . Both the House and Senate bills would have expanded DOT's ability to issue exemptions from existing safety standards to encourage autonomous-vehicle testing on public roads. To qualify for an autonomous-vehicle exemption, a manufacturer would have had to show that the safety level of the vehicle equaled or exceeded the safety level of each standard for which an exemption was sought. Current law limits exemptions to 2,500 vehicles per manufacturer per year. The House-passed bill would have phased in increases over four years of up to 100,000 vehicles per manufacturer per year; the Senate bill would have permitted up to 80,000 in a similar phase-in.\nH.R. 3388 provided constraints on the issuance of exemptions from crashworthiness and occupant protection standards; S. 1885 did not address those two issues. DOT would have been directed to establish a publicly available and searchable database of motor vehicles that have been granted an exemption. Crashes of exempted vehicles would have had to be reported to DOT. The Senate bill would not have required the establishment of a database of exempted vehicles, and reporting of exempt vehicle crashes would not have been required.\nThe Senate staff draft added a provision to ensure that vehicles exempted from federal standards would have been required to nonetheless maintain the same level of overall safety, occupant protection, and crash avoidance as a traditional vehicle. A DOT review of vehicle exemptions would have been required annually. The draft capped exemptions at no more than five years.\nNew NHTSA safety rules. The House bill would have required NHTSA to issue a new regulation requiring developers and manufacturers to submit a \"safety assessment certification\" explaining how safety is being addressed in their autonomous vehicles. The Senate bill included a similar provision requiring a \"safety evaluation report,\" and would have delineated nine areas for inclusion in the reports, including system safety, data recording, cybersecurity risks, and methods of informing the operator about whether the vehicle technology is functioning properly. While manufacturers and developers would be required to submit reports, the legislation did not mandate that NHTSA establish an assessment protocol to ensure that minimum risk conditions are met.\nThe Senate staff draft would have clarified the process by which federal motor vehicle safety standards would be updated to accommodate new vehicle technologies, providing additional time for new rulemaking. Within six months of enactment, DOT would have been required to develop and publicize a plan for its rulemaking priorities for the safe deployment of autonomous vehicles.\nTo address concerns that autonomous vehicles might not recognize certain potential hazards\u00e2\u0080\u0094including the presence of bicyclists, pedestrians, and animals\u00e2\u0080\u0094and hence possibly introduce new vulnerabilities to motor vehicle travel, the Senate staff draft would have clarified that manufacturers must describe how they are addressing the ability of their autonomous vehicles to detect, classify, and respond to these and other road users. Manufacturers and developers would include this analysis in their safety evaluation reports.\nCybersecurity. The House-passed bill provided that no highly autonomous vehicle or vehicle with \"partial driving automation\" could be sold domestically unless a cybersecurity plan had been developed by the automaker. Such plans would have to have been developed within six months of enactment and would include\na written policy on mitigation of cyberattacks, unauthorized intrusions, and malicious vehicle control commands; a point of contact at the automaker with cybersecurity responsibilities; a process for limiting access to autonomous driving systems; and the manufacturer's plans for employee training and for maintenance of the policies.\nThe Senate bill would have required written cybersecurity plans to be issued, including a process for identifying and protecting vehicle control systems, detection, and response to cybersecurity incidents, and methods for exchanging cybersecurity information. A cybersecurity point of contact at the manufacturer or vehicle developer would have had to be named. Unlike the House-passed bill, S. 1885 would have directed DOT to create incentives so that vehicle developers would share information about vulnerabilities, and would have specified that all federal research on cybersecurity risks should be coordinated with DOT.\nIn addition, S. 1885 would have established a Highly Automated Vehicle Data Access Advisory Committee to provide Congress with recommendations on cybersecurity issues. Federal agencies would have been prohibited from issuing regulations pertaining to the access or ownership of data stored in autonomous vehicles until the advisory committee's report was submitted.\nThe staff draft would have added several cybersecurity provisions, including an additional study by the National Institute of Standards and Technology that would recommend ways vehicles can be protected from cybersecurity incidents.\nPrivacy. Before selling autonomous vehicles, manufacturers would have been required by the House-passed bill to develop written privacy plans concerning the collection and storage of data generated by the vehicles, as well as a method of conveying that information to vehicle owners and occupants. However, a manufacturer would have been allowed to exclude processes from its privacy policy that encrypt or make anonymous the sources of data. The Federal Trade Commission would have been tasked with developing a report for Congress on a number of vehicle privacy issues.\nAlthough S. 1885 would not have explicitly required privacy plans by developers and manufacturers, it would have required NHTSA to establish an online, searchable motor vehicle privacy database that would include a description of the types of information, including personally identifiable information (PII), that are collected about individuals during operation of a motor vehicle. This database would have covered all types of vehicles\u00e2\u0080\u0094not just autonomous vehicles\u00e2\u0080\u0094and would have included the privacy policies of manufacturers. The database would also have included an explanation about how PII would be collected, retained, and destroyed when no longer relevant.\nThe Senate staff draft would have added new passenger motor vehicle privacy protections.\nResearch and advisory panels. Both bills would have established several new advisory bodies to conduct further research on autonomous vehicles and advise DOT on possible new vehicle standards. H.R. 3388 would have established a NHTSA advisory group with a broad cross-section of members to advise on mobility access for senior citizens and the disabled; cybersecurity; labor, employment, environmental, and privacy issues; and testing and information sharing among manufacturers.\nS. 1885 would have established other panels, including a Highly Automated Vehicles Technical Committee to advise DOT on rulemaking policy and vehicle safety; a working group comprising industry and consumer groups to identify marketing strategies and educational outreach to consumers; and a committee of transportation and environmental experts to evaluate the impact of autonomous vehicles on transportation infrastructure, mobility, the environment, and fuel consumption. Separately, DOT would have been required to study ways in which autonomous vehicles and parts could be produced domestically, with recommendations on how to incentivize U.S. manufacturing.\nThe Senate staff draft would have consolidated some of the advisory committees in S. 1885 into a Highly Automated Vehicle Advisory Council with diverse stakeholder representation, and mandated to report on mobility for the disabled, senior citizens and populations underserved by public transportation; cybersecurity; employment and environmental issues; and privacy and data sharing.\nNo similar comprehensive autonomous vehicle legislation has been introduced in the 116 th Congress, although discussions on a bicameral bill have been ongoing. In addition, the Senate Committee on Environment and Public Works has reported America's Transportation Infrastructure Act of 2019, S. 2302 , which includes several provisions in Subtitle D addressing the possible impact of autonomous vehicles on highway infrastructure. It would establish a grant program to modernize the U.S. charging and fueling infrastructure so that it would be responsive to technology advancements, including autonomous vehicles. The legislation would also require research on ways in which roadway infrastructure should be improved for autonomous vehicles.\n\n\tState Concerns\n\nState and local rules and regulations may affect how autonomous vehicles are tested and deployed. The National Governors Association (NGA) has noted that state governments have a role with respect to vehicle and pedestrian safety, privacy, cybersecurity, and linkage with advanced communications networks. While supporting technology innovations in transportation, a recent NGA report notes that \"the existing regulatory structure and related incentives have not kept pace with the new technology\" and that \"recent accidents have raised concerns about the safety of drivers, pedestrians and other road users in the period during which autonomous and non-autonomous vehicles share the road.\"\nNGA has joined with other state and local government organizations to call for modifications in forthcoming autonomous vehicle legislation, including\nclarity that states and local governments not only can enforce existing laws governing operation of motor vehicles on public roads, but also originate new statutes and regulations; requiring submission of more detailed automaker and developer reports to DOT on the safety of their technologies, so that states and cities can be assured that autonomous vehicle testing is being conducted in a safe manner; differentiation between limited vehicle testing and the commercial deployment of large numbers of autonomous vehicles through an expanded exemptions process; and expansion of plans for consumer education about \"safe use and interaction\" with respect to autonomous vehicles.\nAccording to the National Conference of State Legislatures (NCSL), at least 41 states and the District of Columbia considered legislation related to autonomous vehicles between 2013 and October 2019; in that time, 29 states and the District of Columbia enacted legislation, governors in 11 states issued executive orders, and 5 states issued both an executive order and enacted legislation. ( Figure 4 ).\nOf the states that have enacted laws in 2017, 2018, and 2019 pertaining to autonomous vehicles, NCSL reports that the largest number of states have passed laws that clarify certain types of commercial activity, such as how closely autonomous vehicles can follow each other when they are coordinated, as in truck platooning. According to NCSL, no recent state laws have been enacted dealing with cybersecurity or vehicle inspection reports. NCSL has organized and categorized the types of state legislation ( Table 4 ). For a more thorough description of the legislation passed in 2017, 2018, and 2019, the NCSL Table of Enacted State Legislation provides more detail.\n\n\tImplications for Highway Infrastructure\n\nDeployment of fully autonomous vehicles will require not only a suite of new technologies, but also changes to the highway infrastructure on which those vehicles will operate. Autonomous vehicles being tested today rely on clear pavement markings and legible signage to stay in their lanes and navigate through traffic. Major highways as well as side roads in urban and rural settings will need to accommodate autonomous vehicles in addition to a large fleet of conventional vehicles with human drivers.\nIn this transition period to more autonomous vehicles\u00e2\u0080\u0094which many anticipate will last several decades \u00e2\u0080\u0094the Federal Highway Administration (FHWA) is expected to play a significant role through its administration of the Manual on Uniform Traffic Control Devices (MUTCD), which sets standards for all traffic control devices, including signs, intersection signals, and road markings. For example, overhead signage on Interstate Highways contains white lettering on a green background in all 50 states\u00e2\u0080\u0094easily recognizable to any U.S. driver\u00e2\u0080\u0094due to MUTCD standards. FHWA is in the process of updating the 2009 MUTCD to address issues specific to autonomous vehicle technologies. However, state compliance with MUTCD is voluntary, and not all states uniformly apply all standards. Audi reportedly announced in 2018 that it would not make its new Level 3 autonomous vehicle technology, called Traffic Jam Pilot, available in the United States because of \"laws that change from one state to the next, insurance requirements, and things like lane lines and road signs that look different in different regions.\" Other automakers have made similar complaints about U.S. roads.\nIn the near term, improvement and better maintenance of pavement markings, signage and intersection design may be the most helpful steps that federal and state transportation officials can take. Despite national standards based on MUTCD, not all states maintain their highway markings at a level that would be useful to guide autonomous vehicles. Inadequate road maintenance may affect the pace of autonomous vehicle deployment. Some 21% of major U.S. roads are in poor condition, and a road with many potholes or temporary pavement repairs may also lack continuous lane markings. Many minor roads, which are generally the responsibility of county or municipal governments, may lack road edge lines as well as center lines, potentially making it difficult for autonomous vehicles to position themselves correctly. Dirt and gravel roads may pose particular challenges for autonomous vehicles, as they generally have no pavement markings and cameras may be unable to detect potholes or edges in low-visibility conditions.\nClosely tied to the need for clearer road markings and signage will be ways in which federal and state transportation agencies develop a standardized method to communicate information to vehicles and motorists about construction, road accidents, detours, and other changes to road environments. Many of the perceived benefits of autonomous vehicles\u00e2\u0080\u0094reduced vehicle fatalities, congestion mitigation, and pollution reduction\u00e2\u0080\u0094may depend on the ability of vehicles to exchange information with surrounding infrastructure. The Transportation Research Board (TRB) has been evaluating how states should begin now to plan and develop the types of connected vehicle infrastructure that will be necessary for full autonomous vehicle deployment. TRB's research is also focused on how cash-strapped transportation agencies can identify the large investments that will in turn be necessary to implement connectivity on top of regular maintenance of highways, bridges, and other traditional infrastructure.\nOther options to facilitate autonomous vehicle travel may include designation of special highway corridors that would include all V2X systems necessary for safe autonomous vehicle operation; three European countries have agreed to build such a corridor.\nOver a longer time line, the importance of highway markings may fade as automakers and developers find new ways for autonomous vehicles to navigate, including greater use of guardrails and roadside barriers, sensors, and three-dimensional maps. If highly detailed mapping is deemed to be one replacement for visual cues such as lane markings, then transportation agencies and automakers may need to develop an open standard so that all vehicles will understand the mapping technology. V2X communications through DSRC and cellular may evolve to provide a mechanism for new types of vehicle guidance.\n\n\t\tAppendix. Image of Nuro Robot, R2X","output":null}
{"id":"gao_GAO-19-670","pid":"gao_GAO-19-670_0","input":"\tBackground\n\n\t\tVHA\u2019s Allocation of Funds\n\nIn February of each year, the President submits the budget request for  VHA health care, which includes requested funding for the upcoming  fiscal year as well as an advance appropriation request to Congress.  VHA allocates funds by the beginning of each fiscal year\u2014October 1\u2014to  VISNs and medical centers based on the amount VA received in the  advance appropriation. Once appropriations are enacted for the  upcoming fiscal year, VHA updates the allocated funding levels for VISNs  and medical centers. For example, VHA\u2019s appropriations for fiscal year  2018 included advance appropriations for fiscal year 2019. VHA allocated  funds by October 1, 2018 (the beginning of fiscal year 2019), based on  the advance appropriation for fiscal year 2019 and updated the funding  levels once appropriations for fiscal year 2019 were enacted.\nVHA allocates general purpose funds to its 18 VISNs through the  Veterans Equitable Resource Allocation (VERA) model. It uses a  separate model, called the Medical Center Allocation System (MCAS), to  allocate each VISN\u2019s general purpose funds\u2014as determined by the  VERA model\u2014to the medical centers within each network. VHA guidance  permits VISNs to make adjustments to the general purpose funding levels  determined by MCAS for each medical center.\nVHA uses other methods to allocate specific purpose funds to VHA  program offices that manage various health care programs, such as those  for community care, prosthetics, and homelessness.  The program  offices, in turn, typically allocate funds for these programs directly to  medical centers. (See fig. 1.)\nOnce funds are allocated and distributed to VISNs and medical centers,  these funds may be redistributed in accordance with law across VA\u2019s  health care system. These redistributions can help address unfunded  needs or surpluses that may arise. For example, according to officials, a  medical center may need additional funds to provide care for veterans  when natural disasters occur.\n\n\t\tVHA\u2019s General Purpose and Specific Purpose Funding Levels\n\nFrom fiscal year 2015 to fiscal year 2019, general purpose funds  increased by 33 percent- from $37 to $49 billion\u2014while specific purpose  funds increased by 24 percent\u2014from $19 to $23 billion. (See fig. 2.) In  fiscal year 2019, community care accounted for $10.5 billion\u201446  percent\u2014of the $23 billion allocated in specific purpose funds. Patient  care services, homelessness programs, non-recurring maintenance, and  medical residency programs also accounted for large portions of specific  purpose funds.\n\n\t\tVA\u2019s Appropriation Accounts and Community Care\n\nAs of fiscal year 2017, VA primarily receives appropriated funds for all  health care it provides or purchases through four appropriation accounts.  The amount of funds in each appropriation account is determined by VA\u2019s  annual appropriation. VHA allocates both general and specific purpose  funds from these appropriation accounts. These accounts include the  following:\nMedical Services: health care services provided to eligible veterans  and other beneficiaries in VA facilities and non-VA facilities, among  other things.\nMedical Community Care: health care services that VA authorizes for  veterans and other beneficiaries to receive from community  providers.\nMedical Support and Compliance: the administration of the medical,  hospital, nursing home, domiciliary, supply, and research activities  authorized under VA\u2019s health care system, among other things.\nMedical Facilities: the operation and maintenance of VHA\u2019s capital  infrastructure, such as the costs associated with nonrecurring  maintenance, leases, utilities, facility repair, laundry services, and  groundskeeping, among other things.\nSeparate from VA\u2019s health care appropriation accounts, the Veterans  Access, Choice, and Accountability Act of 2014 established the Veterans  Choice Fund and provided $10 billion in funds for the Veterans Choice  Program (Choice Program), which was implemented in early fiscal year  2015 and authorized until funds were exhausted or through August 7,  2017, whichever occurred first. The Choice Program allowed veterans  to elect to receive care from community providers when the services  needed were not available at a VA medical center, were not available  within VHA\u2019s wait-time goals, or when veterans did not reside near a VA  medical facility with a full-time primary care provider. Eligible veterans  could also elect to receive care in the community if they met other  eligibility criteria as well.\nVA received additional authority and funds to maintain the Choice  Program through June 6, 2019, when it sunsetted, and the new Veterans  Community Care Program (VCCP) went into effect. The VCCP was  established by the VA MISSION Act and consolidated the Choice  Program along with several other community care programs. The VCCP  is primarily funded through specific purpose funds in the Medical  Community Care appropriation account. The VCCP is similar to the  former Choice Program in allowing veterans to elect to receive care from  community providers when certain eligibility criteria are met, including  criteria relating to the availability and accessibility of the services at  VHA. Under the VCCP, VHA adopted designated access standards for  VCCP eligibility determinations that are broader than the eligibility criteria  that existed under the Choice Program.\n\n\tVHA Allocates Funds Based on Patient Workload but Does Not Use the Most Up- to-date Data and Certain Adjustments to Funding Levels May Lead to Inefficiencies\n\n\t\tVHA Allocates General Purpose and Community Care Funds Based on Patient Workload\n\nVHA\u2019s VERA model uses a national, formula-driven approach that  considers the number and type of veterans served and the complexity of  care provided\u2014collectively referred to as patient workload\u2014as well as  certain geographic factors, such as local labor costs, to determine the  amount of general purpose funds each VISN should receive. VHA uses  VERA to establish funding levels for each VISN in the following areas:  patient care, equipment, education support, and research support, the  largest of which is patient care.\nAfter determining the amount of funds VISNs should retain for VISN-level  initiatives, administrative purposes, and reserves, VHA uses its MCAS  model to distribute the remainder of each VISN\u2019s general purpose funds  to medical centers within the VISN. MCAS is based on a workload  measure developed by VHA, called patient-weighted work (PWW) that  accounts for medical center-level factors such as patient volume, case- mix, and specialized services. According to VHA officials, PWW establishes an equitable measure of workload among medical centers  that vary significantly in their geographic location, and types and costs of  services provided. Furthermore, PWW lessens the impact of cost  differences between medical centers, by recognizing the varying costs  and levels of resource intensity associated with providing care for each  patient at each medical center. For example, PWW would result in more  funds being allocated to a medical center that provides more complex  care, such as open heart surgery, than a workload measure based solely  on a count of each individual patient, which would not account for the  additional costs associated with more complex care.\nSimilar to MCAS, VHA\u2019s Office of Community Care uses a patient  workload-based model to allocate community care funds\u2014which are  specific purpose funds\u2014to medical centers, based on each medical  center\u2019s community care patient workload in prior years. To determine the  community care funding needs for each medical center, VHA calculates  the PWW associated with community care. VHA determines the total  amount of funds available for community care based on the amounts  appropriated to the Medical Community Care appropriation account and  the amount available for community care in the Veterans Choice Fund.  VHA distributes the funds to each medical center in proportion to each  medical center\u2019s PWW. VHA officials told us that VHA is considering  making changes to the methodology for allocating community care funds  under the new VCCP, but as of July 2019, updates to the methodology  had not been developed or implemented.\nThe other four program offices we reviewed developed other  methodologies for allocating other specific purpose funds. In general,  these methodologies involve coordination between VISNs and their  medical centers on needs for these funds and allocating available funds  based on identified needs. For example, the Office of Patient Care  Services which manages prosthetics and hepatitis C drugs allocates  available funds based on identified needs by each of the medical centers.  Appendix 1 provides an overview of the methodologies used by these  four program offices to allocate special purpose funds.\n\n\t\tVHA\u2019s Allocation Models for General Purpose and Community Care Funds Do Not Reflect the Most Up-To-Date Patient Workload Data Available\n\nTo allocate funds for an upcoming fiscal year, VHA\u2019s allocation models  rely on actual patient workload data from prior fiscal years, but not the  most recently completed fiscal year.\nVHA\u2019s VERA model relies on actual patient workload data from two to  six years prior to the upcoming fiscal year, in addition to future  workload projections. For example, to allocate funds for fiscal year  2019, the VERA model relied on actual workload data from fiscal  years 2013 and 2017, in addition to some future projected workload,  but did not take into account actual workload data from fiscal year  2018.\nVHA\u2019s MCAS and community care models rely on actual patient  workload data from two years prior to the upcoming fiscal year. For  example, the 2019 MCAS and community care models were based on  actual workload data from fiscal year 2017, but did not take into  account actual workload data from fiscal year 2018.\nAccording to VHA officials, patient workload data from the most recently  completed fiscal year are not yet available when VHA runs the preliminary  VERA, MCAS, and community care models for each fiscal year in August.  However, these officials told us that these data would be available in  December of each year and therefore could be incorporated into the final  model run after VHA receives its enacted appropriation amount for the  upcoming fiscal year. These officials told us that doing so would result in  little to no delay in when the final model run and the final distribution of  funds takes place, which occurs after the appropriation act is enacted.  Specifically, according to officials from VHA\u2019s Office of Finance, if the full  fiscal year appropriation is enacted prior to the start of the fiscal year on  October 1, VHA will be able to perform the final model runs by mid- November. As a result, incorporating data from the most recent fiscal year  would result in a one month delay in the final model run. Should the  enactment of a full year appropriation be delayed, the timing of the final  model would not be impacted by using data from the most recently  completed fiscal year. (See fig. 3.)\nA VHA Office of Finance official told us that VHA had not previously  considered using patient workload data from the most recently completed  fiscal year because VHA did not believe that using updated data would  have a significant impact on the model. However, the official told us that  the implementation of the VCCP in June 2019 may result in more  significant year-to-year workload changes due to veterans increasing their  use of VHA health care services. As a result, the official told us that using  more up to date information would be more useful in informing allocation  levels. Federal standards for internal control related to information calls  for management to use quality information to achieve the entity\u2019s  objectives. Quality information is appropriate, current, complete, accurate,  accessible, and provided on a timely basis.\nBecause the VERA, MCAS, and community care models do not use the  most up-to-date patient workload data available, the models may not  reflect the most recent workload trends affecting medical centers. This  may result in funding levels determined by the models that may not be  commensurate with medical centers\u2019 actual patient workload. For  example, VHA data we reviewed show that some medical centers  experienced workload changes in fiscal year 2018\u2014changes that were  not captured by the models for fiscal year 2019 allocations. Specifically,  from fiscal years 2017 through 2018, while PWW for care provided by VA  medical centers grew over 1 percent VHA-wide, 34 medical centers  experienced growth of over 3 percent, and 9 experienced a decline of  over 3 percent. Similarly, the PWW for care in the community grew over 6  percent VHA-wide from fiscal year 2017 to fiscal year 2018, with 97  medical centers experiencing growth of over 3 percent and 25  experiencing a decline in community care of over 3 percent over this time  period.\nAdditionally, officials we interviewed at six VISNs told us that the models  have not accounted for recent workload growth their medical centers  were experiencing due to an increase in the number of veterans they  serve, the addition of new services, or changes in the medical centers\u2019  reliance on community care. Two of these VISNs analyzed recent  workload trends at the medical centers within their VISN and allocated  additional funds to those medical centers with recent growth not  accounted for by MCAS. If VHA were to incorporate the most recent  available workload data into its allocation models, the need for such  funding changes would likely be reduced.\n\n\t\tVHA Does Not Adequately Monitor Adjustments Made to Medical Centers\u2019 Allocated Funding Levels, and Certain Adjustments May Lead to Inefficiencies\n\nAs part of the allocation process, VISNs may make adjustments to the  amounts of general purpose funds calculated by MCAS and allocated to  medical centers. VHA guidance requires VISNs to provide a written  explanation to VHA for any adjustments. However, we found that VHA  does not adequately monitor these adjustments and that some of these  adjustments may lead to inefficiencies.\n\n\t\t\tVHA Does Not Adequately Monitor Allocation Adjustments\n\nWe found that VHA Office of Finance officials did not adequately review  the fiscal year 2019 MCAS adjustments to ensure that adjustments were  documented and fully explained. Specifically, VHA did not provide  evidence that they sought an explanation for MCAS adjustments made by  2 VISNs that provided no written explanation for their adjustments, even  though these explanations are required by VHA guidance. VHA Office of  Finance officials said they use informal methods via email to learn about  the adjustments and follow-up as needed, but could not provide  documentation that follow-up and review had occurred. Additionally, VISN  officials we interviewed from all 18 VISNs stated that they had not  received questions or other feedback from the VHA Office of Finance on  the adjustments they made, even if they had not documented and  explained the adjustments.\nFurthermore, even if VISNs follow the requirement and submit written  explanations for the adjustments, they may not provide the type of  information VHA needs to adequately monitor the adjustments. This is  because VHA guidance does not require VISNs to provide information on  how they determined how much and for what reasons they are making  the adjustments. For example, we found that 6 VISNs provided limited  explanations for their fiscal year 2019 MCAS adjustments, such as stating  that they had decided to reallocate funds among medical centers to  ensure \u201ccontinuity of operations,\u201d which is insufficient information to allow  VHA to determine if the adjustments were appropriate.\nFederal standards for internal control related to monitoring state that  management should establish and operate monitoring activities to monitor  the internal control system and evaluate the results. These monitoring  activities could include establishing a formal process to document VHA\u2019s  review of VISN adjustments to medical center allocations. Additionally,  monitoring activities could include requiring VISNs to provide information  on how they determined how much and for what reasons they are making  the adjustments and then reviewing such information. As VHA evaluates  the adjustments, documenting the results of its monitoring and having the  information needed to help determine the appropriateness of the  adjustments will help VHA identify areas for improvement in the allocation  process. Without adequate monitoring, VHA cannot reasonably ensure  these adjustments are justified and align with VA\u2019s strategic plan, which  calls for the efficient allocation of funds.\n\n\t\t\tCertain Adjustments May Lead to Inefficiencies\n\nBased on interviews with VISN officials, we found that, in fiscal year 2019,  seven VISNs adjusted the allocations determined by MCAS to ensure that  every medical center within their VISN received either the same level of  funding or a minimum funding increase of up to 2 percent relative to the  prior year. According to VISN officials, funds were often shifted from  medical centers that had received relatively large increases in funds due  to growing workload to medical centers that had received a decrease or  relatively flat funds compared to the prior year due to either declining or  relatively flat workload. According to VISN officials, declining workload  may be the result of medical centers serving fewer patients or patients  obtaining care from community providers rather than VA providers. When  asked about these adjustments, officials at the seven VISNs stated that  they were necessary to ensure that affected medical centers could  continue to cover the costs for the services they offer and the staff they  employ, including providing federally mandated annual salary increases  for those staff. Officials from four of these VISNs stated that it is difficult  for medical centers to absorb a funding cut or only a small increase in  funding from one year to the next due to rising costs they face.\nWhile VISNs are allowed to make adjustments to medical centers\u2019  allocated general purpose funds, these adjustments may lead to  inefficiencies because medical centers are not required to improve  efficiency\u2014such as, adjust the level of services they offer\u2014to account for  their decreases in workload. Additionally, officials from VHA\u2019s Allocation  Resource Center within the Office of Finance, which is responsible for  developing and executing VHA\u2019s allocation models, told us that because  allocations made through MCAS are based on medical center workload,  VISNs should avoid reallocating funds so that all medical centers receive  a minimal increase. These officials said that doing so results in medical  centers failing to adjust the level of services to meet workload needs.  However, we found that for medical centers with declining workload, VHA  guidance on allocation of funds does not require VISNs\u2014in conjunction  with these medical centers\u2014to develop and submit approaches to  improve the efficiency of medical center operations. Such improvements  in efficiency would help lower overall costs.\nAs we have previously stated, VHA\u2019s strategic plan calls for the efficient  allocation of funds. In addition, federal internal control standards related  to control activities state that management should design control activities  to achieve agency objectives. Such an activity could include having  guidance on the allocation and adjustment of funds that promotes the  efficient use of funds for delivering health care services to veterans.  Without requiring VISNs\u2014in conjunction with medical centers\u2014to  develop and submit an approach to change how medical centers with  decreasing workload should operate, VHA increases the risk that these  adjustments will not align with VA\u2019s strategic plan.\n\n\tVHA Monitors the Use of Allocated Funds, but Does Not Adequately Monitor Redistribution of Funds\n\n\t\tVHA Monitors the Use of Allocated General Purpose and Specific Purpose Funds Using Multiple Mechanisms\n\nOnce funds are allocated and distributed to VISNs and medical centers,  VHA uses multiple mechanisms to monitor the balance of general  purpose and specific purpose funds. VA uses these mechanisms to  ensure that VISNs and medical centers operate within their allocated  funding levels and are in compliance with the Anti-Deficiency Act. VHA\u2019s  primary monitoring mechanism is through VA\u2019s financial management  system, which is used to track obligations and prevent VISNs and medical  centers from obligating amounts that are greater than the funds they have  available. VHA also employs additional mechanisms to monitor the use  of general and specific purpose funds. These additional mechanisms are  described below.\n\n\t\t\tGeneral Purpose Funds\n\nVHA\u2019s Office of Finance requires each VISN to prepare an annual  operating plan after the initial allocation of general purpose funds for each  fiscal year that reflects the total planned obligations for the medical  centers they oversee. These operating plans describe the planned  obligation of funds throughout the fiscal year for various budget  categories, such as personnel, equipment, transportation, and supplies  and materials. VHA requires planned obligations reported in operating  plans to align with the funding levels available to each VISN, which  include allocated funds as well as anticipated collections,  reimbursements, and funds carried over from previous years. VISNs are  required to revise their operating plans during the fiscal year if major  changes are made to their available funding levels, due to, for example,  the enactment of a final appropriation bill, which results in final  allocations.\nTo monitor VISNs\u2019 use of general purpose funds, VHA uses the operating  plans to compare each VISN\u2019s planned obligations with actual obligations  on a monthly basis. VHA does not compare planned obligations with  actual obligations for each medical center individually; instead, each of  the 18 VISNs as well as the five medical centers we reviewed developed  their own tools to monitor the use of funds. According to VHA officials,  VHA requires each VISN to provide an explanation to VHA\u2019s Office of  Finance on a monthly basis about any variances of 5 percent or more  above or below the amount between planned obligations in their  operating plans and actual obligations.\nBased on VHA documents we reviewed, all 18 VISNs provided  explanations for situations in which their actual obligations were equal to,  higher, or lower than 5 percent from their planned obligations in fiscal  years 2018 and 2019 and in some cases, also explained the actions they  were planning to take to address the variance. VISNs reported several  reasons for the variances. For example, some VISNs reported that their  actual obligations exceeded planned obligations in some months because  contracts or equipment purchases were executed earlier than anticipated  in the year. Conversely, some VISNs reported that contracting delays led  to actual obligations lagging behind planned obligations reported in their  operating plans. An official from the VHA Office of Finance told us that  they may contact VISN leadership\u2014including the Director and Chief  Financial Officer\u2014if the variations are significant and additional actions  needed to be taken. VHA Office of Finance officials also told us that they  may review other reports if they become aware of an issue of significant interest to VHA leadership regarding a VISN\u2019s or medical center\u2019s  obligations.\n\n\t\t\tSpecific Purpose Funds\n\nBased on our review of VHA documents and interviews with program  office officials, VHA program offices use various monitoring processes  developed by each program office to monitor the use of specific purpose  funds. Specifically, officials from the Office of Community Care told us  that they monitor the use of community care funds by comparing actual  obligations to planned obligations based on authorized community care.  According to VHA officials, as of February 2019, VHA was in the process  of developing an updated process to monitor the use of community care  funds, which\u2014starting in fiscal year 2019\u2014were obligated at the time of  claim payment rather than when care in the community was authorized.  The other four VHA program offices we reviewed monitor the use of the  funds they manage by generating a monthly or quarterly budget status  report that compares each medical center\u2019s actual obligations against  their planned obligations. For example, officials from the Office of Patient  Care Services told us that to monitor the use of funds for prosthetics, they  conduct monthly reviews of obligations and ask the VISNs and medical  centers to explain deviations between the actual and planned  expenditures and provide an action plan.\n\n\t\tVHA Does Not Adequately Monitor the Redistribution of Funds Throughout the VA Health Care System, Which May Promote Inefficiencies\n\nAfter funds are allocated and distributed to VISNs and medical centers,  VHA can redistribute funds across the VA health care system in  accordance with law. VHA officials told us these redistributions are done  to address unfunded needs and surpluses as they are identified and  occur throughout the year. However, we found that VHA does not  adequately monitor redistributions. We identified the following instances  in which allocated funds are redistributed:\nVHA officials told us that VHA\u2019s Office of Finance redistributes any  surplus general purpose and specific purpose funds to medical  centers based on VHA priorities and to address needs identified by  VISNs. These officials said that these redistributions typically occur  after the middle of the fiscal year. As of June 2019, according to VHA  officials, one VISN had identified unfunded needs to VHA, but the  VISN was working on addressing the funding needs using its own  internal resources. Officials from another VISN told us that the VISN  anticipated unfunded needs, but had not made a request to VHA for  additional funds as of the end of May 2019.\nVISNs may also exchange funds with other VISNs. For example, if a  VISN has excess medical facilities funds but a shortage of medical  services funds, the VISN may exchange these funds with another  VISN that has excess medical services funds but a shortage of  medical facilities funds. According to VHA officials, VISNs must  inform VHA about these exchanges of funds, but are not required to  provide an explanation and do not require VHA approval for the  exchanges.\nVHA officials told us that VISNs also have the flexibility to redistribute  funds throughout the year from medical centers within their VISN that  are experiencing a funding surplus to ones with unfunded needs.  However, VISNs are not required to inform VHA about these  redistributions and are not required to provide an explanation or get  approval from VHA. For example, officials at one medical center told  us that in recent years, its VISN redistributed an average of $15  million per year above allocated funding levels to this medical center  to address unfunded needs.\nWhile the redistribution of funds throughout the year gives VHA flexibility  to move funds where they are needed, VHA\u2019s Office of Finance does not  adequately monitor these redistributions. Specifically, VHA\u2019s Office of  Finance does not require VISNs to identify the reasons why they  redistribute funds between VISNs and medical centers, and a VHA Office  of Finance official told us VHA does not examine the amount of funds that  are redistributed. For example, VHA\u2019s Office of Finance could not provide  us the total amount of redistributions that occurred throughout fiscal year  2018. As a result, VHA\u2019s Office of Finance does not know why VISNs  redistributed funds and the extent to which redistributions resulted in a  deviation from VHA\u2019s workload-based allocation levels. Monitoring the  redistributions would provide VHA with information on the effectiveness of  the allocation models and how they might be improved.\nVHA\u2019s actions are inconsistent with federal internal control standards  related to monitoring, which state that management should establish and  operate monitoring activities to monitor the internal control system and  evaluate the results. Without requiring VISNs to provide this information  and without requiring VHA to document the results of its review of the  redistributions, VHA cannot ensure that these redistributions align with  VHA\u2019s workload-based allocation of funds. As a result, VISNs and  medical centers may not be efficiently operating within available funding  levels, which include allocated funds, collections, reimbursements, and  carry over from previous years.\n\n\tConclusions\n\nVA\u2019s strategic plan calls for the efficient use of funds for delivering health  care services to veterans. Accordingly, it is critical that VHA closely  monitor and account for how its funds are allocated to VA medical centers  and redistributed throughout the year to help ensure the most efficient  use of funds. Especially as the number of veterans eligible to receive care  from a community provider potentially expands, it will be important for  VHA to ensure allocated funding levels accurately reflect individual  medical center funding needs.\nHowever, VHA has opportunities to strengthen its processes for allocating  and monitoring funds distributed across its health care system. VHA could  improve how it allocates funds to its VISNs and medical centers if it were  to use the most up-to-date workload data available as part of its allocation  models. This would allow VHA to account for significant changes in  workload from year-to-year. VHA could also improve how it monitors  VISN adjustments to medical center allocation levels as well as  redistributions that may occur after medical centers receive their  allocations. While these adjustments and redistributions afford flexibility  and may be appropriate in certain circumstances, VHA does not have the  information it needs to monitor these changes to ensure that they are  appropriate and consistent with department goals. Specifically, VHA does  not require VISNs and medical centers to provide information on how they  determined the amount and reasons for adjustments, nor does VHA  require VISNs\u2014in conjunction with medical centers\u2014 to develop and  submit an approach to improve efficiency at medical centers with  declining workload, such as adjusting the level of services offered.  Additionally, VHA does not require VISNs to identify the reasons why they  redistribute funds between VISNs and medical centers after allocations  have been made, and VHA does not document its review of these  redistributions. As a result, VHA lacks reasonable assurance that  adjustments and redistributions align with its strategic goals for efficient  use of funds to best serve the needs of veterans across its healthcare  system.\n\n\tRecommendations for Executive Action\n\nWe are making the following five recommendations to VHA:\nThe VA Under Secretary of Health should use workload data from the  most recently completed fiscal year as part of the models that inform  VISNs\u2019 and medical centers\u2019 general purpose funding needs, when  doing so would not significantly delay the allocation of funds.  (Recommendation 1)\nThe VA Under Secretary of Health should establish a formal process  to document VHA\u2019s review of VISNs\u2019 adjustments to medical center  allocation levels. (Recommendation 2)\nThe VA Under Secretary of Health should revise VHA\u2019s existing  guidance to require VISNs to provide information on how they  determined how much and for what reasons they made adjustments  to medical center allocation levels. (Recommendation 3)\nThe VA Under Secretary of Health should revise its existing guidance  to require VISNs\u2014in conjunction with medical centers\u2014to develop  and submit approaches to improve efficiency at medical centers with  declining workload that received adjusted funding levels. These  approaches could include adjusting the level of services offered.  (Recommendation 4)\nThe VA Under Secretary of Health should require VISNs to provide  explanations on the amount of funds redistributed between VISNs and  medical centers and VHA to document its review of these  redistributions. (Recommendation 5)\n\n\tAgency Comments\n\nWe provided a draft of this report to VA for review and comment. In its  written comments, reprinted in appendix II, VA concurred with four  recommendations and concurred in principle with one recommendation.\nVA also described steps that it plans to take to implement the  recommendations. In addition, VA provided a technical comment, which  we incorporated as appropriate.\nSpecifically, VA concurred with the first recommendation, stating that it  will re-run the VERA model to allocate funds based on prior year  workload data if an enacted budget is passed after the start of the second  quarter of the current fiscal year. VA also concurred with the second and  third recommendations, stating that it will update guidance to establish a  formal process to document the review of VISN adjustments to medical  center allocation levels and will require VISNs to provide information on  how they determined adjustments prior to processing the adjustments. VA  concurred in principle with the fourth recommendation, stating that VHA is  conducting market assessments over a multi-year period to increase  access and quality of care to veterans. VA said that after completing the  market assessments and reviewing information from other VHA efforts, it  may consider adjusting the level of services along with other alternatives.  VA also concurred with the fifth recommendation, stating it will require  review of redistributions between VISNs to ensure adequate explanations  are included. According to VA, the department will also run a monthly  report identifying redistributions between medical centers in a VISN that  exceed 1.5 percent of the VISN\u2019s funding allocation.\nWe are sending copies of this report to the Secretary of Veterans Affairs,  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.\nIf you or your staff have any questions about 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 III.\n\nAppendix I: Methodologies Used by Four Selected Program Offices to Allocate Specific Purpose Funds\n\nIn addition to the Office of Community Care, which managed $10.5 billion,  or 46 percent, of specific purpose funds in fiscal year 2019, we contacted  four other Veterans Health Administration (VHA) program offices that  managed the largest amounts of specific purpose funds in fiscal year  2019\u2014these included funds for patient care services, homelessness  programs, non-recurring maintenance, and medical residency programs.  These four program offices managed at least $1 billion of funds and  collectively managed about 36 percent of all specific purpose funds in  fiscal year 2019. The four program offices developed methodologies for  allocating specific purpose funds that involve coordinating with VISNs and  their medical centers on the purposes for which the funds would be used  and allocating available funds based on these needs. See table 1.\n\nAppendix II: Comments from the Department of Veterans Affairs\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Rashmi Agarwal (Assistant  Director), Michael Zose (Analyst-in-Charge), and Carmen Rivera-Lowitt  made key contributions to this report. Also contributing were Krister  Friday, Cathleen Hamann, Jacquelyn Hamilton, and Ethiene Salgado- Rodriguez.\n\nRelated GAO Products\n\nVA Health Care: Estimating Resources Needed to Provide Community  Care. GAO-19-478. Washington, D.C.: June 12, 2019.\nVA\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.\nVeterans\u2019 Health Care Budget: Improvements Made, but Additional  Actions Needed to Address Problems Related to Estimates Supporting  President\u2019s Request. GAO-13-715. Washington, D.C.: August 8, 2013.\nVeterans\u2019 Health Care: Improvements Needed to Ensure That Budget  Estimates Are Reliable and That Spending for Facility Maintenance Is  Consistent with Priorities. GAO-13-220. Washington, D.C.: February 22,  2013.\nVeterans\u2019 Health Care Budget: Better Labeling of Services and More  Detailed Information Could Improve the Congressional Budget  Justification. GAO-12-908. Washington, D.C.: September 18, 2012.\nVeterans\u2019 Health Care Budget: Transparency and Reliability of Some  Estimates Supporting President\u2019s Request Could Be Improved.  GAO-12-689. Washington, D.C.: June 11, 2012.\nVA Health Care: Estimates of Available Budget Resources Compared  with Actual Amounts. GAO-12-383R. Washington, D.C.: March 30, 2012.\nVA Health Care: Methodology for Estimating and Process for Tracking  Savings Need Improvement. GAO-12-305. Washington, D.C.: February  27, 2012.\nVeterans\u2019 Health Care Budget Estimate: Changes Were Made in  Developing the President\u2019s Budget Request for Fiscal Years 2012 and  2013. GAO-11-622. Washington, D.C.: June 14, 2011.\nVA Health Care: Need for More Transparency in New Resource  Allocation Process and for Written Policies on Monitoring Resources.  GAO-11-426. Washington, D.C.: April 29, 2011.\nVeterans\u2019 Health Care: VA Uses a Projection Model to Develop Most of  Its Health Care Budget Estimate to Inform the President\u2019s Budget  Request. GAO-11-205. Washington, D.C.: January 31, 2011.\nVA Health Care: Challenges in Budget Formulation and Issues  Surrounding the Proposal for Advance Appropriations. GAO-09-664T.  Washington, D.C.: April 29, 2009.\nVA Health Care: Challenges in Budget Formulation and Execution.  GAO-09-459T. Washington, D.C.: March 12, 2009.\nVA Health Care: Long-Term Care Strategic Planning and Budgeting Need  Improvement. GAO-09-145. Washington, D.C.: January 23, 2009.","output":null}
{"id":"gao_GAO-19-674T","pid":"gao_GAO-19-674T_0","input":"\tSelected Agencies Have Scientific Integrity Policies That Are Generally Consistent with Federal Guidance\n\nIn our April 2019 report, we found that all nine of the selected agencies  have policies that are generally consistent with OSTP\u2019s guidance for the  principles of scientific integrity that we reviewed: foundations of scientific  integrity in government and professional development of government  scientists and engineers. OSTP\u2019s guidance describes several  components for each of these principles, which the selected agencies  addressed either (1) through their scientific integrity policies, (2) in related  policies, or (3) through related actions. For example, when addressing the  components of foundations of scientific integrity in government, NOAA\u2019s  scientific integrity policy states that the agency will ensure the free flow of  scientific information online and in other formats, consistent with privacy  and classification standards, and in keeping with other Commerce and  NOAA policies. In another example, NASA\u2019s scientific integrity policy  states that NASA facilitates the free flow of scientific and technological  information among scientists and engineers, between NASA staff and the  scientific and technical community, and between NASA employees and  the public. The policy goes on to cite additional NASA policies on  dissemination of information and public access to data.\nSimilarly, we found that all nine selected agencies addressed all of the  components of the principle professional development of government  scientists and engineers. For example, EPA\u2019s policy states that the  agency encourages publication and presentation of research findings in  peer-reviewed, professional, or scholarly journals and at professional  meetings. NIST\u2019s scientific integrity policy states that the agency supports  scientists\u2019 full participation in professional or scholarly societies,  committees, task forces, and other specialized bodies of professional  societies, with proper legal review and approval. The policy goes on to  cite separate NIST guidance for staff on how to seek approval for  memberships and participation in professional organizations.\n\n\tAll of the Selected Agencies Took Some Action to Achieve Policy Objectives, but Opportunities Exist for Furthering Those Objectives\n\nWe found in our April 2019 report that the nine selected agencies have  taken some actions to help achieve the objectives of their scientific  integrity policies in the three areas we reviewed\u2014communicating  information to staff, providing oversight, and monitoring and evaluating  performance.\nFirst, according to our analysis, seven of the nine selected agencies have  taken some actions to educate and communicate to staff about their  scientific integrity policies, and two have not. Specifically, FE and NIST  have not provided scientific integrity training for staff, according to  officials, or taken other actions to promote their scientific integrity policies  with staff. Under the 2007 America COMPETES Act, civilian agencies  that conduct scientific research are, among other things, required to  widely communicate and readily make accessible to all employees their  scientific integrity policies and procedures. According to FE and NIST  officials, the agencies made their policies available to staff on their  websites and believed no additional actions were needed. By taking  action to educate and communicate their scientific integrity policies to  staff through, for example, regular training, these agencies would have  better assurance that employees have the information, skills, and  competencies they need to help achieve agency scientific integrity  objectives. We recommended the Secretary of Energy and Director of  NIST take action to educate and communicate the agencies\u2019 polices to  staff through, for example, regular training. In DOE\u2019s written comments on  a draft of our report, reproduced in our final report, the department  explained that it will designate a scientific integrity official to be  responsible for leading and coordinating with other offices across DOE to  develop measures to educate and communicate to staff about scientific  integrity policies. In Commerce\u2019s written comments, reproduced in in our  final report, NIST identified ways it plans to provide training to its staff.\nSecond, we found that eight of the nine selected agencies have  designated scientific integrity officials, or the equivalent, who are  responsible for overseeing the agencies\u2019 implementation of their scientific  integrity policies. FE, which follows DOE\u2019s policy, does not have a  scientific integrity official or the equivalent. DOE\u2019s scientific integrity policy  states that the Secretary of Energy will designate a scientific integrity  official for the department. DOE officials explained that the scientific  integrity official has not been designated because the scientific integrity  policy was implemented in January 2017, as the administration was  changing, and that the current Secretary has not yet designated a  scientific integrity official. We recommended the Secretary of Energy  should establish steps and a time frame for designating a scientific  integrity official to oversee the department\u2019s scientific integrity activities. In  DOE\u2019s written comments on a draft of our report, reproduced in our final  report, the department concurred with our recommendation and estimated  that it would address the recommendation by the end of 2019.\nThird, we found in our April 2019 report that four of the nine selected  agencies\u2014ARS, EPA, NASA, and NIH\u2014monitor and evaluate the  performance of their activities under their scientific integrity policies, or  have plans to do so. The remaining five agencies\u2014FAA, FE, NIST,  NOAA, and USGS\u2014have, for different reasons, not done so. Standards  for Internal Control in the Federal Government states that management  should design control activities to achieve objectives and respond to risks,  which may include establishing activities to monitor performance  measures and indicators. By establishing mechanisms to effectively  monitor the implementation of their scientific integrity policies, agencies  may be better positioned to evaluate and measure whether their scientific  integrity policies are achieving their objectives and, where necessary,  improve their implementation.\nWe recommended in our April 2019 report that the five agencies develop  mechanisms to regularly monitor and evaluate implementation of their  scientific integrity policies, including mechanisms to remediate identified  deficiencies and make improvements where necessary. All five agencies  agreed with our recommendation and responded as follows:  In a May 2019 letter from DOT, the department identified several  mechanisms it plans to implement by the end of March 2020.\nIn DOE\u2019s written comments on a draft of our report, the department  said that its scientific integrity official will have the responsibility to  lead in developing procedures to monitor and evaluate  implementation of DOE\u2019s policy.\nIn Commerce\u2019s written comments, NIST stated that, beginning in  fiscal year 2019, the agency will review implementation of its policy at  least annually and make recommendations to the Director of NIST as  to whether any improvements are needed.\nIn Commerce\u2019s written comments, NOAA stated that it will identify  additional metrics for monitoring and evaluating its policy.\nThe Department of the Interior\u2019s written comments stated that the  department plans to implement a biennial scientific integrity survey of  USGS employees, beginning in 2020, to gauge scientific integrity  policy awareness and effectiveness at USGS, among other things.\n\n\tMost of the Selected Agencies Have Procedures for Addressing Alleged Violations of Scientific Integrity Policies, but Two Do Not, Raising Questions about the Consistency of Their Investigations\n\nSeven of the nine selected agencies\u2014ARS, EPA, FAA, NIH, NIST,  NOAA, and USGS\u2014have specific, documented procedures for identifying  and addressing alleged violations of their scientific integrity policies.  Although the details of agencies\u2019 procedures may vary, the procedures  generally include five basic steps: (1) report allegation, (2) screen  allegation, (3) investigate allegation, (4) respond to violation, and (5)  appeal decision (see fig. 1).\nIn contrast, two of the nine selected agencies\u2014FE and NASA\u2014do not  have specific, documented procedures for identifying and addressing  alleged violations of their scientific integrity policies. In March 2009, the  President issued a memorandum on scientific integrity that states that  each agency should have in place procedures to identify and address  instances in which the scientific process or the integrity of scientific and  technological information may be compromised. FE, which follows  DOE\u2019s scientific integrity policy, does not have specific procedures  because DOE has not established any. DOE and FE officials said staff  can report allegations to a supervisor, the whistleblower ombudsperson,  or the U.S. Office of Special Counsel (OSC). Similarly, NASA officials  said employees can report allegations through their chain of command,  such as to a supervisor, for investigation on a case-by-case basis.  However, without documented procedures for identifying and addressing  alleged violations of their scientific integrity policies, DOE and NASA do  not have assurance that all staff have a clear understanding of how to  report allegations and that investigations will be conducted consistently.\nWe recommended the Secretary of Energy and Administrator of NASA  develop documented procedures for identifying and addressing alleged  violations of their scientific integrity policies. In DOE\u2019s written comments  on a draft of our report, the department stated that it will be the  responsibility of the scientific integrity official to lead, and coordinate with  other elements of the department, in developing procedures for identifying  and addressing alleged violations of its scientific integrity policy and  estimated completing actions in June 2020. In written comments from  NASA, the agency stated that it will develop documented procedures for  identifying and addressing alleged violations of its policy and estimated  completion by October 2020.\nChairwoman Stevens and Chairwoman Sherrill, Ranking Member Baird  and Ranking Member Norman, and Members of the Subcommittees, this  concludes my prepared statement. I would be pleased to respond to any  questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this statement, please  contact John Neumann, Managing Director, Science, Technology  Assessment, and Analytics, at (202) 512-6888 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), Wyatt R. Hundrup (Analyst in Charge), Cheryl Harris, and  Douglas G. Hunker. Also contributing to this testimony were Eric Charles  and Ben Shouse. Additional staff who made contributions to our April  2019 report are identified in that report.\nThis 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.","output":null}
{"id":"gao_GAO-19-662T","pid":"gao_GAO-19-662T_0","input":"\tBackground\n\n\t\tFEMA\u2019s Public Assistance Program\n\nFEMA\u2019s Public Assistance program provides grant funding to state,  territorial, local, and tribal governments as well as certain types of private  nonprofit organizations to assist with responding to and recovering from  presidentially-declared major disasters or emergencies. As shown in  figure 3, Public Assistance grant funds are categorized broadly as  \u201cemergency work\u201d or \u201cpermanent work.\u201d Within these broad categories  are separate subcategories. In addition to the emergency work and  permanent work categories, the program includes category Z, which  represents indirect costs, direct administrative costs, and any other  administrative expenses associated with a specific project.\nFEMA\u2019s Public Assistance program also provides grant funding for cost- effective hazard mitigation measures to reduce or eliminate the long-term  risk to people and property from future natural and man-made disasters  and their effects. For example, a community that had a fire station  damaged by a disaster could use Public Assistance grant funding to  repair the facility and incorporate additional measures such as installing  hurricane shutters over the windows to mitigate the potential for future  damage.\nFEMA, the state or territorial government (the recipient), and local or  territorial entities (the subrecipient) work together to develop projects  under the Public Assistance program. After a project has completed  FEMA\u2019s review process and is approved, FEMA obligates funding for the  project by placing money into an account where the recipient has the  authority to draw down\u2014or withdraw\u2014funding to pay the subrecipient for  eligible work upon completion.\n\n\t\tThe Public Assistance Alternative Procedures Program in Puerto Rico and the USVI\n\nThe Sandy Recovery Improvement Act of 2013 authorized the use of  alternative procedures in administering the Public Assistance program,  thereby providing new flexibilities to FEMA, states, territories, and local  governments for debris removal, infrastructure repair, and rebuilding  projects using funds from this program. Unlike in the standard Public  Assistance program where FEMA will fund the actual cost of a project, the  Public Assistance alternative procedures allow awards for permanent  work projects to be made on the basis of fixed-cost estimates to provide  financial incentives for the timely and cost-effective completion of work.\nUnder these procedures, if the actual cost of the project exceeds the  fixed-cost estimate agreed upon by FEMA and the recipient, the recipient  or subrecipient is responsible for the additional costs at the time of the  close-out process. However, if the actual cost of completing eligible work  for a project is below the estimate, the recipient may use the remaining  funds for additional cost-effective hazard mitigation measures to increase  the resilience of public infrastructure. In addition, these funds may also be  used for activities that improve the recipient\u2019s or subrecipient\u2019s future  Public Assistance operations or planning.\nIn October 2017, Puerto Rico requested, and FEMA approved, the use of  the alternative procedures program for all large-project funding for Public  Assistance permanent work projects in categories C through G.  Although FEMA had approved alternative procedure grants in 30 states  as of April 2018, in these cases, alternative procedures were used on a  project-by-project basis. Puerto Rico\u2019s recovery from the 2017 hurricanes  is the first recovery to use alternative procedures for all large permanent  work projects. In addition, in July 2018, FEMA approved a request from  the Governor of the USVI to transition to using the Public Assistance  alternative procedures program for permanent work in the territory. Unlike  in Puerto Rico, the USVI may pursue the alternative procedures on a  project-by-project basis.\n\n\tFEMA Had Obligated $5.6 Billion and $1.8 Billion in Public Assistance Grant Funding in Puerto Rico and the USVI, Respectively, as of April 2019\n\nAs of April 2019, FEMA had obligated a total of about $7.4 billion in grant  funds for Public Assistance projects in both Puerto Rico and the USVI.  Specifically, as shown in figure 4, FEMA obligated approximately $5.6  billion for 1,264 Public Assistance projects in Puerto Rico, including  approximately $5.1 billion (90 percent) for emergency work (categories A  and B) and $377.7 million (7 percent) for permanent work in categories C  through G).\nPuerto Rico had expended approximately $3.5 billion\u2014about 61 percent  of total Public Assistance grant obligations in Puerto Rico\u2014as of April  2019. Ninety-six percent of the expended amount went toward  emergency work projects in categories A and B while just over one  percent went toward permanent work projects. The majority of FEMA\u2019s  obligations and the funding Puerto Rico expended as of April 2019 are for  emergency work because these projects began soon after the disasters  struck and focused on debris removal and providing assistance to  address immediate threats to life and property. In contrast, permanent  work projects take time to identify, develop, and ultimately complete as  they represent the longer-term repair and restoration of public  infrastructure.\nIn the USVI, FEMA had obligated approximately $1.8 billion for 583 Public  Assistance projects across the territory, as of April 2019. Similar to Public  Assistance grant funding in Puerto Rico, the majority of funding FEMA  obligated and the USVI expended was in emergency work categories A  and B. Specifically, FEMA obligated approximately $1.1 billion (63  percent) for emergency work (categories A and B) and $587.3 million (33  percent) for permanent work (categories C through G) in the territory (see  fig. 5).\nOf the $1.8 billion FEMA obligated for Public Assistance projects, the  USVI had expended approximately $982.4 million as of April 2019.  Specifically, the USVI had expended about $808.1 million (82 percent) for  emergency work projects in categories A and B and $163.1 million (17  percent) for permanent work projects in categories C through G.\nEmergency work. As of April 2019, FEMA had obligated a total of  approximately $6.2 billion for emergency work projects in Puerto Rico and  the USVI\u2014including about $5.1 billion in Puerto Rico and $1.1 billion in  the USVI. These projects focused on debris removal activities and  providing assistance to address immediate threats to life and property.  For example, as of April 2019, FEMA had obligated $138.9 million for  projects focused on debris removal activities in the USVI under category  A. This included $45.9 million to the USVI Department of Public Works for  USVI-wide debris removal efforts and $39.1 million to the USVI Water  and Power Authority for these activities in St. Croix (see fig. 6).\nIn another example, FEMA obligated more than $140.0 million to the  Puerto Rico Aqueducts and Sewer Authority under category B to fund  emergency protective measures, including using back-up generators to  supply water to the island after Hurricane Maria, among other things.\nFurther, as of April 2019, FEMA had obligated $1.1 billion in Puerto Rico  and $278 million in the USVI to fund the Sheltering and Temporary  Essential Power pilot program. This program, which is implemented as a  subprogram under Public Assistance program category B, is intended to  provide essential repairs or restore power to private residences to allow  affected individuals to return or remain in their homes, thereby reducing  the demand for other shelter options. We are continuing to assess this  program as part of our ongoing work on recovery efforts in the USVI.\nPermanent work. As of April 2019, FEMA had obligated approximately  $965.0 million for permanent work projects in Puerto Rico and the USVI\u2014 including about $377.7 million in Puerto Rico and $587.3 million in the  USVI. These projects focused on the restoration of disaster-damaged  infrastructure or systems. For example, under category C, FEMA  obligated $137.6 million for projects in Puerto Rico focused on the  permanent repair of roads and bridges, such as the severely damaged  road shown in figure 7 below.\nIn addition, under category E, FEMA obligated $39.2 million and $67.7  million for projects in Puerto Rico and the USVI, respectively, focused on  repairing and rebuilding damaged public buildings and equipment, such  as the schools shown in figure 8 below.\nFurther, under category F, FEMA obligated $504.9 million for projects in  the USVI to repair damaged utilities. Specifically, FEMA obligated $481.8  million\u2014or 95 percent of this total\u2014through the standard Public  Assistance program for projects focused on territory-wide permanent  electrical distribution system repairs. This includes replacing damaged  wooden utility poles with more resilient composite fiberglass poles that  can withstand 200 mile per hour winds as well as power transmission  lines and transformers (see fig. 9).\n\n\tPuerto Rico and the USVI Have Established Recovery Offices to Oversee and Monitor Recovery Efforts\n\nAs the recipients of federal disaster funding, Puerto Rico and the USVI  are responsible for monitoring and overseeing the Public Assistance  program to ensure it is implemented in compliance with applicable laws,  regulations, and requirements as well as FEMA policies and guidance. To  address these responsibilities, Puerto Rico and the USVI established  recovery offices to manage recovery activities and funding, including  through the Public Assistance program.\n\n\t\tPuerto Rico\u2019s Central Office for Recovery, Reconstruction, and Resilience Has Developed Internal Controls to Oversee Recovery Funds\n\nIn March 2019, we reported that Puerto Rico, in accordance with  Amendment 5 to the President\u2019s disaster declaration, established the  Central Office for Recovery, Reconstruction, and Resilience (COR3) to  oversee federal recovery funds. We also reported that COR3 was  developing an internal controls plan to help ensure better management  and accountability of the funds. According to FEMA officials, FEMA  instituted a manual reimbursement process due to Puerto Rico\u2019s financial  situation, weaknesses in internal controls, and the large amount of  recovery funds, among other things, to mitigate risk and help ensure  financial accountability. However, from our ongoing work on Puerto Rico\u2019s  disaster recovery efforts, we have learned that, on April 1, 2019, FEMA  removed the manual reimbursement process and began a transition to  allow the central recovery office to take responsibility for the review and  reimbursement approval of federal recovery funds.\nWe have also learned from our ongoing work that, in March 2019, COR3  released the Disaster Recovery Federal Funds Management Guide.  Among other things, the guide outlines COR3\u2019s roles and responsibilities  and the internal controls COR3 put in place to oversee the recovery. For  example, COR3 will identify, procure, and administer all federal, territorial,  and private resources available to Puerto Rico related to recovery. In  addition, it will provide oversight of subrecipients using risk-based  monitoring, offer technical assistance, and advise Puerto Rico\u2019s  governmental agencies and municipalities regarding any matter related to  recovery. COR3 continues to update its online transparency portal  intended to provide a breakdown of FEMA Public Assistance and other  federal funding obligated for disaster recovery in Puerto Rico.\n\n\t\tThe USVI Established the Office of Disaster Recovery to Monitor and Oversee Recovery Efforts\n\nAccording to our preliminary observations, in February 2019, the USVI  established the new Office of Disaster Recovery. This office serves as the  primary territorial agency responsible for overseeing all disaster recovery  efforts and funding in the territory, and coordinates across all USVI  governmental agencies and other pertinent entities. According to USVI officials, following the 2017 hurricanes, key USVI agencies did not have  enough employees with the knowledge and expertise necessary to staff  recovery-related positions and effectively manage the implementation of  recovery efforts. To address this challenge in the short-term, the USVI  government hired two contractors in December 2017\u2014Witt O\u2019Brien\u2019s,  LLC and Ernst & Young Puerto Rico, LLC\u2014to assist the territory in  planning, developing, implementing, and overseeing Public Assistance  program projects, among other responsibilities. The Director of the Office  of Disaster Recovery told us that while contractor personnel had been  valuable in augmenting the USVI\u2019s management capacity in the short  term, the territory\u2019s longer-term vision included the establishment of the  Office of Disaster Recovery to centrally manage all aspects of federal  recovery in the territory.\nAmong other things, the Office of Disaster Recovery is responsible for  taking on the USVI\u2019s monitoring and oversight responsibilities for the  Public Assistance program in the long term. This includes tracking and  reporting on the progress of projects and overseeing reimbursement  requests for completed work to ensure compliance with applicable laws  and FEMA policies. As of March 2019, the Director of the Office of  Disaster Recovery told us the priority is to quickly hire and train qualified  individuals to staff the new agency. FEMA officials in the USVI stated that  the establishment of the Office of Disaster Recovery and the USVI\u2019s  ongoing efforts to hire local residents into recovery-related positions  represented a positive step forward in increasing the territory\u2019s capacity to  oversee recovery efforts. We will continue to review the monitoring and  oversight of recovery efforts in Puerto Rico and the USVI in our ongoing  work.\n\n\tPublic Assistance Challenges Remain in Puerto Rico and USVI, However FEMA has Taken Some Actions to Improve Program Implementation\n\nOur prior and ongoing work highlight the challenges with implementing  the Public Assistance program\u2014and the alternative procedures\u2014in  Puerto Rico and the USVI. In particular, our prior and ongoing work have  identified challenges related to (1) the clarity of FEMA\u2019s guidance for the  Public Assistance program, (2) the time and resources needed to  transition to FEMA\u2019s new Public Assistance program delivery model in  Puerto Rico, (3) the implementation of flexibilities provided by the  Bipartisan Budget Act of 2018, and (4) developing fixed-cost estimates.  FEMA has taken some actions, including issuing additional guidance and  developing specific training, among other things, to improve Public  Assistance implementation in Puerto Rico and the USVI. However, it is  too soon to assess their effectiveness in addressing these issues.\nClarity of Guidance. In March 2019, we reported that officials from  FEMA, COR3, and municipalities said they experienced initial challenges  with the recovery process, including concerns about lack of experience  and knowledge of the alternative procedures; and concerns about  missing, incomplete, or conflicting guidance from FEMA on the alternative  procedures. In addition, in our June 2019 testimony statement we  continued to report on these challenges and preliminary observations  from our ongoing work indicate that these challenges continue. For  example, officials from Puerto Rico\u2019s government agencies told us they  did not feel they had sufficient guidance on the FEMA Public Assistance  program and where they did, written and verbal FEMA guidance was  inconsistent or conflicting. For instance, officials from one agency  expressed their desire for more FEMA guidance communicated in writing  as FEMA officials would frequently interpret existing guidance differently.  Similarly, officials from two agencies described situations where they had  initially been directed to follow one interpretation of a policy, only to be  directed to follow a different, conflicting interpretation in the subsequent  months. Puerto Rico agency officials also stated that the lack of sufficient  instruction led to a \u201cback and forth\u201d with FEMA for clarifications, which led  to delays in the phases of project development. For example, officials  from one Puerto Rico government agency stated that conflicting verbal  instructions from several FEMA officials contributed to delays in opening  the bidding process for recovery-related contracts. FEMA officials in  Puerto Rico stated that the agency has developed specific guidance for  disaster recovery in Puerto Rico and that there are various ways, such as  in-person meetings, where officials from Puerto Rico can obtain  clarification. FEMA officials also reported that they developed additional  training for new FEMA employees. We are continuing to examine this  issue as part of our ongoing review of Puerto Rico\u2019s recovery.\nFEMA\u2019s new delivery model in Puerto Rico. In May 2019, FEMA\u2019s  Federal Disaster Recovery Coordinator for Puerto Rico announced that  FEMA was transitioning to using the new Public Assistance program  delivery model in Puerto Rico beginning on June 3, 2019. Among other  things, the implementation of the new delivery model establishes a new  Consolidated Resource Center in Puerto Rico to support grant  development for disaster recovery across all recovery sectors and  geographic branches. Following the hurricanes, FEMA implemented a  program delivery model developed specifically for Puerto Rico which  included, among other things, a sector-based approach which  coordinated recovery resources across the federal interagency, private  sector, and nongovernmental organizations to identify and complete  proposed work. According to FEMA officials, the decision to transition  from the initial delivery model to the new delivery model in Puerto Rico  was due to improvements made since its nationwide deployment in 2017.  In response, COR3 officials raised concerns about the scope of the  changes and potential challenges with the amount of time and resources  needed to transition to the new delivery model.\nThe Bipartisan Budget Act of 2018. We reported in June 2019 that in  both Puerto Rico and the USVI, FEMA and local officials have reported  challenges with the implementation of the flexibilities authorized by  section 20601 of the Bipartisan Budget Act. This section of the Act  allows for the provision of assistance under the Public Assistance  alternative procedures to restore disaster-damaged facilities or systems  that provide critical services\u2014such as medical and educational facilities\u2014 to an industry standard without regard to pre-disaster condition. Officials from Puerto Rico\u2019s central government stated that they disagreed with  FEMA\u2019s interpretation of the types of damages covered by section 20601  of the Bipartisan Budget Act of 2018. In response, FEMA officials in  Puerto Rico stated they held several briefings with Puerto Rico\u2019s central  recovery office to explain FEMA\u2019s interpretation of the section. In  addition, FEMA officials in the USVI told us that initially, they had difficulty  obtaining clarification from FEMA headquarters regarding how to  implement key components of section 20601 of the Act. Further, USVI  officials stated that at times, the appropriate process for implementing  components of the Act was not clear and that ensuring program  participants understood its key components was difficult. However, FEMA  officials in the USVI stated that they continue to move forward with  developing alternative procedures projects. USVI officials also told us that  FEMA had been responsive and helpful in identifying its options for using  the new flexibilities the Act provides.\nDeveloping Fixed-Cost Estimates. Preliminary observations from our  ongoing work indicate that as of May 2019, FEMA had obligated funding  for four alternative procedures program projects in Puerto Rico and two  projects in the USVI. FEMA officials in Puerto Rico and the USVI stated  that the ongoing development of a \u201ccost factor\u201d for use in the fixed-cost  estimating process has slowed the pace of FEMA obligations for  permanent work projects. Specifically, these factors are intended to  ensure that the costs associated with implementing projects in Puerto  Rico and the USVI are sufficiently captured when developing the fixed- cost estimates for alternative procedures projects. Since incorporating the  cost factor into the fixed-cost estimating process will increase the amount  of funding obligated for any given permanent work project, FEMA officials  explained that Puerto Rico and the USVI have an incentive to delay the  obligation of individual projects until this factor is finalized. For example,  FEMA officials in the USVI told us in May 2019 that obligations for  permanent work projects in the territory were mostly on hold until the  USVI-specific cost factor was finalized. As of June 2019, the cost factors  for use in both Puerto Rico and the USVI had not yet been finalized.\nAccording to FEMA guidance, the Puerto Rico-specific cost factor is being  developed by a third-party center of excellence comprising personnel  selected by FEMA and Puerto Rico, through COR3. In March 2019, we  reported that while FEMA had identified and chosen personnel, COR3  had not yet finalized its hiring of personnel to staff the center of  excellence, which resulted in delaying the cost estimation process.  Through our ongoing work we learned that, as of June 2019, COR3 had  identified and hired personnel to staff the center; however, FEMA and  COR3 have not come to agreement on a cost estimation approach.  Further, according to FEMA officials, no timeline has been established for  the completion of the center of excellence\u2019s standard operating  procedures for developing fixed-cost estimates for permanent work  projects in Puerto Rico.\nIn addition, according to FEMA officials, the USVI-specific factor is being  developed by an independent contractor. FEMA officials told us that  territorial officials disagreed with the initial cost factors this contractor  proposed and contended the factors were insufficient in accurately  capturing the unique circumstances that influence construction costs in  the territory, such as the limited availability of local resources and the  need to import materials and labor. As of June 2019, these officials told  us the contractor was developing a third and final cost factor for potential  incorporation into the fixed-cost estimation process in the USVI. Despite  these delays, FEMA officials in the USVI stated that they continue to work  with territorial officials to develop alternative procedures projects in the  territory. They added that once the cost factor is finalized and  incorporated into FEMA\u2019s fixed-cost estimating process, FEMA and the  USVI will be well positioned to quickly finalize these projects and obligate  funding. However, we reported in June 2019 that the territory plans to  take a cautious approach in pursuing permanent work projects using the  Public Assistance alternative procedures program. Specifically, USVI  officials we interviewed told us that developing fixed-cost estimates for  alternative procedures projects that accurately incorporate the future  impact of inflation and increases in materials and labor costs for certain  projects was difficult. Further, these officials stated that since the territory  is financially responsible for any costs that exceed these fixed-cost  estimates, the USVI plans to pursue alternative procedures projects that  do not include high levels of complexity or uncertainty to reduce the risk  of cost overruns, especially given its already difficult financial situation.\nAs established in FEMA guidance, Puerto Rico\u2019s deadline for finalizing  fixed-cost estimates for permanent work projects using the alternative  procedures\u2014and the Bipartisan Budget Act, as applicable\u2014is October  2019. Since Puerto Rico must use the alternative procedures for all  large permanent work, all fixed-cost estimates for Public Assistance  program permanent work projects in Puerto Rico must be finalized by this  date, or, according to FEMA officials, Puerto Rico must request that  FEMA extend this deadline on a project-by-project basis. In contrast, the  USVI has the flexibility to pursue either the alternative procedures or the  standard procedures on a project-by-project basis. As the USVI\u2019s  deadline for finalizing these projects is in March 2020, it is too early  gauge the extent to which the alternative procedures will play a role in the  USVI\u2019s long-term recovery strategy.\nWe will continue to evaluate these identified challenges and any efforts to  address them, as well as other aspects of recovery efforts in the USVI  and Puerto Rico, and plan to report our findings in late 2019 and early  2020, respectively.\nThank you, Chairman Payne, Ranking Member King, and Members of the  Subcommittee. This concludes my prepared statement. I would be happy  to respond to any question you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff has any questions concerning this testimony, please  contact Christopher 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. Key contributors  to this statement were Joel Aldape (Assistant Director), Bryan Bourgault,  Aaron Gluck, Taylor Hadfield, Brian Lipman, and Amanda Prichard. In  addition, Eric Hauswirth, Susan Hsu, Tracey King, Taylor Matheson,  Amanda Miller, Heidi Nielson, and Kevin Reeves made contributions to  this statement. Key contributors for the previous work on which this  statement is based are listed in each product.\n\nAppendix I: GAO Products Previously Issued on Emergency Management\n\n2017 Disaster Relief Oversight: Strategy Needed to Ensure Agencies\u2019  Internal Control Plans Provide Sufficient Information. GAO-19-479  (Washington, D.C.: June 28, 2019).\nEmergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight Imperative for Further Improvements,  GAO-19-617T (Washington, D.C.: June 25, 2019).\nEmergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight the Imperative for Further Improvements,  GAO-19-594T (Washington, D.C.: June 12, 2019).\nDisaster Assistance: FEMA Action Needed to Better Support Individuals  Who Are Older or Have Disabilities. GAO-19-318 (Washington, D.C.: May  14, 2019).\nDisaster Contracting: Actions Needed to Improve the Use of Post- Disaster Contracts to Support Response and Recovery. GAO-19-281  (Washington, D.C.: April 24, 2019).  2017 Hurricane Season: Federal Support for Electricity Grid Restoration  in the U.S. Virgin Islands and Puerto Rico. GAO-19-296 (Washington,  D.C.: April 18, 2019).\nFEMA Grants Modernization: Improvements Needed to Strengthen  Program Management and Cybersecurity. GAO-19-164 (Washington,  D.C.: April 9, 2019).\nDisaster Recovery: Better Monitoring of Block Grant Funds Is Needed.  GAO-19-232 (Washington, D.C.: March 25, 2019).\nPuerto Rico Hurricanes: Status of FEMA Funding, Oversight, and  Recovery Challenges. GAO-19-256 (Washington, D.C.: March 14, 2019).\nHuracanes de Puerto Rico: Estado de Financiamiento de FEMA,  Supervisi\u00f3n y Desaf\u00edos de Recuperaci\u00f3n. GAO-19-331 (Washington,  D.C.: March 14, 2019).\nHigh-Risk Series: Substantial Efforts Needed to Achieve Greater  Progress on High-Risk Areas. GAO-19-157SP (Washington, D.C.: March  6, 2019).\nU.S. Virgin Islands Recovery: Status of FEMA Public Assistance Funding  and Implementation. GAO-19-253 (Washington, D.C.: February 25,  2019).  2017 Disaster Contracting: Action Needed to Better Ensure More  Effective Use and Management of Advance Contracts. GAO-19-93  (Washington, D.C.: December 6, 2018).\nContinuity of Operations: Actions Needed to Strengthen FEMA\u2019s  Oversight and Coordination of Executive Branch Readiness.  GAO-19-18SU (Washington, D.C.: November 26, 2018).\nHomeland Security Grant Program: Additional Actions Could Further  Enhance FEMA\u2019s Risk-Based Grant Assessment Model. GAO-18-354  (Washington, D.C.: September 6, 2018).  2017 Hurricanes and Wildfires: Initial Observations on the Federal  Response and Key Recovery Challenges. GAO-18-472 (Washington,  D.C.: September 4, 2018).\nFederal Disaster Assistance: Individual Assistance Requests Often  Granted but FEMA Could Better Document Factors Considered.  GAO-18-366 (Washington, D.C.: May 31, 2018).  2017 Disaster Contracting: Observations on Federal Contracting for  Response and Recovery Efforts. GAO-18-335 (Washington, D.C.:  February 28, 2018).\nDisaster Recovery: Additional Actions Would Improve Data Quality and  Timeliness of FEMA\u2019s Public Assistance Appeals Processing.  GAO-18-143 (Washington, D.C.: December 15, 2017).\nDisaster Assistance: Opportunities to Enhance Implementation of the  Redesigned Public Assistance Grant Program. GAO-18-30 (Washington,  D.C.: November 8, 2017).\nClimate Change: Information on Potential Economic Effects Could Help  Guide Federal Efforts to Reduce Fiscal Exposure. GAO-17-720  (Washington, D.C.: September 28, 2017).\nFederal 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).\nDisaster Recovery: FEMA Needs to Assess Its Effectiveness in  Implementing the National Disaster Recovery Framework. GAO-16-476  (Washington, D.C.: May 26, 2016).\nDisaster Response: FEMA Has Made Progress Implementing Key  Programs, but Opportunities for Improvement Exist. GAO-16-87  (Washington, D.C.: February 5, 2016).\nHurricane Sandy: An Investment Strategy Could Help the Federal  Government Enhance National Resilience for Future Disasters.  GAO-15-515 (Washington, D.C.: July 30, 2015).\nBudgeting for Disasters: Approaches to Budgeting for Disasters in  Selected States. GAO-15-424 (Washington, D.C.: March 26, 2015).\nHigh-Risk Series: An Update. GAO-15-290 (Washington, D.C.: February  11, 2015).\nEmergency Preparedness: Opportunities Exist to Strengthen Interagency  Assessments and Accountability for Closing Capability Gaps. GAO-15-20  (Washington, D.C.: December 4, 2014).\nFiscal Exposures: Improving Cost Recognition in the Federal Budget.  GAO-14-28 (Washington, D.C.: October 29, 2013).\nFederal Disaster Assistance: Improved Criteria Needed to Assess a  Jurisdiction\u2019s Capability to Respond and Recover on Its Own.  GAO-12-838 (Washington, D.C.: September 12, 2012).\nOpportunities to Reduce Potential Duplication in Government Programs,  Save Tax Dollars, and Enhance Revenue. GAO-11-318SP (Washington,  D.C.: March 1, 2011).\n\nAppendix II: Ongoing GAO Reviews on Emergency Management\n\n1.  Review of U.S. Virgin Islands recovery planning and progress;  2.  Puerto Rico disaster recovery planning and progress;  3.  2017 wildfire response and recovery;  4.  Puerto Rico electricity grid recovery after the 2017 hurricane season;  5.  Mass care sheltering and feeding challenges during the 2017  6.  Department of Transportation highway and transit emergency relief  7.  Drinking water and wastewater utility resilience;  8.  Review of disaster death count information in selected states and  9.  Department of Health and Human Services disaster response efforts;  10. Disaster and climate change impacts on Superfund sites;  11. FEMA Public Assistance program fraud risk management efforts;  12. Wildland fire fuel reduction efforts;  13. Preparedness challenges and lessons learned from the 2017  14. FEMA workforce management and challenges;  15. Small Business Administration response to 2017 disasters;  16. Development of the GAO disaster resilience framework;  17. FEMA Individuals and Households Program operations and  18. National Flood Insurance Program post-flood enforcement;  19. Emergency alerting capabilities and progress;  20. National Flood Insurance Program buyouts and property acquisitions;  21. Economic costs of large-scale natural disasters and impacts on  22. Community Development Block Grants \u2013 disaster recovery; and  23. Disaster Housing Assistance Program.\nThis 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.","output":null}
{"id":"gao_GAO-20-104","pid":"gao_GAO-20-104_0","input":"\tBackground Utilities Privatization Authorities\n\nThe military departments have been privatizing utility systems at military  installations since 1988. In 1997, Congress provided the military  departments permanent statutory authority, codified at 10 U.S.C. \u00a7 2688,  as amended, to convey, or privatize, utility systems under military  jurisdiction, such as those on military installations. The authority defines  a utility system as a system for the generation and supply of electric  power; the treatment or supply of water; the collection or treatment of  wastewater; and the supply of natural gas, among others. When  privatizing a utility, the Secretary of a military department makes a  decision to convey a system to a private or public entity, and then a utility  services contract is awarded. Figure 1 shows examples of common utility  systems found on military installations.\nA utility system includes the associated equipment, fixtures, and  structures, as well as easements and rights-of-way. 10 U.S.C. \u00a7 2688  states that the Secretary of a military department may convey a utility  system, or part of a system, to a municipal, private, regional, district, or  cooperative utility company or other entity. DOD\u2019s policy states that the  military departments may maintain ownership of utility systems and  decide not to privatize them for security reasons, or when privatization is  determined to be uneconomical. According to officials, once DOD  conveys a utility system and awards a contract for utility services, the  contractor is responsible for replacing, repairing, and maintaining the  associated equipment and structures as needed. Figure 2 provides  photos of the before and after condition of a privatized utility system  component at Fort Riley, Kansas where the electrical system was  modernized to replace analog monitoring equipment with digital  equipment.\n\n\tUtilities Privatization Program Management\n\nThe Office of the ASD(Sustainment), within the Office of the Secretary of  Defense, develops policies for and oversees DOD\u2019s utilities privatization  program. There are two main sources of DOD policy for utilities  privatization\u2014a DOD instruction on energy management at the  installation level and a supplemental guidance specific to utilities  privatization. During the period covered by our review, the instruction  directed 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. In  February 2019, DOD released supplemental guidance, which, among  other things, superseded the relevant portions of the instruction (and  cancelled prior supplemental guidance), and did not include a preference  for privatization or the direction to complete privatization decisions on all  covered utility systems. Instead, utilities privatization may now be  performed at the discretion of the military departments.\nThe 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. Once a military  department begins to consider an installation for privatization, the  installation command assists and facilitates in carrying out the  privatization effort. According to officials, DLA Energy is the contracting  agent for the majority of privatized utility services contracts awarded on  behalf of the Army since 2004 and for the Air Force since 2008. Navy  officials noted that NAVFAC is the contracting agent and administrator for  the Navy and Marine Corps privatized utility services contracts.\nAs of December 2019, the military departments have privatized roughly a  quarter of the utility systems on military installations (614 of the 2,590  systems); roughly a third of the systems were already owned by entities  other than the federal government (733 of 2,590) (see table 2).\nAs reflected in the table, the military departments have identified 580  utility systems that are available for future utilities privatization. As of  September 2018, DLA Energy reported that it had 18 ongoing utilities  privatization efforts\u201412 for Army and six for Air Force. Also, the Navy  noted that it has three ongoing utilities privatization efforts. According to  Air Force and Navy officials, their departments took a \u201cstrategic pause\u201d on  new utilities privatization efforts in 2015 to determine if privatization is the  best option for recapitalizing their deteriorating utility systems. The Navy  and Air Force resumed new utilities privatization efforts in fiscal year 2017  and fiscal year 2019, respectively. DLA Energy will act as contracting  agent for the Navy on a pilot basis, as well as continuing to do so for the  Army and Air Force for future contract awards.\n\n\tDOD\u2019s Contracting Process\n\nThe process for privatizing a utility system culminates in two actions: the  award of a utility services contract and conveyance of the physical assets  of the utility from the military department to the awardee. Once the  military department has decided to consider privatizing a utility system at  an installation, the department initiates efforts to award one or more utility  services contracts. This contracting process is governed by federal  statutes, the Federal Acquisition Regulation (FAR), the DOD and military  department supplements to the FAR, and military department and agency  guidance. For example, DOD is generally required to award utility  services contracts using competitive procedures, but can award contracts  through other than competitive procedures when authorized by an  exception, which we refer to as non-competitive. Figure 3 depicts the five  phases of the pre-award contracting process identified by GAO.\nAcquisition Planning: Acquisition planning includes developing  requirements, preparing cost estimates, and conducting market  research to determine market interest, among other activities. For  utilities privatization efforts, requirements also include the inventory of  equipment\u2014such as pipes, valves, and wires\u2014and structures  associated with the utility system. For privatized utility services  contracts this phase begins with the decision to consider the  privatization of utilities at a given installation and generally ends with  the approval of an acquisition strategy.\nSolicitation: Military departments may 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 the factors  used to evaluate proposals and their relative importance. Those who  wish to respond must submit their proposal to the contracting 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, although the solicitation can  be amended later and proposals revised.\nInitial Evaluation: Proposal evaluation is an assessment of the  proposals based on stated evaluation factors and the offerors\u2019 ability  to perform the prospective work 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. We consider the initial  evaluation phase to begin when potential offerors submit initial  proposals and end once government contracting personnel receive  approval to enter into negotiations or discussions.\nDiscussion\/Negotiation: Negotiations are exchanges, in either a  competitive or non-competitive environment, between the government  and offerors that are undertaken with the intent of allowing the offerors  to revise proposals and obtaining the best value for the government.  Negotiations allow, among other things, the offerors to address any  government concerns with the proposals. We consider this phase to  begin when the contracting officer receives approval to enter into  negotiation and end when contracting personnel receive approval to  award the contract.\nContract Award: We consider the contract award phase to begin  when the approval to award the contract is given and to end when the  contracting officer signs the contract. In utilities privatization, as a part  of the contract award phase, the Secretary of the military department  makes a decision to convey the utility systems after the awardee has  been selected.\nWhile the utilities privatization process must comply with relevant statutes  and regulations, it has certain unique attributes. According to DLA  Energy and military department officials, installations must conduct a  thorough inventory of the physical assets associated with the utility system (e.g., linear feet of water pipes and location, number and location  of gas valves, and the number and location of lift station pumps) as well  as the system\u2019s workload data to inform the requirements document. This  is due to the fact that ownership of these physical assets will convey\u2014 i.e., be legally transferred\u2014to the contractor after contract award.  Conveyance from the military installation to a regulated public sector  utility, such as a municipal water and wastewater authority, requires  additional approval from the state\u2019s utility regulatory commission. Finally,  privatized utility services contracts are generally long-term, up to 50 years  in some cases. According to DLA Energy and military department  officials, these factors affect the consideration of requirements and  structure of the utilities privatization process in a way not normally found  in standard contracts and can affect the time required for discussions and  negotiations.\n\n\tLeading Practices for Lessons Learned\n\nThe use of lessons learned is a principal component of an organizational  culture committed to continuous improvement. Through lessons learned,  DOD can continuously look for ways to make improvements to the utilities  privatization program to shorten the time to award and enhance  effectiveness and efficiency. Collecting and sharing lessons learned serve  to communicate knowledge more effectively and to ensure that beneficial  information is factored into planning, work processes, and activities. This  process also provide a powerful method of sharing ideas for improving  work processes, facility or equipment design and operation, quality, and  cost-effectiveness. Leading practices of a lessons learned process  identified by GAO and others include collecting, analyzing, validating,  saving or archiving, and disseminating and sharing information and  knowledge gained on positive and negative experiences. Figure 4 shows  this process.\n\n\tPrior GAO Work\n\nSince 2005, we have issued four reports that assessed various aspects of  DOD\u2019s utilities privatization efforts:  In May 2005, we identified several management weaknesses in  DOD\u2019s implementation of the utilities privatization program. For  example, we identified a number of concerns, such as the reliability of  the economic analyses associated with privatization decisions and the  adequacy of contract oversight. We made eight recommendations to  help ensure the reliability of economic analyses and improve the  utilities privatization guidance and procedures, among other things.  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.\nIn September 2006, we reported that DOD\u2019s progress in implementing  the utilities privatization program had been slower than expected and  management concerns remained. For example, the targeted time  frame for program implementation was delayed by 6 years and  concerns remained about the reliability of economic analyses used to  support privatization decisions. We made seven recommendations to  improve DOD\u2019s management of utilities privatization. DOD generally  concurred with and implemented six of these recommendations.\nIn July 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 industrial control systems. We made four  recommendations to clarify utility disruption reporting guidance,  improve data validation steps, and address challenges to  cybersecurity industrial control systems. DOD concurred or partially  concurred with all but one recommendation and implemented three  recommendations.\nIn September 2018, we reported that DOD lacked guidance to  develop performance metrics and implement cybersecurity  requirements for privatized utility services contracts. We made two  recommendations to provide guidance for development of metrics to  track utilities privatization contract performance, and what constitutes  covered defense information as it related to utility services contracts.  DOD concurred with and implemented both recommendations.\nConcerns about the length of time to award contracts are not limited to  utilities privatization. For example, in July 2018, we reported that although  DOD proposed reducing the time it takes to award weapon systems  contracts, the department has limited understanding of how long it  currently took and therefore lacked a baseline to measure success. We  also found that, according to contracting officials, factors such as the  quality of proposals, prospective offeror responsiveness to agency  request for additional information, and complexity of the technical requirements can add or reduce the time required for evaluation of  proposals. We recommended that, to assess time frames for awarding  contracts, DOD should develop a strategy to determine what information  it should collect and how to use that information. DOD concurred and  implemented the recommendation.\n\nTime to Award Privatized Utility Services Contracts Is Lengthy and Affected by a Number of Factors\n\nThe time to complete the utilities privatization pre-award process  generally took an average of 4 years from issuing the solicitation to  awarding a contract for utility services for the contracts we assessed.  Utilities privatization officials acknowledged that the process is lengthy,  but DOD does not maintain complete data on key steps in the process,  including when the process to consider privatization of a utility system  began and the time needed to conduct acquisition planning.  Consequently, it is not possible to determine the entire time to complete  privatization of a utility system. In addition, the time to complete a specific  utilities privatization effort may be affected by a number of factors. These  factors can include changes to internal or external requirements, the  technical complexity of the individual effort, the continuity of personnel  involved in the effort, and command support for privatization.\n\n\tTime to Complete Utilities Privatization Is Lengthy and Data for Each Phase of the Process Is Not Available\n\nThe 21 new contracts for privatized utility services awarded from fiscal  years 2016 through 2018 generally took an average of 4 years from the  time the DOD component issued a solicitation to when the contract was  awarded. Utilities privatization officials acknowledged that the process is  lengthy. They stated that it is due, in part, to the long-term nature of the  contracts\u2014that can be up to 50 years\u2014and the complexity of the  contracts. The entire pre-award contracting process could be longer, as  we found that, with the exception of the one Navy-awarded contract we  reviewed, DOD does not maintain complete data for every phase of the  process. The data DOD does not maintain includes key events in the  acquisition planning phase, specifically, when the military departments  began considering privatizing a specific utility and when the requirements  packages\u2014a complete inventory of the associated infrastructure, such as  pipes, wires, and valves\u2014were available to use in the solicitation. Table 3  presents the available information on the average time to complete the  five phases of the pre-award contracting process identified by GAO for  the contracts we assessed.\nAs indicated in table 3, even after excluding the time needed to conduct  acquisition planning, there is wide variation in the average time taken  from when contracting officials issued the solicitation to when they  awarded the privatized utility services contracts. For example, NAVFAC  took more than 92 months\u2014or more than 7 years\u2014to award its contract  to privatize the Naval Air Station Key West wastewater system. The total  time required to award the contract included a 30-month period during  which the privatization effort was paused to evaluate alternative paths to  meet new Florida wastewater regulations. Navy officials stated that our  timeline should not include the 30-month period because the pause did  allow any additional work to be accomplished to prepare for contract  award. After determining that privatizing the utility system remained the  most effective approach, however, the Navy resumed evaluating revised  proposals that had been received in response to the amended original  solicitation. DLA Energy took, on average, about 45 months\u2014or nearly 4  years\u2014to privatize utility systems and make awards for the 19 contracts it  was responsible for. In contrast, the Air National Guard awarded a non- competitive contract to privatize the wastewater system at Truax Field in  Wisconsin to a local utility provider in about 6 months. However,  according to Air National Guard officials, the local utility provider already  maintained the infrastructure for the installation and had previously  conducted an assessment of the installation wastewater system used to  finalize the privatization requirements. While Air National Guard officials  could not provide a date as to when they began to consider utilities  privatization, they stated that they spent more than 70 months in  acquisition planning before issuing the solicitation due, in part, to  unfamiliarity with the utilities privatization process.\nWhile no provision of the regulations or policies governing utilities  privatization that we reviewed require DOD contracting activities to collect  data on the time to complete each phase of the pre-award process, since  2014, DLA Energy officials have attempted to maintain such data for all  the contracts for which they were the contracting agent. However, DLA  Energy did not maintain data for the completion of milestones within the  acquisition planning phase carried out by the military departments. In  2014, DLA Energy officials, with input from Army and Air Force utilities  privatization officials, established milestones to plan and monitor key pre- award contracting activities, including a target time to complete each  milestone. DLA Energy and military department officials noted that these  data help provide insight into, and accountability for, the progress made  or challenges encountered during the pre-award process. However, the  usefulness of these data are limited because the military departments  must provide time frames for the front end of the process and have not  done so. We found that a number of factors can affect the time to  complete pre-award contracting activities, but for the purpose of  establishing milestones to monitor these activities, DLA Energy varied the  number of milestones and time frames to complete specific activities  depending on whether the contract was competitively awarded and the  number of proposals received. While table 3 shows the average time it  took to complete pre-award phases by contracting agent for the contracts  in our audit scope, figure 5 shows the milestones used by DLA Energy for  competitive and non-competitive awards and the target time frames DLA  Energy established for each milestone.\nDLA Energy officials noted that the time frames for the first three steps in  the process\u2014determining that one or more utility systems on an  installation should be considered for privatization through when the  military department provides DLA Energy a complete requirements  package\u2014are determined by the military departments. The military  departments have not established target time frames for these activities,  but have taken steps to understand factors that affect the time frames,  which we discuss later in this report.\nDLA Energy and military department officials noted that despite the  limitations in the data, this information has helped them provide better  management oversight of the process. A DLA Energy official stressed  that the target time frames are meant to improve contract award time  frames, incentivize performance, and provide accountability, and that they  do not expect every contract to meet targets due to the complex nature of  utilities privatization. Nevertheless, DLA Energy and military department  officials stated that implementation of the milestones helped reduce the  amount of time needed to award privatized utility services contracts. Our  analysis of the 18 competitive utility services contracts awarded by DLA  Energy from fiscal years 2016 through 2018 indicates that the average  time from receipt of requirements to contract award has decreased. For  example, our analysis indicated that DLA Energy took an average of  nearly 61 months from receipt of requirements to competitively award  eight contracts related to solicitations issued prior to 2014. Once the  milestone tracking process was initiated in 2014, our analysis indicates  that DLA Energy took an average of about 35 months from receipt of  requirements to competitively award 10 privatized utility services  contracts (see fig. 6).\nOf the 10 privatized utility services contracts DLA Energy awarded since  the process was initiated in 2014,  two met or exceeded DLA Energy\u2019s target time frame;  six were awarded within 6 months of the target time frame; and  two were awarded over a year longer than the target time frame.\n\n\tMultiple Factors Affected Length of Time to Award Privatized Utility Services Contracts\n\nDLA Energy and military department officials identified several factors  that, individually or collectively, could affect the time to award a privatized  utility services contract. These factors include the extent to which internal  or external requirements remain stable, the technical complexity of the  privatization efforts, the continuity of personnel involved in the effort, and  command support for privatization.\nChanges to Internal or External Requirements. According to a  utilities privatization official we interviewed, unexpected changes to  requirements may affect the time to award a utility services contract.\nFor example, Navy officials stated that Naval Air Station Key West  initiated efforts to privatize its wastewater treatment facilities in August  2007 to meet new Florida wastewater regulations by the compliance  deadline of July 2010. A Navy installation official stated that they  determined that they would be challenged to meet the new regulations  with existing facilities and could not upgrade those facilities to meet  the new standards due to inadequate personnel and funding. After the  Navy issued the original wastewater solicitation in March 2008, the  state extended the required compliance date to December 2015. As a  result, installation and Navy officials reconsidered utilities privatization  and assessed whether the extended deadline would allow them to  reach compliance without privatization. After evaluating alternative  paths of action to ensure compliance with the new Florida wastewater  regulations, installation and Navy officials determined it remained in  the best interest of the installation to proceed with the solicitation and  contract award.\nWright-Patterson Air Force Base officials stated that after they issued  their solicitation for privatization of water systems, installation officials  discovered that two of the wells were contaminated by firefighting  foam. This foam, used to extinguish aircraft fires, contained chemicals  which washed off runways and seeped into the groundwater.  According to installation officials, concentrations of these chemicals  exceeded non-regulatory lifetime health advisory levels, prompting the  installation to remove the chemicals before distributing the water for  use on base. To address the problem immediately, installation officials  reported that they engaged with the Air Force Civil Engineer Center to  fund a project to modify the existing water treatment plant to remove  the chemicals before distributing the water for use; they could not wait  for the award of the utility services contract. Installation officials stated  the modification to the water treatment plant included the construction  of a building to house a large filtration system to remove the  contaminant. These officials also stated the modified water treatment  plant was then included in the requirements package for the utilities  privatization effort.\nDLA Energy officials stated that a change to the requirements  included in utilities privatization efforts was a frequent occurrence. As  this information is central to determining the technical requirements  and the cost estimate, changes to an inventory can affect the length of  time spent in acquisition planning and in discussions and negotiations.  Army officials stated that completion of the list of inventory to be  privatized is a time-consuming process as records of the amount of  pipes, valves, wires, facilities, or other items is often incomplete. Army  and Air Force officials indicated that often multiple surveys of  inventory are conducted by both the military departments and the  contractor selected to maintain the utility system to finalize  requirements. Officials reported that this is because, in part, a final  and complete inventory is required so that after award the government  can finalize the bill of sale and convey those systems to the utility  services contract(s) provider(s).\nTechnical Complexity. According to utilities privatization officials, the  technical complexity of the utilities privatization effort can also affect  how long it takes to award a utility services contract. At Fort Riley,  DLA Energy officials, installation officials, and contractor  representatives shared with us that the complexity of the regulated  environment of some utilities had an effect on the time to award. For  example, a contractor representative stated his regulated utility  company was one of the potential contractors vying for a utility  services contract at Fort Riley, and this required additional approval  from the state\u2019s utility regulatory commission. DLA Energy officials  stated and the contractor representative stated that this additional  complexity led to a prolonged negotiation and discussion effort as his  company sought additional information about the asset inventory to  create what it perceived to be a quality proposal for both the utility  services contract and its utility regulatory commission. Our analysis of  DLA Energy data found that for the majority of the contracts, the  discussion\/negotiation phase required the longest amount of time  during the pre-award contracting process. The time to award for this  utility system took one year longer than other utility systems privatized  on the same installation.\nContinuity of Personnel. Utilities privatization officials we  interviewed stated that the continuity of personnel involved in the  process is critical to awarding a contract in a timely manner. For  example, at Naval Air Station Key West, officials told us that staff  turnover was prevalent at all levels multiple times during the utilities  privatization process. These officials noted this turnover was due, in  part, to the isolated location of the installation, which made it difficult  to recruit and retain both civilian and military staff. They also noted  that in turn, this turnover of staff led to loss of knowledge and  dispersion of data. During our visit, we observed that installation staff  had difficulty locating documentation and had limited knowledge of  what occurred during the pre-award contracting process at the  installation. Officials explained that this was due, in part, to the loss of  some documentation due to flooding and the management of the  process by other commands. In contrast, installation and contracting  officials at Fort Riley stated that there was no turnover in the  installation staff during the pre-award contracting process and no  turnover in the DLA Energy contracting staff once they took  responsibility for administering the utility services contracts. Officials  at Fort Riley stated that with continuity of staff, knowledge and  working relationships were built and maintained. DLA Energy awarded  utility services contracts for three utility systems in a comparatively  quick time frame compared to the other contracts in our analysis.\nCommand Support for Privatization. Utilities privatization officials  stated that the support of the installation\u2019s command leadership can  facilitate award of a utility services contract. For example, officials at  Fort Riley said the installation commander and director of public works  department fully supported utilities privatization as the solution to the  installation\u2019s failing utility systems. These officials noted that due to  this desire to privatize utility systems, the senior installation leadership  openly communicated its goals and support of privatization throughout  the pre-award contracting process. For example, Fort Riley officials  stated that public works department staff assigned to work on the  utilities privatization effort were sequestered or removed from all other  assigned responsibilities. Installation officials stated this allowed the  employees to focus on the utilities privatization tasks. According to  Fort Riley officials, this leadership support was a factor in reducing the  time to contract award. According to our analysis, the utility services  contracts for Fort Riley were awarded more quickly than the majority  of the utility services contracts we assessed at other installations. In  contrast, officials at Wright-Patterson Air Force Base said their  leadership was reluctant to fully support utilities privatization. While  senior military department leadership directed the installation to  privatize its utility systems, installation leadership was reluctant to do  so due to concerns of job loss for public works department employees  and perceived loss of flexibility in installation operations and  maintenance funding. Installation officials stated that this reluctance  was one factor in the amount of time it took to make the contract  awards. According to our analysis, the contracting award process for  the three utility systems at that location took longer than the majority  of the utility services contracts we assessed at other installations.\n\nDOD Generally Demonstrated Leading Practices for Lessons Learned to Improve the Utilities Privatization Pre- award Process, but Lacks Key Data and Archive for Lessons\n\nDOD is generally applying leading practices in its efforts to improve the  timeliness of the utilities privatization pre-award contracting process, but  is missing opportunities to analyze the effects of its changes and to better  share the information with stakeholders. ASD(Sustainment), the military  departments, and DLA Energy have taken, or plan to take, actions that  demonstrate or partially demonstrate four of the five leading practices  identified by GAO and others. However, despite the breadth of activities  performed and planned by DOD, the department lacks key data it needs  for further analysis and validation of the pre-award contracting process as  well as a repository for archiving lessons learned for future stakeholders  to access.\nASD(Sustainment), the military departments, and DLA Energy have taken  actions to implement lessons learned, in part, to reduce the time it takes  to award contracts. We assessed whether these actions demonstrated,  partially demonstrated, or do not demonstrate each of the five leading  practices for implementation of lessons learned identified by GAO and  others. Demonstration of these leading practices is critical to ensuring  that lessons learned endure and that processes are improved. In  reviewing ASD(Sustainment), military department, and DLA Energy pre- award documentation and interviewing knowledgeable officials, we found  that all the DOD entities fully demonstrated the third leading practice\u2014 which is to validate the applicability of lessons\u2014and demonstrated three  other leading practices to varying degrees. None of these entities,  however, demonstrated the store and archive leading practice (see table  4).\nCollect information. The collect information leading practice involves  capturing information about events in the area of interest, which can be  achieved through various methods. ASD(Sustainment), the military  departments, and DLA Energy officials told us that they collect  information for utilities privatization lessons learned through activities  such as data calls, working groups, workshops, studies, conferences, and  meetings.\nSpecific examples of DOD demonstrating this leading practice are as  follows:\nAccording to an ASD(Sustainment) official, since about 1997, their  office has sponsored a monthly Utilities Privatization Working Group  attended by representatives of the military departments and DLA  Energy officials. The purpose of the working group is to provide a  collaborative forum to adjudicate issues and share lessons learned  from utilities privatization activities. For example, topics of discussion  on the April 2019 agenda included issues or challenges associated  with developing an execution framework, methodologies to implement  utilities privatization guidance, and updates on current utilities  privatization activities from the military departments and DLA Energy.\nIn 2019, ASD(Sustainment) added a requirement to its guidance for  an annual utilities privatization program review with each military  department to address portfolio lessons learned. According to  ASD(Sustainment) officials, their office, the military departments, and  DLA Energy officials plan to work together to develop a strategy for  complying with the guidance.\nAccording to an Army official, the Army established a tri-military  department annual Utilities Privatization Post-award Workshop in  2014 that discusses post-award issues among the military  departments, DLA Energy, and contractors. Each military department  has hosted a workshop. For example, the Navy hosted the November  2018 post-award workshop, which included updates by the military  departments and DLA Energy on their utilities privatization activities,  including some lessons learned.\nThe Navy commissioned a study in 2016 to help reestablish its utilities  privatization program and reduce life-cycle expenditures on  infrastructure, including utility systems. The study examined the  costs, benefits, and existing policies for private versus government  facilities ownership and recommended changes to the Navy\u2019s  processes for utilities privatization. The study led to, among other  things, the creation of Navy-specific utilities privatization guidance.  According to a Navy official, they will establish a community of  practice in partnership with DLA Energy to provide a quarterly forum  for NAVFAC officials to share lessons learned and discuss utilities  privatization problems and solutions.\nDLA Energy hosts the biannual DLA Energy Worldwide Energy  Conference to provide personnel of the military departments, DLA  Energy, and contractors the opportunity to learn from each other and  top industry experts on the latest trends and initiatives in energy,  including utilities privatization. DLA Energy also participates in the  annual Department of Energy Annual Energy Exchange Conference.  For example, in 2019 it participated in a discussion panel on utilities  privatization.\nThese efforts to collect information and lessons learned are positive;  however, as discussed earlier in this report, DOD lacks complete and  consistent information on the time to award utility services contracts.  Reducing the amount of time to award these contracts is a stated goal of  DOD. ASD(Sustainment) issues annual data calls to the military  departments to collect information such as the number of utility systems  privatized by military department, the authority under which a privatization  took place, and award dates for the utility services contracts. DLA Energy  and military department officials indicated that collecting this information  has contributed to efforts to reduce the amount of time needed to award  utility services contracts. They acknowledge, however, that the military  departments do not collect information on the formal decision to consider  privatization of utility systems and the length of time to conduct key  acquisition planning activities, such as developing a complete inventory of  physical assets to document its requirements. The requirements package  is a key component in the pre-award contracting process and includes an  inventory of the utility system. This inventory includes items such as the  pipes, valves, and wires that make up the utility system. Consequently,  neither DLA Energy nor the military departments, with the exception of  the Navy, had reliable information on the entire time it took to complete  the pre-award contracting process. Without data on the key tasks that  need to be completed during the pre-award contracting phase, DOD is  missing an opportunity to assess the extent to which updated guidance,  training, and other ongoing efforts are having an effect on the time to  award utility services contracts. In recognition of this, an Air Force official  stated that the Air Force Civil Engineer Center recently implemented a  schedule-tracking mechanism to capture these dates, which will be used  with all new utilities privatization efforts. Collecting this information  consistently across all military departments would allow for a more  thorough analysis of contracting process information and could support  future process improvement efforts.\nAnalyze information. The next leading practice is to analyze the  information collected to determine root causes and identify appropriate  actions.\nExamples of DOD demonstrating the information analysis leading practice  include:\nAccording to DLA Energy officials, in 2014, they reviewed and  analyzed historical data from utility services contracts to revise the  utilities privatization procurement time frame. As mentioned  previously, this analysis led to the development of milestones and  associated time-based targets to achieve each milestone, based on  the number of proposals received, to reduce the pre-award  contracting process. According to a DLA Energy official, the agency  coordinated with its contractor support, and Army and Air Force  program management offices to establish the time-based targets. In  May 2014, the Air Force conducted a utilities privatization process  improvement review with DLA Energy, among others, to streamline  the utilities privatization process. The review allowed the Air Force to  reduce the planned timelines for the utilities privatization pre-award  contracting process, which DLA Energy administers on behalf of the  Air Force, between the issuance of competitive solicitations to award  by 14 months to 33 months. Similarly, in October 2014, the Army  conducted a utilities privatization process improvement review with  DLA Energy with a goal to reduce the time needed from issuance of a  competitive solicitation to award of utility services contracts to less  than 36 months. Army and DLA Energy officials identified  opportunities for process or program improvement during the review.  Overall, adopted changes reduced the planned timelines for the  utilities privatization pre-award contracting process by approximately 5  months to 31 months.\nAn Air Force official stated that lessons learned are collaboratively  shared annually and have revealed lessons learned to improve the  contracting process. This has led to updates of Air Force request for  proposals template.\nThe 2016 Navy study not only collected data on utilities privatization  but also provided analysis to understand the opportunities, costs, and  benefits associated with privatization. The Navy used the study to  enable decisions about whether privatization is the appropriate  strategy to reduce life-cycle expenditures on utility infrastructure. The  analysis performed for the study resulted in multiple products and  findings. For example, the Navy created an Excel-based tool to  consolidate utility data, organize data, and prioritize installations for  evaluation of the potential to privatize.\nASD(Sustainment) revises its utilities privatization guidance and  procedures based on lessons learned and changes in laws and  regulations. For example, we found that DOD responded to industry  feedback by standardizing and clarifying request for proposal  templates used in utilities privatization.\nBased on our analysis, the military departments and DLA Energy fully  demonstrated the leading practice for analyzing information, and  ASD(Sustainment) partially demonstrated the leading practice. According  to DOD, ASD(Sustainment) is responsible for overseeing progress  tracking and goal setting for utilities privatization across the department.  Therefore, analysis for performance across the department on the time it  takes to award utility services contracts is its responsibility. As mentioned  previously, while ASD(Sustainment) collects data on the number of utility  systems privatized by military departments and award dates for the utility  services contracts, it is missing information about key pre-award  contracting activities. In the absence of this information,  ASD(Sustainment) cannot fully analyze the department\u2019s utilities  privatization activities for further lessons learned to help reduce time  frames for awarding contracts.\nValidate applicability of lessons. Once collection and analysis have  identified the lessons learned, the next leading practice is to validate that  the right lessons have been identified and determine the scope of their  applicability. Subject matter experts or other stakeholders may be  involved in this step of the process.\nExamples of DOD\u2019s demonstration of the validation leading practice  include:\nASD(Sustainment) officials noted that they assess the applicability of  lessons by periodically revisiting and revising utilities privatization  guidance. These officials said they revised such guidance, for  example, in 2002, 2005, 2010, and 2019 to incorporate lessons  learned from stakeholders across the process.\nAccording to an Army official, the Army periodically assesses the  applicability of lessons learned by revising its utilities privatization  acquisition process based on the Army\u2019s strategic direction, military  department meetings, and utilities privatization policy changes. This  included the utilities privatization acquisition process improvement  review with DLA Energy to reduce the time needed to award utility  services contracts.\nAccording to the 2016 Navy study, contractors conducted interviews  to validate data, obtain supplementary data, and ascertain qualitative  information. In addition, contractors interviewed Air Force and Army  utilities privatization representatives to garner lessons learned and  understand other DOD components\u2019 approaches to utilities  privatization. One result of the study was development of a repeatable  methodology and framework, based on specific lessons learned, that  can be used to evaluate candidate sites for utilities privatization. In  addition, according to an official, the Navy is using the lessons  learned from its study to develop its new utilities privatization  handbook, a draft of which emphasizes the need throughout the  process for the collection, documentation, and sharing of lessons  learned to help future installations and refine the utilities privatization  program. According to the Navy, it plans to update the handbook on  an ongoing basis to reflect lessons learned from its pilot program with  DLA Energy, and with the Army and Air Force utilities privatization  programs.\nAn Air Force official stated that over an 18-month period they  assessed their utilities privatization process and developed a new,  comprehensive utilities privatization process for pre-award contracting  activities. The Air Force determined the scope of the applicability of  lessons learned when it revised its draft utilities privatization playbook  to incorporate this new process.\nDLA Energy revised how it monitors the utilities privatization process  based on its analysis of historical utilities privatization data. DLA  Energy officials said they validated these changes by testing the  milestones and associated targets on a 2014 Army utility services  contract and found them to be reasonable. Army and Air Force  officials agreed with the assessment. DLA Energy officials stated that  they also determined the scope of the applicability of lessons learned  by determining to whom and what the lessons learned applied, and by  taking actions to continually revisit and revise its templates and  procedures. For example, we found that the fiscal years 2012 and  2016 versions of the request for proposals template reflected changes  for both the Army and Air Force but we could not determine if they  were the result of lessons learned. We also identified revisions DLA  Energy made to incorporate lessons learned into operating manuals it  uses for the utilities privatization process. For example, a DLA Energy  official noted that the agency revised its risk evaluation manual to  improve the quality of the risk evaluations the source selection  evaluation board performs.\nStore and archive lessons. The archiving of lessons learned involves  the use of a repository, used to disseminate and share information. As  appropriate, these repositories should have the capability to store and  share data and to secure classified, sensitive, or proprietary data.  Archiving lessons learned should remain an ongoing process; otherwise,  it risks becoming cumbersome and irrelevant.\nOur observations on DOD\u2019s efforts to store and archive information on  utilities privatization include:\nAccording to Air Force officials, the Air Force does not currently store  or archive lessons learned for pre-award contracting activities. The Air  Force Portfolio and Asset Control and Evaluation System stores and  archives lessons learned for post-award contracting activities. The  system is available to Air Force, DLA Energy, and other stakeholder  agencies like the General Services Administration, but not to other  military departments. To populate the database, the Air Force Civil  Engineer Center portfolio management division uploads utilities  privatization documents into the system, including weekly status  reports, briefings, and meeting notes for post-award contracting  activities. The system also records lessons learned and provides a  social media discussion platform, known as the Contracting Officer\u2019s  Representative Toolbox. Our review of the system determined that it  is not widely populated. Specifically, as of December 2019, the  system contained seven lessons learned, three discussion postings,  and five documents in the Toolbox. According to Air Force officials,  however, this system was not intended to be a repository for storing  and archiving lessons learned for pre-award contracting activities and  acknowledged that the Air Force does not currently have another  means to do so.\nAccording to DLA Energy officials, they do not maintain a specific  repository for storing and archiving lessons learned for utilities  privatization pre-award contracting activities but make their revised  templates and procedures\u2014that they believe generally reflect key  lessons learned\u2014available to stakeholders for utilities privatization on  a website. According to a DLA Energy official, the website is open to  anyone that can access DLA.mil, but most of the content is intended  to assist contracting officer\u2019s representatives in conducting their post- award contracting responsibilities.\nThe Army has one key official who has managed its utilities  privatization program activities for many years and has a substantial  amount of experience and institutional knowledge. This official  maintains utilities privatization files in hard copy\u2014such as guidance,  memorandums, and relevant studies\u2014therefore this information is not  readily available to all relevant stakeholders, such as the other military  departments. According to the Army official, the Army does not  maintain a repository for storing and archiving lessons learned for  utilities privatization pre-award contracting activities.\nAccording to Navy officials, NAVFAC has a business management  system that provides for the management of business processes,  common practices, and process and quality improvement for NAVFAC  products and services. The system\u2019s documentation is available for  use by all NAVFAC commands and links to applicable policies,  guidance, forms, and information so that work will be conducted in a  consistent manner. According to officials, this system is updated  annually or at significant process changes. However, the Navy is  currently developing a module for the business management system  for utilities privatization with an estimated completion date of March  2020. Navy officials stated that the module is expected to include pre- award contracting lessons learned when it becomes operational.\nAccording to ASD(Sustainment) officials, they do not maintain a  repository for storing and archiving lessons learned for utilities  privatization pre-award contracting activities.\nWhile ASD(Sustainment), the military departments, and DLA Energy  officials stated they incorporate lessons learned in various ways, including  when they revise policies and\/or operating manuals, these officials  acknowledge that they do not maintain a repository for storing and  archiving lessons learned on specific utilities privatization pre-award  contracting efforts. DLA Energy officials, who support both the Army and  Air Force utilities privatization efforts, stated that revisions to templates  and guidance were sufficient to implement lessons learned. The leading  practices for lessons learned indicate that the use of a repository to store  lessons learned allows agencies to disseminate and share the lessons  learned. Without such a capability, ASD(Sustainment), the military  departments, and DLA Energy may be missing opportunities to capture  and share lessons learned that could benefit future utilities privatization  efforts, including helping DOD achieve its goal of reducing the length of  time to contract award.\nDisseminate and share lessons. A critical step in any lessons learned  process is the sharing and disseminating of the knowledge gained.\nAgencies can disseminate lessons in many ways, such as briefings,  bulletins, reports, emails, websites, database entries, the revision of work  processes or procedures, and training. Lessons can be \u201cpushed,\u201d or  automatically delivered to a user, or \u201cpulled,\u201d where a user searches for  them in an archive of lessons learned information.\nExamples of DOD demonstrating the disseminating and sharing leading  practice include:\nAs previously noted when discussing the collection criteria, the DOD  officials we spoke with told us that they distribute lessons learned  during annual reviews, industry conferences, regular meetings,  workshops, training sessions, and working groups. The lack of  documentation and archiving of the lessons learned, however, limits  the ability of future users to search for and retrieve them.\nDLA Energy officials stated that they share templates created for the  utilities privatization program with the military departments and  industry. According to an ASD(Sustainment) official, these users find  the information helpful and efficient as the templates can be  customized where necessary depending on the type of potential  contractor and solicitation and updated for lessons learned.  Additionally, DLA Energy revises its standard operating procedures  for the pre-award contracting process to incorporate lessons learned  and disseminate changes. DLA Energy also provides training for the  utilities privatization process, for example on the procedures  contracting officials should use to conduct negotiations and past  performance evaluations for utility services contracts.\nAs previously discussed, the Air Force Portfolio and Asset Control and  Evaluation System is a system used to store and disseminate lessons  learned for the post-award utilities privatization process. While used in  a limited fashion, the Contracting Officer\u2019s Representative Toolbox  consists of a newsfeed and a documents file. The documents section  allows users to save and share helpful utilities privatization documents  with others. The system also contains a resource center to maintain  updated training tools and resources for project oversight including  frequently asked questions, best practices, and resolutions to project  issues. While the system has the ability to both \u201cpush\u201d information to  users and allows for users to \u201cpull\u201d data by acting as an archive for  documentation, it is not available to Army and Navy utilities  privatization staff and does not currently contain lessons learned on  the pre-award contracting process.\nWe assessed DLA Energy as fully demonstrating, and ASD(Sustainment)  and the military departments as partially demonstrating, this lessons  learned criteria. While ASD(Sustainment) and military department officials  do disseminate and share lessons learned, the inability of future users to  search for and retrieve lessons learned limits their utility. For example, Air  National Guard officials stated that they were unfamiliar with the utilities  privatization process and encountered delays prior to releasing the  solicitation, in part, due to the need to obtain information about how to  execute the process. Having the capability for others to retrieve archived  lessons learned could potentially assist future stakeholders in the process  and help further shorten contracting award time frames.\n\nConclusions\n\nDOD is taking steps to improve the effectiveness and efficiency of the  utilities privatization pre-award contracting process and these efforts have  contributed to decreasing the time needed to award utility services  contracts. In particular, Army and Air Force officials consistently noted  that DLA Energy\u2019s establishment of a milestone-based system to track  the time to complete key steps in the pre-award contracting process in  2014 has helped provide better management oversight and improve  accountability. DOD, however, does not collect consistent information on  the time to complete key phases needed to award utility services  contracts. Specifically, DOD does not have information on when the  military departments identify that one or more utility systems on an  installation should be considered for privatization and when the  installation delivers a completed requirements package as part of the  acquisition planning phase. The lack of consistent data on these two key  events may hinder DOD\u2019s efforts to identify additional opportunities to  reduce the length of time needed to award utility services contracts.  Similarly, DOD recognizes the importance of collecting and disseminating  lessons learned for the utilities privatization program, but currently lacks a  mechanism to archive lessons learned during the pre-award contracting  phase. As DOD has identified 580 utility systems that still may be  privatized, having such a capability for others to retrieve archived lessons  learned could potentially assist future stakeholders in the process and  help further shorten contracting time frames.\n\nRecommendations for Executive Action\n\nWe are making two recommendations to the Secretary of Defense:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment collaborates with the military departments and  the Defense Logistics Agency to collect consistent information on the time  to complete key steps in the pre-award contracting process for privatizing  utility services. (Recommendation 1)\nThe Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment collaborates with the military departments and  the Defense Logistics Agency to develop a mechanism to store and  archive lessons learned regarding the pre-award contracting process for  privatizing utility services. (Recommendation 2)\n\nAgency Comments\n\nWe provided a draft of this report to DOD for review and comment. DOD\u2019s  written comments are reproduced in appendix II. DOD partially concurred  with both recommendations and provided technical comments, which we  incorporated as appropriate.\nDOD partially concurred with our first recommendation to collect  consistent information on the time to complete key steps in the pre-award  contracting process for privatizing utility services. DOD suggested that we  modify our recommendation to include other DOD contracting activities  that may support privatization efforts. Our recommendation, based on the  scope of our audit work, was intended to cover recent privatized utility  services contracting activities within the military departments, such as  Naval Facilities Engineering Command. But we agree that DOD should  include any activity that provides support for utilities privatization in its  efforts to collect better data.\nSimilarly, DOD partially concurred with our second recommendation to  develop a mechanism to store and archive lessons learned regarding the  pre-award contracting process for privatization of utility services. DOD  suggested that we modify our recommendation to include other DOD  contracting activities besides DLA and to recommend that DOD add the  lessons learned from the post-award contract process, as post-award  contract actions play a critical role in informing pre-award contracting  processes. As noted above, we agree that DOD should include any  contracting activities that support pre-award utilities privatization efforts.  Similarly, while our work did not specifically assess how post-award  activities could be incorporated into the lessons learned efforts, we agree  that doing so may provide additional insights that would benefit future  utilities privatization efforts.\nIn its technical comments, DOD disagreed with our presentation of the  time required by the Navy to privatize utilities at Naval Air Station Key  West. Specifically, DOD officials believed that we should exclude from our  calculations a 30-month period that occurred during the solicitation phase  in which it evaluated alternative paths to comply with new Florida  wastewater regulations. DOD noted that this pause did not allow any  additional work to be accomplished towards contract award. We had  identified this pause and the rationale underlying the Navy\u2019s decision to  do so in the draft report. We continue to believe it is appropriate to reflect  this period in our calculations as the Navy did not cancel the original  solicitation and, after deciding to continue to pursue the privatization  efforts, evaluated the offerors\u2019 proposals that had been previously  received prior to the pause and subsequently awarded the utility services  contract based on that solicitation. In that regard, we consider the change  in the date by which the Navy had to comply with Florida\u2019s wastewater  regulations to be a relevant example of one of the many external factors  that can affect the time needed to privatize utilities at a military  installation. We did, however, reflect DOD\u2019s disagreement with our  characterization where appropriate in the report.\nWe are sending copies of this report to the Secretary of Defense; the  Under Secretary of Defense for Acquisition and Sustainment; the  Assistant Secretary of Defense for Sustainment; 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 the GAO website at  http:\/\/www.gao.gov.\nIf 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 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nA House Armed Services Committee report accompanying the National  Defense Authorization Act for Fiscal Year 2019 included a provision that  we review the Department of Defense\u2019s (DOD) utilities privatization pre- award contracting process (which includes awarding a contract), including   lessons learned to improve the process. This report examines (1) the  length of time to award contracts for utility services and factors that affect  it, and (2) the extent to which DOD is demonstrating leading practices to  collect and disseminate lessons learned for utilities privatization.\nTo determine the length of time to complete the pre-award contracting  process to award a privatized utility services contract, we focused on  utility services contracts awarded from fiscal years 2016 through 2018,  the latest full year of available data when we began our audit. The time  frame captured at least one privatized utility services contract for each  military department\u2014Army, Air Force, and Navy. To identify these  contracts, we used information maintained by the Office of the Deputy  Assistant Secretary of Defense for Energy, which is part of the Office of  the Assistant Secretary of Defense for Sustainment (ASD(Sustainment))  on its utilities privatization master list, which includes such information as  installation name and location, and when the contract was awarded.\nFor fiscal years 2016 through 2018, a comparison of the  ASD(Sustainment) information and solicitation details provided by the  awarding contracting agents identified 28 utility systems at 15 military  installations that were privatized during our time frame through 21  contracts. Nineteen of the 21 contracts were awarded using competitive  procedures and the remaining two were awarded without providing for full  and open competition, which we refer to as non-competitive. Of the 19  competitive awards, 18 were awarded by the Defense Logistics Agency  Energy (DLA Energy), which served as the contracting agent for the  majority of the Army and Air Force utility services contracts during our  review period; and one was awarded by the Naval Facilities Engineering  Command, the contracting agent for the Navy and Marine Corps. The two  non-competitive contracts were awarded by DLA Energy and the Air  National Guard, respectively.\nFor the purposes of our review, we define the pre-award contracting  process as the date from when a military department begins to consider  privatizing an installation\u2019s utility system(s) to the contract award date. For  all 21 privatized utility services contracts awarded between fiscal years  2016 through 2018, we obtained copies of the award documents. In  addition, for the 19 competitively awarded utility services contracts, we  conducted contract file reviews to record completion dates of pre-award  contracting phases and number of proposals received by utility. For the  18 DLA Energy competitive awards, we conducted two on-site reviews of  the contract files at a DLA Energy facility to verify the dates and  proposals. At the final DLA Energy contract file review, one analyst  located and recorded each relevant document and date confirming  completion of the pre-award contracting phase, as well as the offer  information. A second analyst verified the accuracy of the information.  After correcting certain errors, such as incorrectly recorded dates, we  determined that this information was sufficiently reliable for purposes of  reporting on the length of time to conduct pre-award contracting activities.\nThe Navy provided electronic documents for us to review for its one  competitive award. A similar verification process was conducted for the  Navy information. For the Air National Guard contract, we obtained the  contract and additional information from contracting officials on the time to  complete the pre-award contracting process. To supplement this data, we  interviewed Air National Guard contracting officials involved in the  contract.\nTo compare information on the factors that affected the length of time to  award utility services contracts, we:\nAnalyzed dates of comparable events throughout the pre-award  contracting process found in the utilities privatization award contract  files; and\nConducted site visits to speak with DLA Energy, installation, and  military department officials, and contractor representatives about  their experiences with the utilities privatization pre-award contracting  process.\nWe combined a record of all utilities privatization pre-award contracting  information into one file. We used this file to compare time to award for all  pre-award contracting activities. This data was further compared by  competitive and non-competitive status, contracting agent, military  department, type of utilities in the proposals, number of utilities in the  proposals, and the size of the installation by acreage. The size of each  installation was found in the DOD Base Structure Report \u2013 Fiscal Year  2017 Baseline, A Summary of the Real Property Inventory. However, due  to the small number of contracts we assessed, we were unable to  determine if there were any patterns to corroborate whether the factors  such as the type of utilities in the proposals, number of utilities in the  proposals, and the size of the installation did or did not affect time to  contract award.\nTo determine if there was a change in time to award after the  implementation of DLA Energy\u2019s 2014 time frames for pre-award  contracting activities, we compared the time elapsed between receipt of  requirements and award for competitively awarded privatized utility  services contracts. The analysis does not reflect seven solicitations  issued between fiscal years 2013 and 2018 as they were awarded, or  were expected to be awarded after September 30, 2018, and are outside  our audit scope. Using data obtained from DLA Energy, however, we  determined that the awards or projected awards of these seven contracts  generally follow the trend shown in our analysis.\nTo gather information on the factors that affected the time from the  decision to enter the utilities privatization process to contract award, we  selected a non-generalizable sample of three installations to visit. The  installations were selected from a list supplied by the Office of the Deputy  Assistant Secretary of Defense for Energy of installations privatized from  fiscal years 2016 through 2018. To obtain a variety of utilities privatization  characteristics, we selected the installation visits based on the following  criteria: (1) representation of each military department; (2) types of utility  system privatized (electric, natural gas, water, and wastewater); (3)  geographic location of installation; and (4) fiscal year of award. The  contract awards for all installations visited were awarded using  competitive procedures.\nPrior to our visit to the three installations, we analyzed contract file  documentation and spoke with utilities privatization individuals at military  department and DLA Energy headquarters. At the three installations, we  conducted interviews with officials at the installation command, public  works department, and contracting officials, and contractor  representatives to obtain perspectives on their utilities privatization in  general and specifically on the factors that affected the time to contract  award. We conducted our non-generalizable site visits from May 2019 to  July 2019 at (1) Naval Air Station Key West, Florida, (2) Wright-Patterson  Air Force Base, Ohio, and (3) Fort Riley, Kansas. No Marine Corps  installations were privatized from fiscal years 2016 through 2018. In  addition, we spoke with contracting officials from the Air National Guard at  Truax Field in Wisconsin. The results of this selection are not  generalizable to all utility services contracts or military installations, but  provide insights and illustrative examples regarding factors that affect  timing in the contract award process used to privatize utility systems.\nTo determine the extent to which DOD demonstrated leading practices  identified by GAO and others for collecting and disseminating lessons  learned, we compared DOD\u2019s activities related to lessons learned against  the five leading practices identified in our prior work to determine whether  DOD demonstrated actions consistent with these practices. We then had  a second analyst check the same documents and activities to verify our  initial results. These leading practices for lessons learned are discussed  in a September 2012 GAO report, Federal Real Property Security:  Interagency Security Committee Should Implement a Lessons-Learned  Process; and a December 2018 GAO report, Project Management: DOE  and NNSA Should Improve Their Lessons-Learned Process for Capital  Asset Projects. We compared DOD\u2019s lessons learned documentation,  including the Air Force\u2019s lessons learned database, DLA Energy\u2019s utilities  privatization website and operating manuals, the military departments and  DLA Energy contracting process policies and procedures, and Air Force  and Navy utilities privatization handbooks against these practices. Based  on our analysis, we assessed whether DOD fully (met all of the criteria),  partially (met part of the criteria), or did not (met none of the criteria)  demonstrate the leading practices. To determine the actions that DOD  has taken to learn lessons from the utilities privatization pre-award  contracting process and demonstrate leading practices, we interviewed  officials from ASD(Sustainment), the military departments, and DLA  Energy; obtained and analyzed documents; and attended the 2019 DLA  Energy Worldwide Energy Conference to gain a greater understanding of  utilities privatization.\nWe conducted this performance audit from March 2019 to April 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Comments from the Department of Defense\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nTimothy J. DiNapoli, (202) 512-4841 or dinapolit@gao.gov  In addition to the contact named above, J. Kristopher Keener (Assistant  Director), Joe E. Hunter (Analyst-in-Charge), Stephanie Gustafson, Gina  Hoover, Tamera Lockley, Roxanna T. Sun, Anne Louise Taylor, Kari  Terrio, and Kristy Williams made key contributions to this report.","output":null}
{"id":"crs_R46308","pid":"crs_R46308_0","input":"\tIntroduction\n\nAccording to a 2019 study, 2 million Americans lack access to running water, indoor plumbing, or wastewater services. Many of the communities with inadequate water supply infrastructure are in rural areas or on tribal lands. Over time, Congress has authorized projects and programs through various federal agencies to address rural water supply needs. Since 1980, Congress has authorized the Bureau of Reclamation (Reclamation), among other federal agencies, to develop municipal and industrial (M&I) water supply projects in rural areas and on tribal lands. \nReclamation was established to implement the Reclamation Act of 1902, which authorized the construction of water works to provide water for irrigation in arid western states. Reclamation owns and manages 491 dams and 338 reservoirs, which are capable of storing a combined 140 million acre-feet of water. Reclamation has incorporated M&I water resource projects into larger projects that serve various other authorized purposes (e.g., irrigation, power). Reclamation-funded M&I water deliveries total approximately 10 trillion gallons of water per year. As part of Reclamation's M&I responsibilities, Congress has expressly authorized the agency to undertake the design and construction of rural water supply projects intended to deliver potable water supplies to defined rural communities.\nFrom 1980 through 2009, Congress authorized Reclamation to undertake the design and construction, and in some cases the operations and maintenance (O&M), of specific projects intended to deliver potable water supplies to rural communities in western Reclamation states. These projects were largely located in North Dakota, South Dakota, Montana, and New Mexico. The rural communities include tribal reservations and nontribal rural communities with nonexistent, substandard, or declining water supply or water quality. Many rural water projects are large in scope\u00e2\u0080\u0094taking water from one location and moving it long distances to tie to existing systems. M&I portions of Reclamation water supply facilities typically require 100% repayment of construction costs to the federal treasury with interest. Congress also has authorized rural water projects that receive funding from the federal government for some or all costs on a nonreimbursable basis (i.e., a de facto grant). For example, the federal government pays up to 100% of the cost of tribal rural water supply projects, including O&M. For nontribal rural water supply projects, the federal cost share for current projects ranges from 75% to 80%.\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) created the Rural Water Supply Program, a structured program for developing and recommending rural water supply projects. This program was to replace the previous process of authorizing projects individually\u00e2\u0080\u0094often without the level of analysis and review (e.g., feasibility studies) consistent with Reclamation's other projects. Under the Rural Water Supply Program, Congress authorized Reclamation to work with rural communities and tribes to identify M&I water needs and options to address such needs through appraisal investigations and feasibility studies. Congress would then consider feasibility studies recommended by the Administration before authorizing specific projects for construction in legislation. Ultimately, Congress did not authorize any projects for construction through this process, and the authority for the program expired in 2016. \nReclamation continues to construct rural water projects (and to provide O&M assistance for some tribal components) that were authorized and initiated outside of the Rural Water Supply Program. In 2012, Reclamation developed prioritization criteria for budgeting these projects: \ninclusion of tribal components amount of financial resources committed urgency and severity of need financial need and potential economic impact regional and watershed approach water, energy, and other priority objectives \nAccording to Reclamation, the criteria aim to reflect both the priorities identified in the statutes that authorized individual projects and the goals of the Rural Water Supply Act of 2006.\nFor FY2020, Congress appropriated $145.1 million for construction and O&M at seven authorized rural water projects, which was $117.4 million above the Administration's FY2020 budget request. As of early 2020, Reclamation reported that $1.2 billion was still needed to construct authorized, ongoing rural water projects. For FY2021, the Administration requested $30.3 million for Reclamation rural water activities, of which $8.1 million is for construction.\nThis report provides an overview of Reclamation rural water projects, including completed and ongoing rural projects and efforts under Reclamation's Rural Water Supply Program. The report also discusses considerations for Congress (e.g., funding prioritization, potential nexus with other federal programs) and presents recent legislation relating to authorizing additional projects and reauthorizing the Rural Water Supply Program. \n\n\tRural Water Projects\n\nCongress has funded water supply projects in rural areas for more than four decades. Reclamation first became involved in these efforts beginning with authorization of the WEB Rural Water Supply Project in 1980 ( P.L. 96-355 ). Since that time, Congress has authorized Reclamation to fund the construction of several other rural water supply projects (see Table 1 ). These projects have individual authorizations and generally aim to provide water exclusively for M&I water uses in rural areas\u00e2\u0080\u0094a departure from the historical mission of providing water for irrigation, with M&I water use as an incidental project purpose. According to a U.S. Government Accountability Office (GAO) report, Reclamation became involved in such projects because communities proposed projects directly to Congress and, in response, Congress created specific authorizations for these rural water supply projects, with Reclamation overseeing funding and construction. In addition to projects authorized only in Reclamation states, Congress specifically authorized Reclamation's involvement in the Lewis and Clark Rural Water Supply Project located in South Dakota, Iowa, and Minnesota.\nReclamation reported that, prior to authorization, some rural water projects did not go through the level of analysis and review that is consistent with Reclamation's other projects and did not meet the economic, environmental, and design standards that are required to determine the feasibility of federal water resources development projects. In these instances, following authorization, Reclamation was to complete the analysis that was necessary to execute the project while adhering to the project configuration and designs specified by the authorizing statutes and in accordance with other laws (e.g., Clean Water Act [33 U.S.C. \u00c2\u00a7\u00c2\u00a71251-1387], National Environmental Policy Act [42 U.S.C. \u00c2\u00a74321 et seq.]). Critics have sometimes expressed concerns over this approach\u00e2\u0080\u0094specifically, whether the authorized project would have emerged as the most cost-effective preferred alternative had a feasibility study been performed prior to authorization. \nEach rural water project authorization required that the cost ceilings authorized in the legislation be indexed to adjust for inflation to include the rising cost of materials and labor, which was estimated to be 4% annually. The result of these indexing requirements is that the overall cost of authorized rural water projects has risen and continues to rise due in part to actual federal appropriations for projects falling short of the optimal funding scenarios that were assumed under planning projections. As of early 2020, Reclamation reported that $1.2 billion was needed to construct authorized, ongoing rural water projects.\nFor FY2021, the Administration's budget proposal requested $30.3 million: $8.1 million for ongoing construction at four authorized rural water projects and $22.2 million for O&M of tribal systems (e.g., $14.5 million for the Mni Wiconi Project, $7.7 million for the Garrison Diversion Unit M&I, and $20,000 for the Mid-Dakota Rural Water System). The FY2021 request is $114.8 million less than FY2020 enacted funding of $145.1 million. The FY2021 request continues a trend since FY2014 in which the President's budget requested reduced funding for rural water projects from prior-year enacted levels. Reclamation also has emphasized its authority to accept nonfederal contributions in excess of cost-sharing requirements as one way to expedite projects in the absence of increased federal funding. In the FY2021 budget request, Reclamation noted that nonfederal parties have the ability to move forward with important investments in water resources infrastructure by contributing amounts in excess of minimum contributions. \n\n\t\tRural Water Projects Under Construction in FY2020\n\nIn FY2020, Reclamation funded $125.4 million in construction work at five projects ( Table 2 ). Reclamation's FY2020 budget request included $8.0 million in construction for four projects, but Congress provided $117.4 million in appropriations above the President's budget request. The Administration distributed the funds above the request among five authorized projects, as described in Reclamation's additional funding spend plan. The following briefly describes the projects under construction in FY2020 based on Reclamation budget documents.\n\n\t\t\tGarrison Diversion Unit of the Pick-Sloan Missouri Basin Program\n\nThe Garrison Diversion Unit of the Pick-Sloan Missouri-Basin Program was authorized in 1965 (P.L. 89-108) and was amended in 1986 by the Garrison Diversion Unit Reformulation Act ( P.L. 99-294 ) to include rural water services. Garrison Diversion Unit water supply facilities are associated with Garrison Dam of the Pick-Sloan Missouri Basin Program. They are located in eight counties in the central and eastern part of North Dakota and serve four tribal reservations (Spirit Lake, Fort Berthold, Turtle Mountain, and Standing Rock Indian Reservations). The multipurpose project principally provides tribal and nontribal M&I water, along with fish and wildlife, recreation, and flood control benefits. \n\n\t\t\tFort Peck Reservation\/Dry Prairie Rural Water System\n\nThe Fort Peck Reservation Rural Water System Act of 2000 ( P.L. 106-382 ), as amended, authorized rural water projects in northeastern Montana for the Fort Peck Reservation, serving the Assiniboine and Sioux Tribes, and for the Dry Prairie Rural Water Authority, serving towns outside of the reservation. The total service area population is around 25,000 people; rural water use is also available for commercial users and livestock. Currently, groundwater from shallow alluvial aquifers is the primary water source for the municipal systems, but groundwater quality is generally poor. The regional rural water project is to provide for a single water treatment plant located on the Missouri River, which is to distribute up to 13.6 million gallons of treated water per day through 3,200 miles of pipeline. \n\n\t\t\tLewis and Clark Rural Water System\n\nThe Lewis and Clark Rural Water System Act of 2000 (Division B, Title IV of P.L. 106-246 ) authorized the Lewis and Clark Rural Water System to serve over 300,000 people in southeast South Dakota, southwest Minnesota, and northwest Iowa. The project aims to address concerns regarding low water quality, contamination, and insufficient supplies of existing drinking water sources throughout the project area. The water source for the Lewis and Clark Rural Water System is the sand and gravel aquifers of the Missouri River near Vermillion, SD. The project is to collect, treat, and distribute water through a network of wells, pipelines, pump stations, and storage reservoirs to each of 15 municipalities (including the city of Sioux Falls) and five rural systems. As of February 2020, completed facilities delivered water to the first 14 of 20 members, serving more than 200,000 individuals in Iowa, Minnesota, and South Dakota.\n\n\t\t\tRocky Boy's\/North Central Montana Rural Water System\n\nThe Rocky Boy's\/North Central Montana Regional Water System Act of 2002 (Title IX of P.L. 107-331 ) authorized a rural water system to serve the Rocky Boy's Indian Reservation (Chippewa Cree Tribe) and surrounding communities in northern Montana. The system is designed to serve a total projected population of 43,000 (14,000 on reservation and 29,000 off reservation) by providing infrastructure to ensure existing water systems within the project service area comply with federal Safe Drinking Water Act (42 U.S.C. \u00c2\u00a7\u00c2\u00a7300f-300j-26) regulations. A core pipeline is to provide potable water from Tiber Reservoir to the Rocky Boy's Reservation, and non-core pipelines are to serve 21 surrounding towns and rural water districts. A $20 million trust fund established with Bureau of Indian Affairs appropriations is to fund O&M and replacement for the core and on-reservation systems initially; eventually, water users are expected to entirely fund the project. Reclamation states that the current authorization is not adequate to cover the project.\n\n\t\t\tEastern New Mexico Water Supply\n\nSection 9103 of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ) authorized the Eastern New Mexico Water Supply project to deliver water from Ute Reservoir on the Canadian River to eight member communities. The use of Ute Reservoir water aims to provide long-term water supply and reduce the eight communities' dependence on groundwater in the Ogallala Aquifer. Current funding is for planning, design, and construction of interim projects to deliver groundwater to the communities before treated surface water is delivered from the Ute Reservoir Pipeline.\n\n\tRural Water Supply Act of 2006\n\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) authorized the Rural Water Supply Program and directed the Secretary of the Interior to undertake certain activities to implement the program. Specifically, the act directed Reclamation to conduct appraisal investigations and feasibility studies (or to ensure that nonfederal entities conducted such studies) and to recommend proposed projects to Congress for construction authorization and subsequent funding.\nIn 2008, Reclamation published an interim final rule (43 C.F.R. \u00c2\u00a7404) that established operating criteria for the program and defined the criteria for the prioritization, eligibility, and evaluation of appraisal investigations and feasibility studies, in accordance with the act. To be eligible under the rule, a rural community must have a population under 50,000. The rule prioritized domestic, residential, and municipal uses and prohibited the use of water for commercial irrigation purposes. Interested entities (e.g., Reclamation states and western tribes) may request that either (1) Reclamation complete an appraisal investigation or feasibility study or (2) Reclamation provide financial assistance so the entity can conduct an appraisal investigation or feasibility study. \nReclamation began to implement the Rural Water Supply Program in FY2010 on a pilot basis, providing assistance to nonfederal entities to conduct appraisal investigations and feasibility studies. Between FY2009 and FY2012, Congress provided Reclamation a total of $7.9 million for the program. After FY2012, Reclamation no longer requested funding for the program and Congress did not appropriate funds for it. Overall, Reclamation reported using this authority to study approximately 22 projects to varying extents (see Appendix ). Twelve were located in the Reclamation's Great Plains region, five in the Upper Colorado region, four in the Lower Colorado region, and one in the Pacific Northwest region. Of these, Reclamation finalized and approved two feasibility reports: the Musselshell-Judith Rural Water System Feasibility Report (Montana) and the Payson-Cragin Reservoir Water Supply Project Feasibility Report (Arizona). Reclamation did not recommend these or any other projects for authorization, and Congress did not authorize any projects. In justifying its lack of construction recommendations, Reclamation pointed to existing rural water construction obligations, which it argued precluded recommendation of new projects with completed feasibility studies. \nThe authority for the Rural Water Supply Program expired at the end of FY2016 and has not been renewed. Members of Congress have introduced legislation in the 116 th Congress that would reauthorize both the Rural Water Supply Program and particular projects and studies previously considered through the expired program (see \" Legislation in the 116th Congress \").\n\n\tIssues for Congress\n\nCongress continues to fund construction and O&M (only required for tribal components) of authorized rural water projects; however, since the FY2016 expiration of the Rural Water Supply Program, Reclamation has for the most part ceased activities relating to new project study and authorization. Congress may consider conducting oversight or legislating changes to Reclamation's rural water activities, including those related to existing or new program and project authorizations, funding prioritization criteria, and Reclamation's role in supporting rural water projects. \n\n\t\tAddressing Ongoing Rural Water Needs\n\nThe Rural Water Supply Act of 2006 required the Secretary of the Interior to assess the demand for new rural water supply projects in Reclamation states. In FY2009, Reclamation estimated that identified needs for potable water supply systems in rural areas ranged from $5 billion to $8 billion for nontribal needs; in the same year, it estimated approximately $1.2 billion for specific tribal water supply projects. However, the Administration has not recommended, and Congress has not authorized, any new Reclamation rural water projects since 2009. Additionally, because authorization of Reclamation's Rural Water Supply Program lapsed at the end of FY2016, Reclamation lacks a structured program for developing and recommending rural water supply projects. \n\n\t\t\tLegislation in the 116th Congress\n\nIn the 116 th Congress, House and Senate companion bills H.R. 967 and S. 334 , both titled the Clean Water for Rural Communities Act, would authorize $5 million for a feasibility study for the Dry Redwater Rural Water System and $56.7 million (2014 price levels) for construction of the Musselshell-Judith Rural Water System. As noted, a feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program, but the Administration did not recommend the project to Congress for authorization. \nCongress also is considering legislation to reauthorize the Rural Water Supply Program through FY2026. In the 116 th Congress, both the Water Justice Act ( H.R. 4033 ) and the Securing Access for the Central Valley and Enhancing (SAVE) Water Resources Act ( H.R. 2473 ) would reauthorize the existing program. \nCongress may consider other legislative proposals to address the demand for rural water assistance in the West. For example, the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would require the Secretary of the Interior to establish a grant program to provide financial assistance to disadvantaged communities of less than 60,000 residents that have experienced a significant decline in quantity or quality of drinking water. The grants could fund technical assistance, initial operating and capital costs for edible facilities, and up to 25% of such facilities' O&M. Other legislative proposals would address rural water needs by amending authorities to specific water technology and programs. For example, the Western Water Security Act of 2019 ( H.R. 4891 ) would amend the Water Desalination Act of 1996, as amended ( P.L. 104-298 ; 42 U.S.C. \u00c2\u00a710301 note), to add a classification for rural desalination projects with a higher federal cost share than desalination projects serving more than 40,000 individuals.\n\n\t\tFunding of Current and Future Projects\n\nIn early 2020, Reclamation stated that $1.2 billion was needed to complete authorized rural water projects under construction by the agency. In addition, Reclamation has previously estimated nontribal rural water supply needs in excess of $5 billion, and some observers have reported that assistance for communities is needed to address these needs. Some stakeholders have requested continued and increased funding for Reclamation rural water projects. In the 115 th Congress, representatives of the National Water Resources Association and the Family Farm Alliance asked Congress to compel Reclamation and the Office of Management and Budget to implement the Rural Water Supply Program and investigate opportunities to develop loan and loan guarantee programs that can help fund new water infrastructure projects.\nOver the years, Reclamation has provided its views regarding funding for rural water projects. In general, Reclamation has testified that rural water projects must compete with a long list of other priorities, including aging infrastructure, environmental compliance and restoration actions, and dam safety. During the consideration of authorizing existing rural water projects, Reclamation stated that long-standing agency policy was that local sponsors, particularly those that are nontribal, should reimburse Reclamation for 100% of the costs incurred for rural water supply from multipurpose projects. Reclamation notes in its budget requests to Congress that constrained federal budgets do not preclude nonfederal sponsors' ability to move forward with rural water projects by funding in excess of the minimum nonfederal contributions. Reclamation has recommended that tribes, where possible, and other project beneficiaries be responsible for the O&M expenses of their rural water projects. \nCongress has appropriated funds for rural water projects on a nonreimbursable basis (i.e., as de facto grants). In some cases, local and tribal sponsors do not have funds or have not prioritized funds to increase their funding contributions. Should Congress continue to support rural water projects through Reclamation, Congress may consider various options. These might include\nContinue to provide Reclamation annual appropriations for the agency to allocate funds to individually authorized rural water projects based on established agency criteria. Establish mandatory funding for Reclamation to allocate funds to individually authorized rural water projects based on established agency criteria. For example, the Authorized Rural Water Projects Completion Act ( S. 1556 ) in the 115 th Congress would have created a Reclamation Rural Water Construction Account to receive $80 million annually that otherwise would be deposited into the Reclamation Fund. Funds in the Reclamation Rural Water Construction Account, in addition to amounts appropriated for rural water projects, would be available for the construction of authorized rural water projects. Provide grant funding through a competitive process for nonfederal sponsors to support local projects, such as the grant program the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would establish for communities with fewer than 60,000 residents. Direct appropriations to individually authorized rural water projects. \n\n\t\tOther Rural Water Options\n\nAs GAO noted in a 2007 report, numerous federal entities provide funding for water supply and wastewater projects. In addition to Reclamation (which funds only water supply projects), the U.S. Department of Agriculture (USDA), Environmental Protection Agency (EPA), Army Corps of Engineers (USACE), Department of Housing and Urban Development (HUD), and Department of Commerce (DOC) all provide funding for both water supply and wastewater projects. USDA, EPA, HUD, and DOC have formal, nationwide programs with standardized eligibility criteria and processes under which communities compete for funding. In contrast, Reclamation and USACE fund water projects in defined geographic locations under explicit congressional authorizations. According to GAO, Congress has chosen Reclamation to fill a void for projects that are larger and more complex than other rural water projects and that do not meet the criteria of other rural water programs.\nSome might argue that these projects would be better accomplished via other existing federal water quality or water supply programs. However, as GAO has observed, as designed, some of Reclamation's authorized rural water projects do not fit criteria of other agency's programs due to their cost and regional focus; thus, project proponents have looked to Reclamation for funding. For example, Reclamation may assist rural areas with populations in excess of 10,000 residents that may not be eligible for funding under other programs. Reclamation rural water projects also may serve more than one community (i.e., a regional area, as opposed to a single area).\nReclamation developed its Rural Water Supply Program with the intent to complement, rather than duplicate, the efforts of the other agencies' programs and activities. In creating the program, Reclamation signed memoranda of understanding and related documents with other agencies to coordinate efforts. Reclamation has stated that it participates in a variety of broad coordination activities among agencies related to ongoing authorized projects. With the expiration of the Rural Water Supply Program, this formal coordination between Reclamation and other agencies' programs is no longer required.\n\n\t\t\tAppendix. Rural Water Supply Program Appraisal Investigations and Feasibility Studies\n\nThe Bureau of Reclamation (Reclamation) provided the Congressional Research Service with a list of appraisal investigations and feasibility studies conducted for potential projects under the Rural Water Supply Program. Before the program authorization expired in FY2016, 22 appraisal investigations were conducted, with nine recommendations for a feasibility study. Five feasibility studies were conducted. Reclamation did not recommend any projects for construction funding, although two studies found feasible alternatives for rural water supply. Reclamation issued concluding reports for appraisal investigations and feasibility studies of projects that were not recommended for construction funding. Reclamation provided a range of reasons for issuing concluding reports: studies being incomplete, no found feasible alternatives, lack of funding, and program expiration. According to Reclamation, some concluding reports were not issued due to a lack of time or resources. In these cases, Reclamation considered the appraisal reports as concluding reports for the purposes of the Rural Water Supply Program. A feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program. Legislation introduced in the 116 th congress, the Clean Water for Rural Communities Act ( H.R. 967 and S. 334 ), would authorize the Central Montana Musselshell-Judith Rural Water System.","output":null}
{"id":"gao_GAO-20-378","pid":"gao_GAO-20-378_0","input":"\tBackground\n\n\t\tHospice Services\n\nHospice care helps patients who are terminally ill\u2014as well as the families  of those patients\u2014maintain their quality of life. Hospice care focuses on  the comfort of patients (palliative care), not curing the illness. Patients are  eligible for hospice care under Medicare if they have a life expectancy of  six months or less. Most patients get hospice care at home, which  typically includes use of controlled substances, including opioids such as  oxycodone, to provide pain relief. According to CMS, hospice teams are  required to include a physician, nurse, social worker, and pastoral or  other counselor; and may also include hospice aides, trained volunteers,  and speech, physical, and occupational therapists. The patient selects a  primary caregiver when first admitted into home hospice, and this person  becomes a member of the home hospice team. The primary caregiver,  often a family member, provides most of the care for the patient in home  hospice, including most of the physical care for the patient, keeping  records of symptoms and other problems, and communicating with the  hospice team.\n\n\t\tDisposal of Controlled Substances in Home Hospice\n\nThe Controlled Substances Act regulates the manufacture, distribution,  use, and disposal of controlled substances. In general, the Controlled  Substances Act was enacted to facilitate the use of controlled substances  for legitimate medical, scientific, research, and industrial purposes while  preventing them from being diverted for illegal uses. DEA is the primary  agency with responsibility for administering and enforcing the law, and  DEA provides oversight of all persons or entities required to register with  DEA. The Controlled Substances Act has been amended twice to clarify  federal requirements for patient disposal of controlled substances.\n2010. The Secure and Responsible Drug Disposal Act of 2010  amended the Controlled Substances Act to allow a patient who has  lawfully obtained a controlled substance to deliver the controlled  substance to another person for the purpose of disposal, without  being registered with DEA. Any person lawfully entitled to dispose of  a deceased patient\u2019s property may also deliver the patient\u2019s controlled  substances to another person for the purpose of disposal. The person  receiving the controlled substances must be legally authorized to do  so and the disposal has to take place in accordance with DEA  regulations, which DEA issued in 2014. Among other things, the DEA  rulemaking clarified that home hospice personnel could not dispose of  a deceased patient\u2019s controlled substances unless authorized to  dispose of the patient\u2019s property by a state or local law. Instead, the  rulemaking encouraged home hospice personnel to assist patients  and their families in disposing of controlled substances in accordance  with the Controlled Substances Act, and partner with authorized  collectors to promote or jointly conduct mail-back programs.\n2018. The SUPPORT Act amended the Controlled Substances Act to  allow employees of qualified hospices, whether or not registered with  DEA, to dispose of a patient\u2019s unused controlled substances onsite  and in accordance with all applicable laws after the patient\u2019s death or  the controlled substance expires. The employee must be a  physician, physician assistant, nurse, or other person who is: employed by a qualified hospice;  licensed to perform medical or nursing services by the jurisdiction  in which the patient is receiving hospice care; acting within the scope of their employment in accordance with  applicable state law; and  trained on the disposal of controlled substances by the qualified  hospice.\nIf the hospice patient no longer requires the controlled substances  because of a change in his or her care plan, only the patient\u2019s DEA- registered physician may dispose of the patient\u2019s unused controlled  substances. The authority to dispose of unused controlled substances  under the SUPPORT Act applies only to qualified hospices. Such  hospices must have written policies and procedures for assisting in the  disposal of controlled substances after the patient\u2019s death, and must  document that they provided and discussed these policies and  procedures in an understandable manner with the patient and family. In  addition, the hospice must document the type of controlled substance,  dosage, route of administration, and quantity disposed, as well as the  time, date, and manner in which the disposal occurred. The SUPPORT  Act also allows the Attorney General to issue guidance to hospices  regarding the disposal of controlled substances in patients\u2019 homes.\n\n\t\tFederal Oversight\n\nAccording to DEA officials, DEA\u2019s oversight of the disposal of controlled  substances in home hospices is limited to instances of suspected or  actual diversion. This is because the SUPPORT Act allows employees of  qualified home hospices to dispose of unused controlled substances in  patients\u2019 homes without registering with DEA.\nCMS regulates Medicare-certified home hospices through the Hospice  Conditions of Participation, which are intended to protect the health and  safety of individuals under hospice care. Hospices must be in compliance  with the Hospice Conditions of Participation to participate in the Medicare  program. CMS oversees compliance with the Hospice Conditions of  Participation primarily through inspections, which are conducted by state  survey agencies contracted by CMS or CMS-approved national private  accrediting organizations. Among other things, the Hospice Conditions of  Participation require hospices to have written policies and procedures for  the management and disposal of controlled substances in the patient\u2019s  home, discuss the hospice policies and procedures for managing the safe  use and disposal of controlled substances with the patient and family in a  manner that they understand, and document that the written policies and  procedures for managing controlled substances were provided and  discussed. CMS does not oversee the disposal process.\n\n\tSelected Home Hospices\u2019 Experiences, Best Practices, and Challenges in Disposing of Controlled Substances\n\n\t\tSelected Home Hospices\u2019 Experiences Disposing of Controlled Substances\n\nAccording to a national hospice association official, each hospice had a  different approach to disposal prior to the DEA rulemaking in 2014. Some  hospices asked their employees to dispose of controlled substances to  prevent diversion and others did not. After the DEA rulemaking, some  states enacted laws granting authority to hospice employees to dispose of  patients\u2019 unused controlled substances when the medications were no  longer needed, upon death of the patient, or both. Requirements under  states\u2019 laws vary (see appendix I).\nHospices in some states without laws on the disposal of controlled  substances in home hospice began, or resumed, disposing controlled  substances in patients\u2019 homes following the enactment of the SUPPORT  Act in 2018. Officials from six selected home hospices expressed  support for the authority to dispose of controlled substances granted by  the SUPPORT Act, and officials we interviewed from two hospices  operating in states without disposal laws told us their hospices had  resumed disposing of controlled substances in patients\u2019 homes under the  authority granted by the SUPPORT Act. In contrast, an official from one  hospice told us that their hospice had not begun disposing of these  medications with the enactment of the SUPPORT Act because the state  department of health directed it not to do so until a state law granting  disposal authority to hospices had been enacted. For now, the hospice  has continued with its practice of educating patients\u2019 family members on  how to dispose of controlled substances themselves.\n\n\t\tSelected Home Hospices\u2019 Policies and Best Practices for Disposing of Controlled Substances and Reducing the Risk of Diversion\n\nMedicare-certified hospices, including the seven we selected for our  review, are required by CMS\u2019s Hospice Conditions of Participation to  have written policies and procedures for the safe disposal of controlled  substances in a patient\u2019s home. The policies and procedures may include  best practices, such as measures for assessing and mitigating the risk of  diversion in a patient\u2019s home, and if and how the hospice will conduct  controlled substance disposal. According to officials we interviewed from  the selected hospices and state hospice associations, hospices utilize  various strategies or best practices to attempt to mitigate diversion risks,  including, but not limited to, the following:\nEducation on controlled substance use and disposal. Hospice  policies may include disposal education for patients and their  caregivers. Specifically, officials from five hospices and five state  hospice associations said that patient and family member education  on controlled substances and their disposal begins or should begin  upon the patient\u2019s admission into hospice care or as soon as possible  thereafter. According to officials from three hospices, their staff may  use written agreements or acknowledgements that must be signed by  the patient or their caregiver. An official from one hospice association  told us the association made an agreement template available to their  hospice members that can be used to ensure patients understand  how to properly use prescribed controlled substances, agree to use  them properly, and will not give them to anyone else.\nPrescription drug counts. Officials from four hospices and two state  hospice associations told us that, in general, nurses conduct  prescription drug counts at every visit to check if the proper amounts  of medications remain. Officials from two of these hospices said that  drug counts should require the family\u2019s acknowledgement or be  witnessed. Officials from three other state hospice associations  mentioned that their members use drug counts as well but did not  specify if this occurred at every visit. These counts can be used to  recognize possible drug misuse or diversion. If there is an indication  that diversion may be the cause of an incorrect count, hospices can  put additional drug diversion risk reduction practices in place.\nLockboxes. If diversion is suspected to be a risk or if there are  children present in the patient\u2019s home, a hospice may choose to use a  lockbox to store the patient\u2019s medications and limit access to only an  alert patient or their caregivers. Officials from five hospices and five  state hospice associations mentioned that their employees and  members use lockboxes for such purposes. One hospice official  explained that lockboxes may also be used as an accountability tool  so that those with access cannot accuse others of stealing if drugs are  unaccounted for.\nPharmacy cooperation. A hospice may choose to have the  pharmacy mail a prescribed controlled substance in smaller quantities  and with greater frequency. For example, an official from one of the  selected hospices explained that the pharmacy they use will deliver  medications as often as daily if needed to reduce the risk of controlled  substances being diverted. Similarly, an official from a state hospice  association explained that some pharmacy managers and benefits  managers note when a refill for a prescription is requested sooner  than it should have been and alert the hospice.\nWitnessed disposal or assisted disposal. Pursuant to some state  disposal laws and according to officials from five hospices and four  state hospice associations, controlled substance disposal and  assisted disposal must or should be performed with a witness present.  The state disposal laws may specify who the witness must be. For  example, according to two state laws, a family member or a second  hospice employee may witness disposal.\nIn-home disposal products. Hospices may have varying  preferences for how they dispose of controlled substances; officials  from four of the selected hospices mentioned using in-home disposal  products, and two specifically explained they believed these to be the  safest disposal method, even though, according to the officials, it can  be costly. Officials from another hospice told us they receive their in- home disposal products through a grant program.\nDocumentation. Officials from four selected hospices told us their  employees document the completion of certain tasks, such as  diversion risk assessments, drug counts, drug disposal, and the  refusal of drug disposal. An official from one of these hospices told us  their staff perform and document a diversion risk assessment of the  patient\u2019s home. While officials from four hospices told us their  employees perform drug counts, only one official specified that  employees from their hospice document the drug counts. Another  hospice official explained that disposal documentation includes the  name, dosage, form, and administration method of the medication.  One hospice official told us that if a patient\u2019s family members refuse  disposal, they must sign a form stating they declined to allow the  nurse to dispose of the patient\u2019s remaining drugs.\n\n\t\tSelected Home Hospices\u2019 Challenges with Disposing of Controlled Substances\n\nOfficials from selected hospices and state hospice associations in our  review described various challenges associated with disposing of  controlled substances in patients\u2019 homes. The challenges described by  the selected hospices and state hospice associations include but are not  limited to the following:\nCertain disposal methods may be too costly. An official from one  state hospice association said that most of its members do not use a  drug disposal process, which may include a mail-back program or in- home disposal product, because it is an extra expense, and an official  from one hospice said that after pricing an in-home disposal product,  their hospice decided it was cost prohibitive. One state hospice  association official explained that although most of its in-home  hospice members use an in-home disposal product, in instances  when the hospice employee is disposing of 40 to 50 vials, the  expense of this disposal method can be burdensome. The official told  us the product costs approximately $6 each and fits four to five vials  of pills in each.\nDisposal can be time consuming. One hospice official said that  disposal can sometimes be a time-consuming and resource-intensive  activity. According to two state hospice association officials,  sometimes a patient\u2019s family will ask the disposing hospice employee  to dispose of all of the patient\u2019s unused prescription drugs that remain  in the home, not only controlled substances or drugs prescribed under  hospice care. Officials from two of our selected hospices and two  state hospice associations told us that it is not atypical for a hospice  patient to have bags or boxes full of unused medications, though the  officials did not describe this as a disposal challenge for hospices.\nLack of a witness. One hospice official told us that it is a challenge  when a witness is not available or is unwilling to participate in a drug  count or disposal. Another hospice official indicated that the patient\u2019s  primary caregiver is not always the family member present at the time  of a drug count or disposal. This can create a challenge, as the  hospice employee must either wait for the patient\u2019s primary caregiver  to arrive, or for that person to agree to witness a count, disposal, or  both.\nFamily members and caregivers sometimes refuse to dispose of  controlled substances. Officials from two hospices and three state  hospice associations indicated that a family\u2019s refusal to dispose of a  patient\u2019s remaining medications can be a challenge, though one  hospice official said it occurs infrequently. An official from another  hospice said that if a family initially refuses disposal, hospice staff  return after two weeks to complete the disposal process.\nInconsistencies between state laws and federal law. Hospices  must comply with applicable federal and state laws governing  controlled substances, and to the extent state law is inconsistent with  the Controlled Substances Act, hospices must follow federal law.  Hospice officials told us that inconsistencies between state laws and  federal law can cause challenges. For example, the SUPPORT Act  limits disposal to only physicians, physician assistants, nurses, or  other hospice employees who are licensed to provide medical or  nursing services. An official from one hospice stated that the hospice  used the help of social workers and volunteers to dispose of  controlled substances. Regulations in this state do not specify which  types of hospice employees are permitted to assist with disposal.  According to the official, social workers and volunteers helped dispose  of patients\u2019 controlled substances when disposal occurred at a later  time, rather than immediately following a patient\u2019s death. Since the  SUPPORT Act limits disposal to home hospice personnel with specific  qualifications, it is unclear whether hospices are able to allow social  workers and volunteers to help in that capacity.\nAs another example, under the SUPPORT Act, only a hospice  patient\u2019s DEA-registered physician can dispose of the patient\u2019s  controlled substances if the plan of care has been modified.  However, some state laws allow other types of hospice employees to  perform disposal in this circumstance. Officials from two hospices in  these states indicated it will be a challenge for disposal to be limited to  physicians when a patient\u2019s plan of care is modified. Similarly, officials  from two other selected hospices in states without disposal laws also  stated that this would be a challenge. For example, one hospice  official explained that their hospice does not have many physicians,  and it would be unlikely for a physician to be able to visit a patient\u2019s  home solely to handle disposal.\n\n\tAgency Comments\n\nWe provided a draft of this report to the Departments of Justice and  Health and Human Services for review. The Departments of Justice and  Health and Human Services provided technical comments, which we  incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Attorney General of Justice, 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.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at 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 II.\n\nAppendix I: Summary of Five States\u2019 Controlled Substances Disposal Laws for Hospices\n\nTo describe what is known about selected hospices\u2019 experiences  disposing of and preventing the diversion of controlled substances in  home settings, we selected five states with laws on the disposal of  controlled substances in home hospices and six states without such  laws. The five states with disposal laws were chosen for this review  because they had state hospice associations that were involved in  disposal discussions with a national hospice association or they had  higher opioid-related death rates than most states. The summaries in  Table 1 below reflect our reviews of the five states\u2019 laws.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact name above, Martin T. Gahart (Assistant  Director), Deborah J. Miller (Analyst in Charge), Samuel G. Amrhein,  Kaitlin M. Farquharson, and Christina C. Murphy made key contributions  to this report.","output":null}
{"id":"gao_GAO-20-24","pid":"gao_GAO-20-24_0","input":"\tBackground\n\nApproximately 51,000 drinking water systems and 15,000 public  wastewater systems provide clean and safe water to communities  nationwide. About 9,000 drinking water systems provide service to 92  percent of the total population, or approximately 273 million people  nationwide. The remaining 8 percent of the population is served by small  systems that according to the American Society of Engineers frequently  do not have the financial, managerial, and technical capabilities  necessary to meet state and federal requirements for safe drinking water,  such as limits in the levels of specific contaminants in drinking water.\nDrinking water and wastewater facilities include infrastructure such as  tanks, pipes, pumps, and buildings that contain electrical, chemical, and  mechanical equipment to treat and test water. The infrastructure is often  built to last for over 50 years or longer, depending on the equipment.  Many utilities in the country were built decades ago and therefore have  existing and aging infrastructure that they must operate and maintain.  Utilities generally develop long-term capital plans to identify the  infrastructure they will need to replace or rebuild in the future.\nUtilities generally use historic records of seasonal precipitation, runoff,  water temperature, and snow pack levels to determine how their systems  should be designed and operated. According to the Water Research  Foundation\u2019s 2014 study, utilities have designed their infrastructure based  on the expectation that future climate conditions will remain the same and  have used historical climate or other data within a 100-year range.  Generally, the study reported that utility infrastructure is designed and  operated to convey or treat water up to a specific threshold amount based  on these historic records.\nAs they plan to rebuild or replace their infrastructure, utilities employ or  contract with engineers to ensure that their infrastructure treats and  transports water appropriately to meet standards under the Safe Drinking  Water Act or the Clean Water Act. Under the Safe Drinking Water Act,  EPA, among other actions, sets standards to protect the nation\u2019s drinking  water from contaminants, such as lead and arsenic. The Clean Water Act  generally prohibits the discharge of pollutants from \u201cpoint sources\u201d\u2014such  as discharge pipes from industrial facilities and wastewater treatment  facilities\u2014without a permit.\nDrinking water and wastewater infrastructure remain the largest financial  investment by communities nationwide, according to the Water Research  Foundation\u2019s 2014 Study. To pay for operations, maintenance, repair,  and replacement of their infrastructure, drinking water and wastewater  utilities generally raise revenues by charging their customers for the  services they provide. In addition, the federal government invests in  drinking water and wastewater infrastructure, as we reported in  September 2017. In 2017, the most recent year for which data were  available, state and local governments spent approximately $109 billion  on their drinking water and wastewater infrastructure, according to  Congressional Budget Office data. During the same time period, the  federal government spent approximately $4 billion on drinking water and  wastewater infrastructure.\n\n\t\tClimate Information Provided by the Federal Government\n\nAgencies across the federal government, such as NOAA and the National  Aeronautics and Space Administration, collect and manage many types of  climate information and provide technical assistance to make this  information more meaningful to federal, state, local, and private decision  makers. Decision makers from all levels of government and the private  sector use different types of climate information in their planning  processes to reduce the potential impacts of climate change. To be  useful, climate information must be tailored to meet the needs of each  decision maker, such as an engineer responsible for building a bridge in a  specific location, a county planner responsible for managing development  in a large region, or a federal official managing a national-scale program.  Decision makers also need climate information at different timescales  corresponding to the short-, medium-, or long-term nature of their  planning processes. A 2011 World Meteorological Organization report  stated that decision makers need access to expert advice and support to  help them select and properly apply climate information.\nAccording to a 2010 National Research Council report on making  informed decisions about climate change and our November 2015 report  on climate information, most decision makers need a basic set of  information to understand and make choices about how to adapt to  climate change. The set of information includes the following:  Information and analysis about observed climate conditions. This  includes information on, for example, temperature, precipitation,  drought, storms, and sea level rise and how they may be changing in  a local area.\nInformation about observed climate impacts and vulnerabilities.  This includes site-specific and relevant information on environmental,  social, and economic impacts and vulnerabilities, resulting from  observed changes in the climate against which past and current  decisions can be monitored, evaluated, and modified over time.\nProjections of what climate change may mean for a local area.\nThis includes, for example, projections based on easily  understandable best- and worst-case scenarios with confidence  intervals and probability estimates and examples of potential climate  impacts. The primary source is NOAA\u2019s online Climate Explorer,  which provides climate projections in a range of climate variables  relevant to decision makers for every county in the contiguous United  States, enabling users to compare historical climate observations  under two possible climate change scenarios that could occur this  century.\nInformation on the economic and health impacts of climate  change. Observed and projected local impacts must be translated  into costs and benefits, as this information is needed for many  decision-making processes.\nAgencies across the federal government collect and manage many types  of climate information, including observational records from satellites and  weather monitoring stations on temperature and precipitation, among  other things; projections from complex climate models; and other tools to  make this information more meaningful to decision makers.\n\n\t\tFederal Planning for Critical Infrastructure Resilience\n\nPresidential Policy Directive 21 directs federal agencies to work with  owners and operators and state, local, tribal, and territorial entities to  manage risks and strengthen the security and resilience of critical  infrastructure against all hazards. The directive, issued in 2013,  identifies 16 critical infrastructure sectors whose assets, systems, and  networks\u2014either physical or virtual\u2014are considered so vital to the United  States that their incapacitation or destruction would have a debilitating  effect on the nation\u2019s security, economy, and public health or safety. One  of the sectors is the Water and Wastewater Sector. The directive  established a national policy on critical infrastructure security and  resilience and made DHS the lead agency to coordinate the overall  federal effort to promote security and resilience of the nation\u2019s critical  infrastructure.\nThe directive assigned protection responsibilities to selected federal  government agencies and departments, called Sector Specific Agencies,  and designated EPA as the Sector Specific Agency for the Water and  Wastewater Sector. As the Sector Specific Agency, EPA organized a  Water and Wastewater Government Coordinating Council, including  federal, state, and local decision makers. In turn, water utility owners and  operators organized the Water and Wastewater Sector Coordinating  Council. EPA and the councils work together and are responsible for  planning and implementing the sector\u2019s security and resilience activities.\nPresidential Policy Directive 21 also directed the DHS to update the  National Infrastructure Protection Plan to provide a framework for how  federal, state and local decision makers and private sector stakeholders  can coordinate to improve the security and resilience of critical  infrastructure. The DHS updated the National Infrastructure Protection  Plan in 2013 and EPA issued the Water and Wastewater Sector-Specific  Plan in 2015.\nIn 2016, the Water and Wastewater Government Coordinating Council  and the Water and Wastewater Sector Coordinating Council chartered the  Water and Wastewater Sector Strategic Roadmap Work Group to review  key threats and vulnerabilities of the sector, identify gaps in the sector\u2019s  capabilities relative to the key threats and vulnerabilities, and develop  priorities and associated actions to address those gaps. In 2017, the work  group issued the report, Roadmap to a Secure and Resilient Water and  Wastewater Sector (Roadmap), in part, to help inform utilities\u2019, industry  groups\u2019, and government agencies\u2019 planning processes and to support  collaboration and leverage resources between stakeholders in the  sector. The resulting report identified weather-related disasters, such as  floods and earthquakes, and long-term climate-related hazards, such as  drought and sea level rise, as among the most significant risks to drinking  water and wastewater infrastructure.\n\n\t\tGAO Work on Climate Information and Disaster Resilience\n\nOur previous work on climate change found that the federal government  could improve the way that it provides information to facilitate more  informed local infrastructure adaptation decisions. In November 2015, we  reported that federal agencies could help local infrastructure decision  makers by providing the best available climate-related information and by  clarifying federal sources of technical assistance for incorporating climate- related information into their planning. In November 2015, we found that  federal efforts to provide climate information could be improved by  incorporating key organizational and data elements, including (1) a  focused and accountable organization; (2) authoritative data that define  the best available information for decision makers; and (3) technical  assistance to help decision makers assess, translate, and use climate  information in planning. We recommended that the Executive Office of  the President direct a federal entity to develop a set of authoritative  climate change projections and observations and create a national  climate information system with defined roles for federal and nonfederal  entities. The Executive Office of the President neither agreed nor  disagreed with the recommendations and, as of May 2018, had not  implemented them.\nOur previous work on natural disasters found that disaster costs are a key  source of federal fiscal exposure. In our July 2015 report on Hurricane  Sandy, we found that there was no comprehensive, strategic approach to  identifying, prioritizing, and implementing investments for disaster  resilience, which increases the risk that the federal government and  nonfederal partners will experience lower returns on investments or lost  opportunities to strengthen critical infrastructure. We recommended that  the Mitigation Framework Leadership Group\u2014an interagency group  chaired by FEMA that organizes mitigation efforts across the federal  government and assesses the effectiveness of mitigation strategies\u2014 establish an investment strategy to identify, prioritize, and guide federal  investments in disaster resilience and hazard mitigation-related activities  and make recommendations to the President and Congress on how the  nation should prioritize future disaster resilience investments. The  Mitigation Framework Leadership Group agreed and issued the National  Mitigation Investment Strategy in August 2019.\nIn September 2018, we reported that four near-sequential disasters in  2017\u2014Hurricane Harvey, Hurricane Irma, Hurricane Maria, and the  California wildfires\u2014created an unprecedented demand for federal  disaster response and recovery resources and that Hurricanes Harvey,  Irma, and Maria ranked among the top five costliest hurricanes on  record. As of June 2018, Congress had appropriated over $120 billion in  supplemental funding for response and recovery related to the 2017  hurricanes and wildfires.\nIn October 2019, we issued a Disaster Resilience Framework that  identifies federal actions and opportunities to enhance and promote  disaster and climate change resilience nationwide focusing on three  principles where the federal government can influence decision-making.  First, the framework states that federal action can help ensure that  decision makers at all levels of government and across industrial sectors  can access, understand, and use information on current and future  disaster risk. As part of this, federal agencies can use risk reduction  strategies, such as providing technical assistance to help decision makers  use climate information in their infrastructure investment decisions.  Second, the framework stated that federal agencies can help decision  makers use risk reduction strategies and prioritize all types of risk. For  example, federal agencies can ensure that federal programs and policies  that support disaster risk reduction are well coordinated. Third, the  framework stated that federal agencies can provide decision makers at all  levels of government and across sectors with incentives to make long- term, forward-looking risk reduction investments and remove barriers to  such investments.\n\n\tPotential Climate Change Impacts Could Have Various Effects on Drinking Water and Wastewater Infrastructure, and the Type and Severity of the Effects Will Vary by Region\n\nProjected increases in the frequency, severity, and duration of extreme  temperature changes or precipitation events, as well as rising sea levels,  are among the potential impacts of climate change that may affect  drinking water and wastewater infrastructure. The type and severity of  these potential impacts on drinking water and wastewater infrastructure  will vary by region.\nEPA, the USGCRP, NOAA, and other federal agencies have identified a  variety of potential climate change impacts that may affect drinking water  and wastewater infrastructure, as well as other critical and interconnected  industries. EPA\u2019s Adaptation Strategies Guide for Water Utilities (Guide)  identifies five general categories of climate change impacts that can affect  drinking water and wastewater utilities: ecosystem changes, droughts,  floods, water quality degradation, and changes in service demand and  use. Within these five general categories, EPA has identified specific  climate change impacts that may affect drinking water and wastewater  infrastructure systems. For example, degraded water quality from  decreased stream flows may lead to higher treatment costs and the need  for capital improvements to treat wastewater before discharging it from  wastewater treatment facilities to meet more stringent regulatory  requirements. Additionally, projected sea level rise can lead to saltwater  intrusion in coastal groundwater aquifers and in estuaries. This may  degrade water quality and increase treatment costs for drinking water  treatment facilities or require new desalination facilities to treat water  supplies with higher salt content.\nAccording to the Fourth National Climate Assessment, compound  extreme events\u2014the combination of two or more hazard events or  climate variables (e.g., extreme rainfall and storm surge) that occur  simultaneously or consecutively that lead to an extreme impact\u2014have a  multiplying effect on the risk to drinking water and wastewater  infrastructure systems. Compound extreme events can also increase the  risk of cascading infrastructure failure since some infrastructure systems  rely on others and the failure of one system can lead to the failure of  interconnected systems. This includes a water infrastructure system  relying on the energy sector for power to operate pump stations and  drinking water and wastewater treatment facilities. For example, during  Hurricane Sandy in 2012, extreme rainfall coincided with high tides  creating a storm surge. Hurricane Sandy caused power outages and  flooding at eight of New York City\u2019s 14 wastewater treatment facilities and  42 of the city\u2019s 96 pumping stations. Further, power outages and flooding  of wastewater treatment facilities and the large influx of floodwater in the  sewer system resulted in the release of approximately 562 million gallons  of untreated and diluted sewage into local waterways, as shown in figure  1.\nThe Fourth National Climate Assessment states that drinking water and  wastewater infrastructure in every region in the United States are  sensitive to weather- and climate-related events and noted that the  effects of such events will vary in severity and type by region, meaning  different measures will be required to make infrastructure more resilient.  The Fourth National Climate Assessment established 10 climate regions  to better address the risks and needs of specific regions across the  United States. Further, EPA\u2019s Guide states that the type and severity of  potential climate impacts on utilities will vary by region, and identifies the  impacts that have the greatest likelihood of affecting utilities in the  different regions and along the U.S. coast.\nFor example, in the Southwest, increased duration and intensity of  drought may stress water supplies and increase water demand for  agricultural uses, increase energy requirements to treat and cool drinking  water and wastewater effluent, and require investments in new water  sources and options for reusing water. In the Northwest, increased water  temperatures, as well as wildfires that create increased nutrient runoff,  may degrade drinking water quality from higher levels of harmful toxins  and algal blooms, and require drinking water utilities to develop increased  treatment capabilities.\nThe interactive map in figure 2 displays the 10 climate regions as  established in the Fourth National Climate Assessment and the U.S.  coasts, the most relevant potential climate change impacts for each  region and the coast, and examples of the potential effects on drinking  water and wastewater utilities, according to EPA\u2019s Guide.\n\n\tOne Federal Program Is Designed to Provide Technical Assistance to Water Utilities for Climate Resilience, but Options Exist for Coordinating Additional Technical Assistance\n\nOne federal program\u2014EPA\u2019s Creating Resilient Water Utilities initiative\u2014 is designed to provide technical assistance to drinking water and  wastewater utilities for planning climate resilient infrastructure, although  the 15 selected utilities used a mix of sources, including other federal  programs, to obtain technical assistance with understanding climate  impacts and designing resilient infrastructure. To provide additional  technical assistance for climate resilience, selected experts generally  supported the option of developing a coordinated network of technical  assistance providers including federal and state agencies, universities,  consultants, and industry groups.\n\n\t\tEPA\u2019s Creating Resilient Water Utilities Initiative Is Designed to Provide Technical Assistance to Water Utilities for Climate Resilience\n\nOur review of the programs federal agencies\u2019 used to provide technical  assistance to 15 selected utilities to help make drinking water and  wastewater infrastructure more climate resilient found that one program\u2014 EPA\u2019s Creating Resilient Water Utilities initiative (CRWU)\u2014was  specifically designed to provide drinking water, wastewater, and  stormwater utilities with the practical tools, resources, training, and  technical assistance needed to increase resilience to extreme weather  events. The initiative provides web-based tools and resources in the form  of an interactive guide, a case studies map, a risk assessment tool,  climate scenario projection maps, and storm surge inundation maps to  help drinking water and wastewater utilities understand potential long- term risks and options to enhance their resilience to climate impacts,  including extreme weather events. Furthermore, CRWU provides direct  utility technical assistance and training through workshops and onsite  exercises with utilities. As part of the initiative, EPA developed the  Climate Resilience Evaluation and Assessment Tool (CREAT), a web- based application to assist drinking water and wastewater utilities in  understanding potential climate change impacts and assessing the  related risks to their systems. EPA also developed a Resilient Strategies  Guide for Water Utilities, a web-based interactive guide to help drinking  water and wastewater utilities identify resilience strategies to prepare for  droughts, protect water quality, build flood protections, preserve  ecosystems, maintain service levels, improve energy efficiency,  implement green infrastructure, and conserve water. In addition, from  2010 through 2013, EPA collaborated with the Water Research  Foundation and NOAA to publish the results of a series of workshops  assessing the information and tools necessary to incorporate climate risks  into utility planning.\nAs part of a pilot program to help EPA develop CREAT, most of the  drinking water and wastewater utilities we reviewed used CREAT to  conduct climate risk assessments of their systems. Utility  representatives said the tool was a helpful starting point for thinking about  potential climate risks and vulnerable infrastructure qualitatively. For  example, Bozeman Water and Sewer (Bozeman, Montana) used CREAT  to assess potential consequences of drought, water quality changes, and  wildfires on their drinking water assets and operations to better  understand their systems\u2019 vulnerabilities and start thinking about potential  resilience measures. Keene Public Works (Keene, New Hampshire) also  used CREAT to assess potential climate change impacts from extreme  precipitation events on their water supplies and drinking water system  and evaluate the performance and costs of additional short-term and  long-term resilience measures. However, representatives from a few  drinking water and wastewater utilities said they used additional  assistance from consulting firms to help them use CREAT, and to  complete assessments on the current and future climate risks to their  infrastructure systems.\nA few other federal agencies have been involved in efforts to help utilities  incorporate climate resilience into their planning, but their programs were  not specifically designed to provide technical assistance to water utilities.  NOAA\u2019s Regional Integrated Science Assessments (RISA) program and  the National Center for Atmospheric Research (NCAR) worked with  utilities and EPA, through an effort called the Water Utility Climate  Alliance which aims to enhance the quality and accessibility of regional  climate change data to help improve water resource planning, develop  adaptation strategies, and assist overall decision-making for water-related  policies. The alliance, which was formed in 2007 and includes 12 of the  nation\u2019s largest drinking water utilities, provides leadership and  collaboration on climate change issues affecting the country\u2019s water  agencies. The alliance collaborates with member agencies, federal  agencies, industry groups, academia, and consulting firms to provide  workshops on planning for climate change uncertainty for drinking water  and wastewater sector professionals.\nRepresentatives from the New York City Department of Environmental  Protection (New York City, New York) and the San Diego County Water  Authority (San Diego, California), stated that through their membership in  the alliance, they have used technical assistance from NOAA\u2019s RISA  program research teams and the Water Research Foundation to manage  their climate risks. Specifically, in 2010, four Water Utility Climate Alliance  members, including the New York Department of Environmental  Protection (New York City, New York), contributed to a pilot project to  better understand how climate change might affect their water systems  through collaboration between climate experts and utilities, with the goal  of improving the process of producing climate information utilities need for  decision-making. Two RISA research teams, the Consortium on Climate  Risk in the Urban Northeast at Columbia University and the Pacific  Northwest Climate Impacts Research Consortium at Oregon State  University, provided technical assistance on climate information and  modeling to support the effort. In 2013, three Water Utility Climate  Alliance members, including the San Diego County Water Authority (San  Diego, California), contributed to a research study to increase the  adaptive capacity of water utilities in planning for and responding to  pressures that may result from climate change, particularly related to the  demand for water. The Water Research Foundation led the study.\nWe found that other federal programs offer technical assistance, but the  assistance is either not targeted to drinking water and wastewater utilities  or it is not specific to climate impacts. For example, San Diego Public  Utilities (San Diego, California) worked with the Bureau of Reclamation to  assess the region\u2019s water supply and demand, determine the potential  effects from climate change impacts within the region, and explore  alternatives for addressing future water management challenges.  Utilities in Estes Park, Colorado and Iowa City, Iowa worked with FEMA  after flood events to develop long-term recovery plans that made their  river pipeline crossings stronger and moved a wastewater treatment plant  from the floodplain, respectively. In addition, several of the selected  utilities worked with NOAA or the U.S. Geological Survey to collect data  necessary for planning efforts, including monitoring weather and storms,  rainfall levels from stream gauges, and salt water intrusion into water  supplies. Houston Water (Houston, Texas) also used NOAA\u2019s Atlas 14  Precipitation-Frequency Atlas to update its floodplain regulations and  redefine the amount of rainfall it takes to qualify as a 100-year or 1,000- year flood event (see fig. 3 for pictures of flooded infrastructure).\nTo date, federal efforts to provide technical assistance to help drinking  water and wastewater utilities manage climate risks have been small- scale or pilot efforts to develop tools and information. For example, EPA\u2019s  CRWU has developed a number of tools and guides for utilities and has  provided training and assisted a number of utilities, but the number of  utilities that EPA helped directly is small\u2014about 50\u2014and EPA does not  have the resources to provide assistance to all utilities, according to EPA  officials. Similarly, the Water Utility Climate Alliance\u2019s membership  consists of 12 utilities in large metropolitan areas, and has focused on  large utilities when developing examples of how drinking water utilities  can plan for climate risks according to Water Utility Climate Alliance  representatives; however, these alliance members are large enough to  have in-house climate expertise and have established relationships with  federal or university-based climate services providers. According to  industry group officials, the majority of the 70,000 utilities across the  country are small and do not have resources to work with consultants or  research climate information.\nWhile water utilities used federal technical assistance, we found that  almost all of the selected drinking water and wastewater utilities,  regardless of size, used a mix of technical assistance providers including  consultants, industry groups, academia, or federal programs to help them  plan for resilience projects, as shown in appendix IV. Most of the selected  utilities said they used a mix of assistance because they needed help  understanding what climate information and climate models were  appropriate to use for their regions and locales. For example, Anacortes  Public Works (Anacortes, Washington) worked with the Skagit Climate  Science Consortium\u2014a nonprofit organization\u2014to conduct a climate risk  assessment for their drinking water system. Anacortes Public Works  used the initial climate risk assessment to implement projects that will  increase their resilience to the most significant effects from climate- related impacts, flooding, and increased sediment levels in their water  supply (see fig. 4). Anacortes Public Works plans to work with the  consortium again to better understand how rising sea levels and  increasing salinity levels will affect their drinking water supply in the  future. A few utilities said that technical assistance efforts should be a  collaborative process between the utilities using climate information to  make decisions and the scientists providing the technical assistance to  ensure that climate information and models are what drinking water and  wastewater utilities need to plan for climate resilience.\n\n\t\tSelected Experts Stated That Additional Technical Assistance and a Network of Technical Assistance Providers Could Help Utilities Enhance Climate Resilience\n\nAll 10 of the selected experts we interviewed said that drinking water and  wastewater utilities need additional technical assistance to manage  climate risks. Specifically, these experts stated that utilities need technical  assistance to use key climate information to incorporate climate resilience  into their planning and operations. This information includes the following:  forward-looking climate information and models to identify  vulnerabilities to specific geographic regions; potential climate change impacts on regional and local socioeconomic  and demographic trends for utility users; hydrologic information on the movement, distribution, and quality of  water at the local, regional, and\/or watershed level; and estimates of benefits and costs of incorporating resilience into utility  projects.\nAccording to several of the selected experts we interviewed, such  information is provided through a mix of sources, depending on what is  available, and all sources are needed. Several selected experts also said  that the utilities could obtain forward-looking climate information and  models from federal agencies, such as NOAA, and could obtain  information on potential climate change impacts from CREAT. In addition,  several experts stated that they could obtain local socioeconomic and  demographic data, hydrologic information, and benefit-cost information  from industry sources, universities, and consultants.\nSeveral of the experts we interviewed also said that such assistance is  not a one-time event, but requires consistent and continuous collaborative  efforts between utilities and technical assistance providers. For example,  several experts said that utilities need technical assistance on an ongoing  basis to reevaluate their planning and operations regularly given the  uncertainty associated with the severity of some potential climate risks. In  addition, several experts said that individual utilities need help  understanding which climate information and analytical tools are  appropriate for assessing the climate risks specific to their regions or  localities, and how to use them to manage climate risks to their  infrastructure. Almost all of the experts said that small and rural utilities  would need additional technical assistance to collect and use the  information necessary to enhance their resilience to climate change  impacts. Specifically, several experts said that, as opposed to many large  utilities, small utilities lack the technical capacity to use climate  information and do not have the financial resources to hire consultants or  develop the internal expertise necessary to manage climate risks to their  drinking water and wastewater infrastructure.\nFurther, most of the selected experts we interviewed stated that a  network of providers would be needed to provide assistance to water  utilities. This is consistent with what we and others have previously  reported. For example, we reported in November 2015 that clearly  organized technical assistance would improve federal climate information  efforts by helping different types of decision makers\u2014ranging from those  who can define their needs to those who have limited experience using  climate information\u2014access, translate, and use climate information. We  also found that key stakeholders and relevant studies generally called for  a system of nonfederal technical assistance providers, with federal  leadership to help federal, state, and local decision makers, including  utility decision makers, use climate information. In addition, a 2014 task  force of state, local, and tribal leaders stated that the greatest need for  enhancing climate resilience is often not the creation of new data or  information, but assistance and tools for decision makers, including utility  managers, in navigating the wide array of resources already available.\nFurther, in August 2019, the National Mitigation Investment Strategy  recommended that the federal government increase investment in hazard  mitigation by building the capacity of communities to address their risks,  including climate-related risks. To implement the recommendation, the  strategy said that the federal government should create a professional  network to encourage collaboration and information sharing across  different levels of government and the water and wastewater sector, and  that the federal government and its nonfederal partners should work  together to develop a pool of skilled mitigation professionals.\nThe following is a list of options for providing a network of technical  assistance providers that selected experts we interviewed discussed, as  well as the advantages and disadvantages of each.\nExisting utility technical assistance providers. A strengthened and  expanded network of existing federal technical assistance providers,  including EPA\u2019s Environmental Finance Centers, USDA\u2019s Rural  Utilities Service, the National Rural Water Association, and the Rural  Community Assistance Partnership, could help consolidate climate  information and provide technical assistance to utilities to improve  their resilience. Most experts said that a network of existing utility  technical assistance providers would have the advantage of  established relationships with communities and utilities or could  ensure that small and rural utilities obtain needed information and  assistance to improve their resilience to climate change. However,  several experts said that the network may lack the expertise  necessary to effectively identify or develop climate information and  planning tools to provide the technical assistance necessary to meet  the specific needs of utilities to improve their resilience. See appendix  V for additional information on these programs.\nExisting federal climate services providers. A strengthened and  expanded network of existing federal climate services providers, such  as USDA\u2019s Climate Hubs, Interior\u2019s Landscape Conservation  Cooperatives, Interior\u2019s Climate Science Centers, and NOAA\u2019s RISA  program could provide technical assistance to utilities to improve their  resilience. Several experts said that a network of existing federal  climate services providers would have a good understanding of the  available climate information and would, for example, be best  positioned to develop the specific tools and guidance necessary to  provide the technical assistance utilities need to improve their  resilience. In contrast, several experts said that federal climate  services providers may not have the established relationships with  utilities necessary to understand and tailor technical assistance to the  needs of individual utilities. In addition, one expert said that the  climate services providers may not have the funding to provide these  services to utilities in a comprehensive way. See appendix V for  additional information on these programs.\nUniversities and university-based research centers. A new  network of academic or university-based technical assistance  providers, such as NCAR, organized by state, region, or watershed  could provide technical assistance to all types of utilities to improve  their resilience. According to several experts, this option would be  advantageous because many universities and centers already have  the technical capacity to use climate information to provide risk  assessment and planning tools necessary to provide technical  assistance to utilities at the local or regional level. Several experts  also said that it would be cost-effective to expand this option because  some universities and centers are already providing technical  assistance. However, several experts said that without a clear shift in  federal incentives to prioritize the applied research necessary to  provide the technical assistance that utilities need, universities and  centers are unlikely to provide sustained assistance nationwide.  Similarly, several experts said that federal coordination would be  needed to ensure that the universities and centers were consistently  providing information, planning tools, and assistance that meet the  specific needs of utilities. See appendix V for additional information on  these programs.\nIndustry groups and private-engineering consultants. A new  network of nonfederal industry and nonprofit groups, such as the  American Water Works Association and the Association of Municipal  Water Utilities, could provide technical assistance to utilities to  improve their resilience. Several experts said that this option would be  advantageous because it could leverage existing relationships, for  example, to strengthen information sharing between utilities regarding  the best available climate information and approaches to resilience  planning. In addition, several experts said that industry groups and  private engineering consultants would have a better understanding of  utility operations and management when compared to other options  for providing technical assistance. In contrast, half of the experts said  that this network would need additional federal oversight and  coordination. For example, several experts said that there would need  to be a certification process for industry groups and private  consultants to ensure that the technical assistance being provided to  utilities was sufficient and transparent. In addition, several experts  said that the network would not be effective unless it was coordinated  among stakeholders from, for example, the private sector; industry  groups; and federal, state, and local governments.\nA network of utilities. A network of utilities, similar to the Water  Utility Climate Alliance, could consolidate and update information and  provide technical assistance for all types of utilities to improve their  resilience. Similar to a network of industry groups and consultants,  several experts said a network of utilities could help coordinate and  strengthen information sharing between utilities on best practices and  lessons learned from resilience planning. However, several other  experts said that it would be difficult to develop and expand a network  of utilities that was capable of providing technical assistance to utilities  of different sizes or geographic locations. One expert also said that  utilities that provide technical assistance would need to be certified by  the federal government, academics, or industry groups to ensure the  technical assistance being provided to utilities was sufficient.\nWhen asked how they would design a network to provide technical  assistance, most experts supported an approach in which federal  agencies organized a network of technical assistance providers for  drinking water and wastewater utilities, a network that would include  federal and state agencies, universities, consultants, and industry groups.  For example, one expert said that EPA and other relevant federal  agencies could provide guidance and leadership for a network of (1)  university and federal climate services providers that would assess the  risks that potential climate impacts pose to utilities and (2) utility technical  assistance providers, including consultants and industry groups, to help  utilities apply those assessments to their infrastructure to make it more  resilient.\nAnother expert said that existing networks of universities, industry groups  and consultants, or utilities would not be as effective unless they were  part of a larger networked effort with clear leadership that provides  continuous technical assistance to utilities. Similarly, several experts  stated that it was important that the network be a collaboration of different  technical assistance providers to be able to tailor the technical assistance  to the needs of different types of utilities, in different locations, with  differing technical capabilities. For example, one expert said that  universities, industry groups, and federal programs have different levels  of resources and expertise in different regions of the country and a  coordinated network could help utilities identify the sources of technical  assistance in their regions or localities. Further, another expert said that it  was important that the network have the capability to help utilities  understand and respond to climate risks that other types of infrastructure  create. Specifically, the expert said that while EPA has a role in regulating  drinking water and wastewater infrastructure, the agency does not  regulate larger-scale infrastructure, such as dams and reservoirs that  need to be operational to reduce risks to utilities.\nUnder Presidential Policy Directive 21, EPA, as the Sector Specific  Agency for the water and wastewater systems sector, is to work to enable  efficient information exchange between federal agencies and  infrastructure owners and operators, and to implement an integration and  analysis function to inform planning and operational decisions regarding  critical infrastructure. In addition, one of the key activities of the Water  Sector Government Coordinating Council, which EPA chairs, is to  facilitate information sharing between federal, state, and local decision  makers on critical infrastructure protection. This is consistent with our  disaster resilience framework, which states that federal efforts should  improve the availability of authoritative, understandable, and  comprehensive information on disaster risks and risk reduction strategies  to help entities effectively assess their climate risks, determine what  viable alternatives are available to increase resilience to those risks, and  better understand and measure the impact of resilience strategies. Our  framework also states that federal efforts can help by providing technical  assistance and capacity building to nonfederal partners.\nTo date, however, federal efforts to provide technical assistance to  drinking water and wastewater utilities do not provide the ongoing  technical assistance that according to experts utilities need to plan and  build climate resilient infrastructure. In addition, current efforts may not be  widespread enough to provide comprehensive coverage of the drinking  water and wastewater utilities across the nation. The 2017 Roadmap  shows actions for the short term (2 years) and midterm (5 years), but it  does not include actions such as developing guidance on technical  assistance, building networks of technical assistance providers, or  developing other methods to help utilities build capacity to manage their  climate change risks and plan for resilient infrastructure. According to  EPA officials we interviewed, the agency has worked within its existing  authorities and available resources to prioritize developing voluntary  guidance, tools, training, and webinars that utilities can use to identify  potential risks from climate change and plan to improve their resilience.  Further, EPA officials said that while the agency has collaborated closely  with key federal, state, and local decision makers; industry groups; and  utilities in its role as chair of the Water Sector Government Coordinating  Council, the council has focused on other short-term threats to utilities,  such as disasters and terrorism, and has not assessed how it could  develop and coordinate a network to effectively provide the technical  assistance that utilities need to enhance their climate resilience. By  identifying and engaging existing technical assistance providers in a  network to help drinking water and wastewater utilities incorporate climate  resilience into their projects and planning on an ongoing basis, EPA  would have more reasonable assurance that climate information was  effectively exchanged among federal agencies and infrastructure owners  and operators.\nSupporting the need for a broader collaborative approach, several of the  selected utilities are already members of organizations that coordinate  and collaborate among members and various technical assistance  providers, including federal agencies, to understand the potential climate  impacts for their regions, use similar climate models, and share best  practices for projects to enhance climate resilience. For example, the  Southeast Florida Regional Climate Change Compact is a decade-old  partnership between Miami-Dade, Broward, Monroe, and Palm Beach  Counties to coordinate mitigation and adaptation activities across county  lines in response to the effects of climate change, including sea level rise,  flooding, and economic and social disruptions. The compact and its  partners work with various federal, state, regional, municipal, nonprofit,  academic, and private sector partners to provide technical assistance and  support for utilities in southeast Florida to help the region identify  emerging issues and all move in one direction for resilience planning  efforts. The supporting federal agencies include NOAA, EPA, and the  Army Corps of Engineers. Another example is Charleston Water  (Charleston, South Carolina), a member of the Charleston Resilience  Network\u2014a collaborative group of public, private, and nonprofit  organizations in the region that work to increase resilience of  communities, critical infrastructure, and the economy to natural disasters  and chronic coastal hazards, such as rising sea levels. The network  provides a forum to share science-based information, educate  stakeholders, and enhance long-term resilience planning decisions. The  network also works to provide consistent information for planning  decisions. The federal agencies that advise the Charleston Resilience  Network include NOAA, DHS, and the Army Corps of Engineers.\n\n\tThe Federal Agencies Do Not Consistently Provide Financial Assistance for Projects That Could Enhance Climate Change Resilience and Limit Future Fiscal Exposure\n\nThe four selected federal agencies in our review provide broad financial  assistance to help drinking water and wastewater utilities plan and build  infrastructure projects. The agencies have taken some actions to promote  climate resilience when providing financial assistance for water  infrastructure projects, but they do not consistently include the  consideration of climate resilience when funding such projects. Most  selected experts we interviewed suggested that requiring the  consideration of climate change risks in the planning and design of all  federally funded water and wastewater infrastructure projects could help  enhance climate resilience and limit future federal fiscal exposure.\n\n\t\tFour Federal Agencies Provide Financial Assistance for Projects But Do Not Consider Climate Resilience Consistently\n\nThe four federal agencies we reviewed have nine programs that provide  broad financial assistance, through loans or grants, for drinking water and  wastewater infrastructure (see table 1). However, federal programs  generally do not have selection criteria or requirements for utilities to  incorporate climate resilience in the planning and design of projects that  receive federal financial assistance.\nEach of the programs used different selection criteria for providing  financial assistance to drinking water and wastewater utilities. EPA\u2019s  Drinking Water State Revolving Fund, Clean Water State Revolving Fund,  and Water Infrastructure Finance and Innovation Act (WIFIA) programs  generally provide financial assistance to projects that address the most  serious risks to human health and ensure compliance with the Safe  Drinking Water Act or Clean Water Act. Other programs, such as  FEMA\u2019s Public Assistance and Hazard Mitigation Grant programs provide  financial assistance to repair or replace infrastructure damaged during  natural disasters, or to enhance disaster resilience against future  damage. HUD\u2019s Community Development Block Grant-Disaster Recovery  funding is used for, among other things, projects to help cities,  communities, and states recover from presidentially-declared disasters or  enhance disaster resilience of damaged infrastructure, especially in low- income areas. USDA provides financial assistance for drinking water and  wastewater infrastructure in small and rural communities. According to  EPA, FEMA, HUD, and USDA officials we interviewed, drinking water and  wastewater utilities can use financial assistance from their programs to  pay for projects that, in addition to other benefits, can help enhance  climate resilience.\nWe have previously reported that the federal government invests billions  of dollars annually in infrastructure\u2014such as roads, bridges, and  wastewater infrastructure\u2014but faces increasing risks from climate  change. When the climate changes, infrastructure\u2014typically designed  to operate within past climate conditions\u2014may not operate as well or for  as long as planned, leading to economic, environmental, and social  impacts. We have also reported that some federal agencies have made  efforts to manage climate change risk within existing programs and  operations\u2014a concept known as mainstreaming\u2014and these efforts may  convey some climate resilience benefits. For example, an agency  planning to build a seawall to protect a coastal facility might build it higher  to account for rising sea level projections, but may not track this spending  as related to climate change.\nRepresentatives of several of the drinking water and wastewater utilities  we reviewed reported using selected federal financial assistance  programs to help fund projects for fiscal years 2011 through 2018 that, in  addition to other benefits, enhanced their climate resilience. For example,  Iowa City Public Works used financial assistance from HUD Community  Development Block Grant-Disaster Recovery funding and FEMA\u2019s Public  Assistance grant program to increase their resilience to floods by  relocating a flood-prone wastewater treatment facility after flooding in  2008, as shown in figure 5.\nSimilarly, as of December 2018, Houston Water was working with FEMA  to use Public Assistance grants and Hazard Mitigation grants to increase  the utility\u2019s resilience to floods and extreme storm events when rebuilding  the wastewater infrastructure damaged by Hurricane Harvey in 2017,  according to Houston Water representatives. In addition, the San Diego  Public Utilities Department received an EPA WIFIA loan to increase its  resilience to droughts by building a new recycled wastewater treatment  facility that will provide an additional source of drinking water and reduce  the need for water imported from the Colorado River Basin (see app. VI  for details on completed and ongoing infrastructure projects that utilities  undertook to enhance their climate resilience, according to selected  drinking water and wastewater utility representatives).\nThe remaining selected utilities relied on other sources of funding such as  municipal bonds and funds raised primarily through user rates and fees  for fiscal years 2011 through 2018 to enhance their climate resilience  (see app. VII for details on the financial assistance drinking water and  wastewater utilities used for infrastructure projects). However, making the  nation\u2019s drinking water and wastewater infrastructure resilient will be  expensive, costing anywhere from $448 billion to $944 billion, including  operations and maintenance through 2050, according to a 2009  Association of Metropolitan Water Agencies study, the most recent such  study. These costs would likely be in addition to the EPA-estimated  $774 billion in costs for replacing and repairing existing infrastructure over  the next 20 years. According to representatives of several of the selected  utilities in our review, additional financial assistance will be necessary to  enhance the resilience of drinking water and wastewater infrastructure.  Representatives from several utilities said they would not be able to make  the necessary upgrades to incorporate climate resilience into their  drinking water or wastewater systems without additional grant assistance.  Based on estimates from one of the selected utilities, the costs to  enhance their resilience will be high. For example, in 2013, the New York  Department of Environmental Protection estimated that it would cost  about $315 million to build the protective measures necessary to make its  wastewater treatment facilities and pump stations resilient to future flood  projections.\nOfficials from EPA, FEMA, HUD, and USDA said that federal agencies  have taken action to change program requirements or selection criteria to  provide financial assistance for projects that enhance climate resilience.  However, according to federal officials, some federal agencies are  providing financial assistance to utilities for projects that do not consider  climate resilience in their planning and design consistently. In addition,  federal officials stated that their ability to require that climate resilience be  incorporated in the projects they fund is limited by requirements specific  to their programs. Examples of their efforts, and limited authorities,  include the following:\nEPA. EPA provides annual grants to states to capitalize their state- level drinking water and wastewater state revolving fund programs.  The states use the revolving funds to provide low-cost loans or other  financial assistance to communities for, among other things, a wide  range of drinking water and wastewater infrastructure projects.  According to EPA officials, states establish program criteria and do  not consider climate resilience consistently in planning and designing  projects that receive financial assistance from state revolving fund  programs. Specifically, EPA officials said that despite agency efforts  to promote climate resilience, states have discretion in setting project  funding criteria and priorities for their state revolving fund programs,  and that the agency does not have the authority to require that states  prioritize projects that incorporate climate resilience. EPA continued to  encourage the states to incorporate resilience planning in their priority systems. In documents released in May 2016, September 2016, and  June 2017, the EPA described the types of climate resilience projects  eligible for drinking water and clean water state revolving fund  assistance. The September 2016 document also describes how  programs can encourage resilient infrastructure through financial  incentives. According to fiscal year 2015 data that EPA provided, 17  state clean water revolving fund programs have created additional  financial incentives that utilities could use to fund climate resilience  projects, and only New York\u2019s program requires that climate risks from  sea level rise be incorporated into the projects that receive financial  assistance. In addition, utilities have discretion in whether to  incorporate climate resilience into their state revolving fund project  applications, and EPA cannot require utilities to incorporate climate  resilience into the planning and construction of projects that states  fund, according to EPA officials. Similarly, while EPA manages the  WIFIA program and its application process and criteria, EPA officials  said that the 2018 and 2019 program guidance did not prioritize  protection against the impacts of climate change in its selection  criteria, and that the agency does not require that applicants  incorporate climate resilience into project planning and design.\nFEMA. FEMA\u2019s Public Assistance Grant Program provides grants to  state, tribal, territorial, and local governments, and nonprofits that can  be used to repair and replace damaged infrastructure, including  drinking water and wastewater infrastructure. In addition, FEMA\u2019s Pre- Disaster Mitigation and Hazard Mitigation Grant Programs can provide  financial assistance to states, communities, or tribes that can be used  to reduce the risks to drinking water and wastewater infrastructure  from future disasters. FEMA officials said they have developed  guidance for states and communities to incorporate climate resilience  into the planning for projects funded by all three programs.  However, officials said that states and utilities do not consider climate  change resilience consistently in planning and designing of projects  that use financial assistance from FEMA. Specifically, according to  FEMA officials, funding through the Public Assistance Program and  the Hazard Mitigation Grant Program is limited to states and localities  with a presidentially-declared disaster and generally is not provided  for projects that incorporate climate resilience into their planning and  design. In addition, according to FEMA officials, states and localities  have discretion over the projects they choose to submit for funding  and FEMA cannot require them to incorporate climate resilience into  the planning and construction of projects that states fund without a  change to program requirements.\nHUD. HUD provides grants to states and local governments through  its Community Development Block Grant program to fund housing;  economic development; neighborhood revitalization; and other  community development activities, including drinking water and  wastewater infrastructure. In addition, HUD can provide grants that  can be used for reconstruction of drinking water and wastewater  infrastructure to help communities recover from presidentially  declared disasters through its Community Development Block Grant  program. According to HUD officials, the agency has taken action to  encourage states and local governments to incorporate climate  resilience planning in the projects they fund after disasters. Officials  also said that HUD provides guidance on how financial assistance  requirements for states and entitlement communities can be waived  so that states and communities can use Community Development  Block Grant funding for disaster recovery and resilience in  presidentially-declared disaster areas. In addition, in 2016, HUD  finalized rules requiring states and localities to consider incorporating  resilience to natural hazard risks and climate change into their  planning documents for Community Development Block Grant funding  in low- and moderate-income communities. However, officials said  that states do not consider climate change resilience consistently  when planning and designing projects using financial assistance from  HUD. Specifically, according to HUD officials, the agency can only  directly provide financial assistance to projects that enhance climate  resilience using Community Development Block Grant-Disaster  Recovery Grants if climate change resilience is specified in disaster  relief appropriations language. Further, states and localities have  discretion regarding whether to incorporate climate resilience into their  project applications, and HUD cannot require them to incorporate  climate resilience into the planning of projects that receive financial  assistance, according to HUD officials.\nUSDA. USDA\u2019s Rural Utilities Service provides grants and loans for  drinking water, wastewater, and stormwater projects in rural areas\u2014 defined as any area not in a city or town with a population in excess of  10,000 inhabitants. According to USDA officials, the agency has  promoted climate resilience planning through its Water and Waste  Disposal Program by requiring small and rural utilities to complete  planning and vulnerability assessments for natural disasters. In  addition, USDA officials said the agency has collaborated with EPA to  develop guidance and training through the Sustainable Rural and  Small Utility Management Initiative to help small and rural utilities  create plans for improving their sustainability, including planning to  help make the utilities resilient to potential climate impacts. According  to USDA officials, utilities have discretion in whether to incorporate  climate resilience into their Water and Waste Disposal project  applications, and USDA cannot under its current regulations require  them to incorporate climate resilience into the planning and  construction of projects that receive financial assistance. As a result,  according to officials, utilities do not consider climate resilience  consistently when planning and designing projects that receive  financial assistance from USDA.\n\n\t\tMost Selected Experts Said That Requiring Climate Resilience in Federal Projects Would Help Address Future Climate Impacts and Limit Future Federal Fiscal Exposure\n\nAccording to most selected experts, requiring the consideration of climate  risks in projects that receive financial assistance will help limit the future  fiscal exposure of the federal government and help enhance the climate  resilience of drinking water and wastewater infrastructure. Specifically,  most of the experts we interviewed said that a federal requirement that  potential climate impacts be considered and, if necessary, incorporated  into the design of all new drinking water and wastewater infrastructure  projects that receive federal financial assistance, should be a high or very  high priority for the federal government. Several of the experts said that  this option would be advantageous because it could help ensure more  effective and efficient use of federal dollars on drinking water and  wastewater infrastructure. For example, several experts said that this  option would help ensure that infrastructure funded by the federal  government incorporated climate risks during the planning stages, helping  avoid expensive retrofits or the abandonment of federally funded  infrastructure that was not climate resilient. Several other experts said  that such a federal requirement could help make consideration of future  climate risks to enhance resilience a standard industry practice within the  drinking water and wastewater sector.\nSeveral of the selected utilities said that a federal requirement for  potential climate impacts to be considered and, if necessary, incorporated  into the design of all new drinking water and wastewater infrastructure  projects that receive federal financial assistance, would be moderately to  extremely effective in helping utilities enhance their resilience. These  selected utilities also said that it would be at least moderately feasible to  implement. Several of the selected utilities are already required to  consider some potential climate risks in the planning and design of their  drinking water and wastewater infrastructure. For example, according to  representatives from the Miami-Dade County Water and Sewer  Department, Miami-Dade County adopted an ordinance requiring that  potential climate risks be considered in the design of county-funded  infrastructure. According to the same officials, this requirement has  shifted the culture of the Miami-Dade County Water and Sewer  Department to emphasize potential future climate change risks in the  planning and design of all of the county\u2019s drinking water and wastewater  infrastructure. Representatives from a few selected utilities also said that  a requirement could make it easier to access federal financial assistance  programs for projects that enhance climate resilience.\nSeveral selected experts cautioned that many utilities do not have the  climate information and technical capacity to carry out such requirements  or that the uncertainty of the available climate science would make it  difficult to implement for some utilities. In addition, several experts said  that such a requirement may force utilities with limited funding to prioritize  planning and investment in projects to improve climate resilience over  more pressing concerns, such as repairing and replacing damaged or  obsolete infrastructure. Several selected utilities said that it will be difficult  to implement these new requirements, but added that additional technical  and financial assistance could help. For example, representatives from  Cottage Grove Public Utilities said that the federal government will need  to provide additional financial and technical assistance opportunities for  small and medium-sized public utilities that do not have the capacity to  plan, implement, and fund large climate resilience projects.\nHowever, if the federal agencies do not require the incorporation of  climate resilience into the projects that receive financial assistance, they  may continue to fund drinking water and wastewater infrastructure  projects that may be damaged or incapacitated by future floods, drought,  water quality problems, and other climate change impacts. This increases  the risk that critical infrastructure will not be well protected and drinking  water and wastewater utilities will not be able to continue operations that  provide critical public health and environmental services to the public.\nEPA and other federal, state, local, and sector-level officials, recognizing  the need to incorporate climate resilience into drinking water and  wastewater infrastructure, have taken action to promote climate resilience  but generally do not require it to be incorporated in these projects.  Specifically, the 2017 Roadmap calls for the Water Government  Coordinating Council and the Water Sector Coordinating Council to  promote eligibility criteria for financial assistance programs to support  resilience activities by 2019. In addition, in a 2019 report, EPA\u2019s  Environmental Finance Advisory Board recommended that EPA create a  coordination group to set priorities and reduce gaps in funding predisaster  resilience for drinking water and wastewater infrastructure, and that EPA  consider expanding the state revolving fund program to include financial  assistance for flooding and storm-related damages. Further, the National  Mitigation Investment Strategy, issued in draft in January 2018, and  finalized in August 2019, states that successful mitigation of natural  hazard risks requires shared priorities, consistent approaches, aligned  funding, expanded incentives, and coordination between the federal  government and nonfederal partners. It also states that the federal  government and nonfederal partners should look at risk and resilience  consistently by, for example, having similar requirements for assessing  risk and rebuilding for long-term resilience. It emphasizes the need to  focus on critical infrastructure in communities, such as drinking water and  wastewater infrastructure.\nIncorporating climate resilience likely decreases the risk that water and  wastewater infrastructure, some of which is paid for with federal financial  assistance, will fail during extreme events. According to the National  Research Council, as the climate changes and historical patterns\u2014in  particular, those related to extreme weather events\u2014no longer provide  reliable predictions of the future, infrastructure designs may  underestimate the climate-related impacts to infrastructure over its design  life, which can range as long as 50 to 100 years. In April 2013, we  reported that according to one set of commonly used design standards,  wastewater treatment plant components are typically designed for 25-,  50-, or 100-year storms. We reported that changes in characteristics of  strong storms\u2014for instance, a storm that historically occurred once every  100 years may occur every 50 years in the future\u2014could cause  wastewater management systems to be overwhelmed more frequently.\nIncorporating climate resilience into drinking water and wastewater  infrastructure projects also likely decreases the risk that the federal  government will need to pay to repair and replace damaged facilities. In  our previous work, we said that building resilience can help reduce the  federal fiscal exposure. As we reported in April 2013, such resilience  means reducing potential future losses rather than waiting for an event to  occur and paying for recovery afterward. We said that enhancing  resilience can create additional up-front costs, but can also reduce  potential future damage from climate-related events that\u2014given expected  budget pressures\u2014would otherwise constrain federal programs. In 2018,  the National Institute of Building Sciences found that every dollar spent on  infrastructure hazard mitigation to enhance resilience to wind- and  flooding-related disasters resulted in 7 to 8 dollars in avoided future  losses, respectively. This potential can be considered in light of recent  costs that the federal government incurred to address losses. In  particular, from fiscal year 2011 through fiscal year 2018, we estimate  that FEMA\u2019s Public Assistance program and HUD\u2019s Community  Development Block Grant-Disaster Recovery Grants have obligated at  least $2.3 billion and at least $1.4 billion, respectively, in federal disaster  recovery funding on drinking water and wastewater infrastructure-related  projects.\n\n\tConclusions\n\nDrinking water and wastewater utilities face challenges in using climate  information to identify actions that they can take to enhance their climate  resilience. At the moment, utilities obtain technical assistance and use  climate information from a mix of sources and that assistance is not  organized to help ensure more comprehensive coverage of the more than  70,000 drinking water and wastewater utilities across the nation. As  designated lead agency for the resilience and security of the drinking  water and wastewater sector and as chair of the Water Sector  Government Coordinating Council, EPA is tasked with coordinating  federal and sector efforts to provide the information and assistance that state and local decision makers\u2014including utilities\u2014need to enhance  their climate resilience. The councils have identified a number of actions  to support the drinking water and wastewater sector, but EPA, other  federal agencies, and the water and wastewater sector, have not  assessed how they could organize a network of technical assistance  providers to effectively provide the assistance that utilities need to  enhance their resilience to climate change. By identifying existing  technical assistance providers and engaging them in a network to help  drinking water and wastewater utilities consider climate resilience in the  planning and design of projects on an ongoing basis, EPA, as chair of the  Water Sector Government Coordinating Council, would have more  reasonable assurance that climate information was effectively exchanged  among federal agencies and infrastructure owners and operators.\nIn recognition of the federal interest in protecting the health and economic  benefits that clean and safe water provide, federal programs provide  funding to support drinking water and wastewater infrastructure. In 2013,  Presidential Policy Directive 21 identified the water and wastewater sector  as critical infrastructure, with important implications for protecting and  investing in that sector. Federal agencies such as EPA, FEMA, HUD, and  USDA provide financial assistance to help ensure the long-term success  of drinking water and wastewater utilities. These agencies have taken  action to promote climate resilient infrastructure projects with the financial  assistance they provide, but their abilities to ensure that projects receiving  financial assistance are resilient are limited. To enable agencies to further  drive climate resilient investments by drinking water and wastewater  utilities, changes would be needed to programs that EPA, FEMA, HUD,  and USDA administer to require that climate resilience be incorporated  into planning for projects that receive federal financial assistance. Such  changes could help ensure that drinking water and wastewater  infrastructure projects that receive federal financial assistance adequately  address risks from climate change and ensure that utilities carry out their  critical operations. Such changes could also help limit the fiscal exposure  to the federal government for future recovery costs.\n\n\tMatter for Congressional Consideration\n\nWe are making the following matter for congressional consideration:  Congress should consider requiring that climate resilience be  incorporated in the planning of all drinking water and wastewater projects  that receive federal financial assistance from programs that EPA, FEMA,  HUD, and USDA administer. (Matter for Consideration 1)\n\n\tRecommendations for Executive Action\n\nWe are making one recommendation to EPA:  The Director of Water Security of EPA, as Chair of the Water Sector  Government Coordinating Council, should work with the council to identify  existing technical assistance providers and engage these providers in a  network to help drinking water and wastewater utilities incorporate climate  resilience into their projects and planning on an ongoing basis.  (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to EPA, DHS, HUD, NOAA, and USDA  for review and comment. EPA provided written comments, which are  reproduced in appendix VIII. The other four agencies did not provide  comments on our draft report. EPA and USDA provided technical  comments, which we incorporated as appropriate.\nIn its written comments, EPA neither agreed nor disagreed with our  recommendation that the Administrator, as Chair of the Water Sector  Government Coordinating Council, should work with the council to identify  existing technical assistance providers and engage these providers in a  network to help drinking water and wastewater utilities incorporate climate  resilience into their projects and planning on an ongoing basis. The  agency noted in its technical comments that the Director of Water  Security is the chair of the Water Sector Council, not the administrator.  We made this change in the report.\nIn its written response, EPA made two points related to the  recommendation. First, it stated that it will, consistent with our  recommendation, continue to work with its wide-ranging, existing  technical assistance providers and coordinate with its stakeholders to  identify additional providers as applicable. We agree with this approach  and highlighted several of these efforts in our report. For example, EPA  noted that it provides annual training to over 5,000 water utilities, state  officials, and federal emergency responders on how to become more  resilient to natural or manmade incidents that could endanger water and  wastewater services.\nSecond, in response to the part of the recommendation that EPA engage  the providers in a network, the agency noted that states serve as a  coordinating entity under its Small System Training and Technical  Assistant grants. Further, EPA also noted that the providers work with  states to identify the systems in greatest need of assistance and identify  the training topics of greatest need for small public water systems. We  agree that this could be a helpful approach, but note that EPA remained  silent on how it plans to work with the states and the water and  wastewater sector to develop a network of technical assistance providers.  Our report showed that utilities obtain technical assistance from a number  of different sources and that they could benefit from a larger network with  continuous technical assistance. The Water Sector Coordinating Council  functions as a forum to coordinate members of existing networks, and to  ensure they have the most current and relevant information as they  provide assistance to utilities. As EPA works with its wide-ranging  technical assistance providers, consistent with our recommendation, we  would encourage it to also work with the Water Sector Coordinating  Council to ensure the coordination of the different networks that exist in  the water and wastewater sector.\nAs 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 Administrator of the Environmental  Protection Agency; and the Secretaries of Homeland Security, Housing  and Urban Development, Commerce, and Agriculture. In addition, the  report will be available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staffs 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 IX.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThe objectives of our review were to examine (1) the potential impacts of  climate change and the effects of these impacts on drinking water and  wastewater infrastructure; (2) technical assistance selected federal  agencies provided to selected utilities to help make drinking water and  wastewater infrastructure more resilient to the impacts of climate change,  and options experts identified for providing additional technical assistance  to utilities; and (3) financial assistance federal agencies provided to  selected utilities to help make drinking water and wastewater  infrastructure more resilient to the impacts of climate change, and options  experts identified for providing additional financial assistance to utilities.\nFor the first objective, we reviewed the Fourth National Climate  Assessment; the Environmental Protection Agency\u2019s (EPA) Adaptation  Strategies Guide for Water Utilities, Climate Resilience Evaluation and  Awareness Tool Methodology Guide, and Climate Scenarios Projection  Map, and the U.S. Climate Resilience Toolkit, which the Department of  Commerce\u2019s National Oceanic and Atmospheric Administration (NOAA)  manages and hosts with oversight from the U.S. Global Change  Research Program. Based on our review of these sources, we first  identified different categories of potential climate change impacts, and  how those impacts may vary in the different climate regions identified in  the Fourth National Climate Assessment.\nFor both the second and third objectives, we reviewed the efforts of and  interviewed five federal agencies and 15 drinking water and wastewater  utilities. We reviewed our previous reports to identify agencies that  provide technical assistance or financial assistance, or both, to drinking  water and wastewater utilities and identified five agencies: EPA, NOAA,   the Department of Homeland Security\u2019s (DHS) Federal Emergency  Management Agency (FEMA), the Department of Housing and Urban  Development (HUD), and the Department of Agriculture\u2019s (USDA) Rural  Utilities Service.\nFor the second and third objectives, we also selected a nongeneralizable  sample of 15 drinking water and wastewater utilities in 13 communities  using a stratified purposeful sampling approach. We selected utilities to  obtain variation in their size and climate region to capture similarities and  differences among utilities. We classified utilities into small, medium, and  large utilities based on the sizes of the populations that they serve. We  defined small utilities (serving populations of 10,000 or less), medium  utilities (serving populations of 10,001 to 999,999), and large utilities  (serving populations of 1 million or more) for this report to capture utilities  with the greatest resources available for climate resilience efforts. In order  to ensure geographic diversity, we selected small, medium, and large  utilities from different climate regions identified in the Fourth National  Climate Assessment. Because this was a nonprobability sample, the  findings related to the 15 utilities cannot be generalized to all drinking  water and wastewater utilities but provide illustrative examples of how the  selected utilities used federal technical assistance and financial  assistance.\nFurther, for the second and third objectives, we selected 10 experts in the  climate change and disaster fields to interview about options for providing  additional technical and financial assistance to drinking water and  wastewater utilities. To identify experts on the resilience of water  infrastructure to climate change, we searched Elsevier\u2019s Scopus  database for peer-reviewed articles published from January 2003 through  September 2018 searching titles, abstracts, and keywords for \u201cdrinking  water\u201d or \u201cwastewater\u201d in close proximity to terms such as \u201cinfrastructure,\u201d  \u201cclimate change,\u201d and \u201cresiliency.\u201d We identified approximately 300  studies from this search, identified the relevant studies from that group,  and then found an additional eight studies from their citations. We  reviewed the abstracts of these studies and found 96 that were within the  scope of our objectives. To develop a list of potential experts, we  extracted the names of the authors of these studies and the names of  authors cited in these studies using the Python programming language  and the Scopus Application Programming Interface.\nNext, we used statistical software to calculate the number of times that  each author cited every other author. Using these calculations, we  arrayed the authors into a network graph, in which authors who frequently  cited each other were situated closer together and authors who did not  cite each other were situated further apart. We analyzed this network  using social network analysis techniques. Specifically, to measure each  author\u2019s prominence in the network, we calculated the number of times  that each author was cited in the articles written by other authors in the  network. To divide the network into groups, we used an algorithm known  as hierarchical clustering. This algorithm allowed us to identify groups of  authors who cited each other frequently and who cited authors in the rest  of the network infrequently. We sorted authors by group and by the  number of times they were cited. For the most frequently cited authors in  the largest groups in the network, we examined biographical details and  publication details via web searches, such as their geographic location  and the relevance of their publications to our research topic. We selected  a final list of 15 frequently cited experts who were primarily from the  largest clusters in the network, who were based in North America, whose research was topically relevant, and who were still active in the field.  Eight of these experts agreed to be interviewed and we included them in  our final sample. We supplemented this list with two experts who served  as lead authors for the water chapter of the Fourth National Climate  Assessment. While these 10 experts are prominent researchers and  correspond to a range of major fields of research on the topic, their views  do not represent the views of all experts on the resilience of drinking  water and wastewater infrastructure to climate change.\nTo examine the first part of the second objective, the technical assistance  selected federal agencies provided to selected utilities, we reviewed  relevant laws, regulations, and planning guidance about programs that  can provide technical assistance to drinking water and wastewater utilities  to help enhance climate resilience for each selected federal agency. We  also interviewed federal officials at each agency. To examine the first part  of the third objective, the financial assistance selected federal agencies  provided to selected utilities, we reviewed project eligibility criteria and  appropriation amounts for EPA\u2019s Clean Water State Revolving Fund,  Drinking Water State Revolving Fund, and Water Infrastructure Finance  and Innovation Act Programs; HUD\u2019s Community Development Block  Grant Program and Community Development Block Grant-Disaster  Recovery Fund; and USDA\u2019s Water and Wastewater Disposal Program  for fiscal years 2011 through 2018. We also interviewed federal officials at  each agency.\nAs part of analyzing the federal financial assistance to drinking water and  wastewater utilities, we estimated FEMA\u2019s pre- and post-disaster  spending to help such utilities recover from natural disasters. To identify  federal disaster recovery and hazard mitigation obligations on drinking  water and wastewater infrastructure, we analyzed federal financial  assistance that FEMA\u2019s Public Assistance, Hazard Mitigation, and Pre- disaster Mitigation Programs provide for disaster recovery for drinking  water and wastewater infrastructure. Specifically, using a list of search  terms associated with drinking water and wastewater infrastructure, we  queried FEMA\u2019s disaster recovery spending database to identify a list of  drinking water and wastewater infrastructure disaster recovery and  hazard mitigation projects funded from fiscal years 2011 through 2018.  After we queried FEMA\u2019s disaster recovery spending database, we  manually reviewed records from a stratified sample to ensure that each  project was related to water and wastewater infrastructure. We reviewed  all 25 records with the highest obligated amounts, 15 records in which a  project was associated with more than one site, and 35 records in which a  project was associated with just one site.\nWe chose this sample design to ensure that we were capturing projects  with the highest dollar amounts as well as all other projects, while also  ensuring that if one site in a project was water related, the rest of the sites  under the project were also water related (manual review showed that if  one site in a project was water related, 98 percent of the other sites in the  project were also water related). After manual review, we generated an  estimate of total obligated funds from the ratio of number of projects that  we reviewed that were related to water and wastewater infrastructure to  the total number of projects in our sample.\nThe estimate we used was the lower bound of a 95 percent confidence  interval. We chose this estimate in order to give a conservative estimate  of the amount that FEMA\u2019s public assistance program has obligated. The  relative error was 0.07. To assess the reliability of the disaster recovery  obligations data, we (1) performed electronic testing for errors in accuracy  and completeness, (2) reviewed related documentation about the data  and the system that produced them, (3) interviewed agency officials  knowledgeable about the data, and (4) worked closely with agency  officials to identify and resolve data discrepancies before conducting our  analyses. We determined that the data were sufficiently reliable for the  purposes of our reporting objectives.\nTo examine what technical assistance and financial assistance selected  drinking water and wastewater utilities used for the second and third  objectives, we provided a short questionnaire and interviewed utility  representatives from the 15 selected drinking water and wastewater  utilities to understand what technical and financial assistance they used to  enhance their climate resilience for fiscal years 2011 through 2018. In the  questionnaire and interviews, we discussed their efforts to plan for climate  resilience and the technical and financial assistance they used for such  efforts, which could include the five agencies we selected to review or  other federal and nonfederal entities we did not review, but knew could  potentially be sources of technical and financial assistance for utilities  based on our prior work. Specifically, the federal agencies we did not  review, but included in our questionnaire were: NOAA, the Department of  Defense\u2019s U.S. Army Corps of Engineers, and the Department of the  Interior\u2019s Bureau of Reclamation (Reclamation).\nTo examine the second parts of the second and third objectives, the  options experts identified for providing additional technical and financial  assistance to utilities, we conducted semistructured interviews with the 10  climate change and disaster resilience experts. To develop the  semistructured interview documents, we assessed the content of the 96  articles identified in our literature review to develop a list of actions that  the federal government could take to make drinking water and  wastewater infrastructure more resilient to the effects of climate change.  The articles used to develop this list of actions were identified by  searching resources such as Agricola, ProQuest\u2019s Environmental  Databases, Policyfile, Harvard\u2019s Think Tank Search, and Scopus. We  searched for both peer-reviewed articles and reports from nonprofits and  think tanks published between January 2003 and September 2018  searching titles, abstracts and keywords for \u201cwater\u201d in close proximity to  \u201cclimate change,\u201d \u201cutilities,\u201d and terms such as \u201cproject,\u201d \u201cprogram,\u201d  \u201cpolicy,\u201d or \u201crecommendation.\u201d We asked the 10 experts about the list of  actions during our interviews (see table 2).\nWe conducted semistructured interviews with the 10 selected experts and  asked the experts to rate the effectiveness of the nine actions we  provided for making drinking water and wastewater infrastructure more  resilient to the impacts of climate change, describe the advantages and  disadvantages of each action, and describe how the actions could be  implemented. We also asked experts to rate the administrative feasibility  and cost of the actions. Finally, we asked the experts if any additional  actions should be added to our list.\nWe then analyzed the results of our interviews to identify five options to  provide technical assistance and developed a follow-up questionnaire.  The questionnaire asked the 10 selected experts to rate the effectiveness  of the five options for providing additional technical assistance, describe  the advantages and disadvantages of each option, and describe how the  options could be implemented (see table 3). We also asked experts to  rate the overall effectiveness, administrative feasibility, and cost of the  options. We also requested written responses from the 15 selected  utilities on the 5 technical assistance options and the 4 financial  assistance options identified in our interviews with experts.\nWe conducted this performance audit from October 2017 to January 2020  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Examples of the Most-Relevant Potential Climate Change Impacts and Their Potential Effects on Drinking Water Utilities by Region\n\nTable 4 corresponds with figure 2 in the report, which is an interactive  figure and contains the text for drinking water utilities that is not  accessible to readers of print copies of this report. As readers scroll over  the water-drop icons in the figure, separate pop-up boxes appear  describing specific regional impacts.\n\nAppendix III: Examples of the Most-Relevant Potential Climate Change Impacts and Their Potential Effects on Wastewater Utilities\n\nTable 5 corresponds with figure 2 in the report, which is an interactive  figure and contains the text for wastewater utilities that is not accessible  to readers of print copies of this report. As readers scroll over the water- drop icons in the figure, separate pop-up boxes appear describing  specific regional impacts.\n\nAppendix IV: Technical Assistance Providers That Selected Drinking Water and Wastewater Utilities Used\n\nTable 6 provides additional information on the selected drinking water and  wastewater utilities and the sources of technical assistance they used for  climate resilience planning for fiscal years 2011 through 2018.\n\nAppendix V: Federal Programs That Provide Technical Assistance\n\nThe following federal programs have the potential to help drinking water  and wastewater utilities, in particular smaller utilities that do not have the  resources to conduct climate risk assessments and plan for measures to  help make their drinking water and wastewater infrastructure more  resilient to climate change impacts.\nSeveral of the federal efforts we reviewed provide general assistance with  planning and operating drinking water and wastewater infrastructure.  Specifically:\nEnvironmental Protection Agency\u2019s (EPA) Environmental  Finance Centers. The Environmental Finance Centers provide  targeted technical assistance to, and partner with states and the  private sector to help manage the costs of environmental financing.  Environmental Finance Centers can provide technical assistance for  financing drinking water and wastewater infrastructure and its  operations and maintenance.\nEPA\u2019s Training and Technical Assistance for Small Systems  Grants. EPA\u2019s Training and Technical Assistance to Small Systems  grants provide funding to nonprofit organizations to provide training  and technical assistance to small public water systems, small  wastewater systems, and private well owners, located in urban and  rural communities in the U.S. and its territories. According to EPA  officials, training and technical assistance to small systems facing  drought, flooding, and other weather-related challenges is an eligible  activity for the grants.\nDepartment of Agriculture\u2019s (USDA) Rural Water and Wastewater  Technical Assistance and Training Program. USDA\u2019s Rural Water  and Wastewater Technical Assistance and Training Program provides  grants to nonprofits such as the National Rural Water Association and  the Rural Community Assistance Partnership to provide training and  technical assistance to small and rural utilities for operating,  managing, and financing drinking water and wastewater  infrastructure.\nUSDA\u2019s Rural Water and Wastewater Circuit Rider Program.\nUSDA contracts with a qualified national organization, through its  Circuit Rider program, to provide technical assistance to rural water  and wastewater systems to provide technical assistance to rural  utilities for operating, managing, and financing water and wastewater  infrastructure. Circuit riders also provide critical assistance in disaster  response and recovery. The circuit rider contract was awarded to the  National Rural Water Association in fiscal year 2019.\nOther federal efforts help decision makers use climate information in  existing planning processes. Specifically:\nUSDA Climate Hubs. USDA established regional Climate Hubs to  deliver science-based knowledge and practical information to farmers,  ranchers, and forest landowners to support decision-making related to  climate change.\nDepartment of the Interior\u2019s (Interior) Landscape Conservation  Cooperatives. Interior developed a network of collaborative  Landscape Conservation Cooperatives composed of federal, state,  local, and tribal governments; nongovernmental organizations;  universities; and interested public and private organizations to,  manage large landscapes such as national forests, grasslands, and  wetlands. As part of this program, the groups develop and provide the  science and technical expertise needed to apply climate data in  natural resources decision-making.\nU.S. Geological Survey\u2019s Climate Adaptation Science Centers.\nClimate Adaptation Science Centers partner with natural and cultural  resource managers to provide science that helps fish, wildlife,  ecosystems, and the communities they support adapt to climate  change by, among other things, providing climate, water, and  ecosystem information to decision makers.\nNational Oceanic and Atmospheric Administration\u2019s (NOAA)\nRegional Integrated Sciences and Assessments (RISA) Program.  NOAA\u2019s RISA program supports a network of 11 regional research  teams that work with public and private decision makers to identify  and provide specific climate information and models to identify risks  and adaptation options to increase resilience to climate variability and  change. One area of emphasis for the RISA teams is conducting  research on climate and water management issues while engaging  with a range of water management organizations, including some  water utilities.\nNational Center for Atmospheric Research (NCAR). NCAR carries  out interdisciplinary research on adaptation to climate change by  generating scenarios of projected climate change, developing  scientific tools and methods for analyzing current and future  vulnerability, and conducting integrated analyses of climate change  impacts and adaptation. An important component of NCAR\u2019s program  is the integration of decision makers and users of climate information,  including water utilities, into its research activities. NCAR provides the  atmospheric research community in academia, government, and the  private sector with the shared resources necessary to conduct their  research.\n\nAppendix VI: Examples of Ongoing and Completed Drinking Water and Wastewater Capital Improvement Projects to Enhance Climate Resilience\n\nTable 7 presents examples of drinking water and wastewater capital  improvement projects to enhance climate resilience, according to utility  representatives, from fiscal years 2011 through 2018.\n\nAppendix VII: Types of Financial Assistance Used by Selected Drinking Water and Wastewater Utilities on Capital Improvement Projects to Enhance Climate Resilience\n\nTable 8 presents additional information on financial assistance used by  utilities we reviewed for capital improvement projects to enhance their  climate resilience for fiscal years 2011 through 2018.\n\nAppendix VIII: Comments from the Environmental Protection Agency\n\nAppendix IX: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Susan Iott (Assistant Director),  Micah McMillan (Analyst-in-Charge), Jim Ashley, Mark Braza, Colleen  Candrl, Caitlin Cusati, John Delicath, David Dornisch, Kathryn Godfrey,  Holly Halifax, Karen Howard, Rob Letzler, Jon Melhus, Patricia Moye,  Eve Nealon, Sam Portnow, Dan Royer, Kiki Theodoropoulos, Joe  Thompson, Seyda Wentworth, and Melissa Wolf provided key  contributions to this report.","output":null}
{"id":"gao_GAO-20-534","pid":"gao_GAO-20-534_0","input":"\tBackground\n\n\t\tIntimate Partner Violence\n\nData from CDC\u2019s 2015 NISVS indicate that about 43.6 million women  (36.4 percent) and 37.3 million men (33.6 percent) in the United States  have experienced sexual violence, physical violence, and stalking by an  intimate partner. Approximately 21.4 percent of women and 14.9  percent of men in the United States experienced severe physical violence  by an intimate partner. About 30 million women (25.1 percent) and 12  million men (10.9 percent) reported experiencing some effect from the  violence. (See fig. 1 for the most commonly reported effects of intimate  partner violence, as reported by NISVS.)\nIntimate partner violence can also result in death. Data from U.S. crime  reports suggest that 16 percent of homicide victims (about one in six) are  killed by an intimate partner. Strangulation victims, in particular, are at  greater risk for being killed, according to the Training Institute on  Strangulation Prevention.\nResearch has shown that certain factors increase the risk that someone  may experience intimate partner violence. For example, a review of  research on risk factors for women who experience intimate partner  violence identified younger age, less education, unemployment,  pregnancy, childhood victimization, and mental illness as being  associated with higher rates of intimate partner violence. Exposure to  intimate partner violence between a child\u2019s parents or caregivers is also  associated with a greater risk of intimate partner violence in adulthood,  according to CDC. Adults with disabilities are also at a higher risk of  violence than those without disabilities.\nHowever, research indicates that victims of intimate partner violence may  be less likely than others to obtain medical or other services. Even when  services are obtained, victims may be less likely than others to identify  the source or extent of their injuries out of fear for their safety or reprisal.\n\n\t\tBrain Injuries\n\nBrain injuries, including those that may result from intimate partner  violence, can have several causes, including physical trauma and  strangulation; range in severity; and can result in a number of health  consequences.\nTBI refers to a brain injury caused by external physical force, such as  a blow to the head or shaking of the brain.\nAnoxic (a complete disruption of oxygen to the brain) or hypoxic (a  partial disruption of oxygen to the brain) brain injury may result from  strangulation or other pressure applied to the neck that restricts blood  flow and air passage.\nTBIs and anoxic or hypoxic brain injuries may result in irreversible  psychological and physical harm. Specifically, people who suffer from  TBI and anoxic or hypoxic brain injuries may experience cognitive  symptoms, including depression and memory loss, as well as behavioral  symptoms, such as changes in mood, or difficulty sleeping, among  others. The symptoms individuals experience can also vary. The signs  and symptoms of an anoxic or hypoxic brain injury from strangulation can  be similar to those of mild TBI, which is often referred to as a concussion.  (See fig. 2.)\nAccording to the Brain Injury Association of America, a severe brain injury  can be clearly identified by reviewing an individual\u2019s symptoms, but when  the brain injury is mild or moderate, providers may need to conduct  further assessments or screening to diagnose the brain injury. According  to NIH, providers have several options for assessing brain injury that can  help determine the severity of the injury. For example, providers may  evaluate a person\u2019s level of consciousness and the severity of brain injury  by attempting to elicit body movements, opening of the eyes, and verbal  responses. Providers may also evaluate an individual\u2019s speech and  language skills or cognitive capabilities.\n\n\t\tRole of HHS and DOJ in Addressing Intimate Partner Violence\n\nBoth HHS and DOJ support activities for individuals affected by intimate  partner violence through several of their agencies. Within HHS, for  example, ACF provides federal funding to support emergency shelter and  services for the victims of domestic violence and their dependents, as  well as the National Domestic Violence Hotline. CDC provides grants to  state and local entities to develop programs aimed at preventing intimate  partner violence. Additionally, HRSA\u2014which provides funding to federally  qualified health centers\u2014provides funding to develop educational  materials for health care workers, in partnership with ACF, to increase the  number of individuals screened for intimate partner violence and referred  to treatment services, among other things.\nDOJ, through its Office of Justice Programs and Office on Violence  Against Women, conducts research and provides funding to help states,  local governments, and nonprofit organizations\u2019 develop programs to  reduce violence against women. Many DOJ programs aim to strengthen  responses at the local, state, tribal, and federal levels to domestic  violence, dating violence, sexual assault, and stalking. Further, the  Violence Against Women Reauthorization Act of 2013 amended federal  laws to establish criminal penalties for strangulation or suffocation.  Additionally, DOJ increased its support of activities focused on training to  recognize and prosecute strangulation.\n\n\t\tRole of HHS in Addressing TBI\n\nHHS agencies also conduct work related to recognizing and responding  to TBI. For example, NIH funds research aimed at developing knowledge  about the brain and nervous system in order to reduce the effect of brain- related diseases on individuals. In addition, CDC conducts research on  the prevention of TBIs, and ACL provides grants to states to help them to  support individuals with brain injuries and to promote the rights of, and  provide advocacy support to, those living with TBI.\n\n\tEfforts to Provide Education, Screen for, or Treat Brain Injuries Resulting from Intimate Partner Violence\n\nWe identified 12 initiatives led by non-federal entities that focused on     (1) education on brain injuries resulting from intimate partner violence by  developing materials or offering training; (2) screening victims of intimate  partner violence for potential brain injuries; or (3) treatment involving  individuals with brain injuries resulting from intimate partner violence.  Our list represents initiatives identified during the course of our review  and may not be exhaustive. Some of these initiatives focus on only TBI or  strangulation, while others focused on both. See appendix II for additional  information on the initiatives.\nTraining for Domestic Violence Program  Staff  Domestic violence program advocates we  spoke to told us that before they participated  in the Ohio Domestic Violence Network  training, they knew their clients were having a  hard time remembering things or getting their  thoughts across; however, they did not know  this could be the result of a brain injury. The  training helped advocates identify signs and  symptoms in their clients and make others  aware of these symptoms. For example,  advocates told us they may inform a  prosecutor that a client may have a brain  injury and may have difficulty remembering or  sharing their experiences.\nThe Ohio Domestic Violence Network\u2014as a part of its Connect,  Acknowledge, Respond, Evaluate (CARE) initiative\u2014trained staff at  five domestic violence programs on brain injuries, and developed  educational materials for shelter staff to share with intimate partner  violence victims, according to network officials. For example, we  spoke to staff at a domestic violence program in Ohio who told us how  the education they received from the network helped them identify the  signs and symptoms of brain injury in their clients. Staff from another  domestic violence program in Ohio told us as a result of CARE  training they now suggest strategies to clients to assist them with their  memory issues, such as writing appointment information on a  whiteboard or in a planner.\nThe Swedish Hospital Violence Prevention Program, in Illinois,  provided education to physicians, medical residents, and hospital staff  to increase health care provider and staff awareness of and ability to  respond to brain injuries among victims of intimate partner violence,  according to officials with the initiative.\nThe Safe Futures initiative, in Connecticut, developed strangulation  training materials for emergency medical personnel, law enforcement,  prosecutors, and providers, as well as hosted trainings throughout  Connecticut on intimate partner violence and brain injuries, according  to officials with the initiative.\nScreening. Six of the 12 initiatives used screening tools to identify  potential brain injuries among intimate partner violence victims, according  to officials. Based on our review of documentation from these initiatives,  we found that the screening tools generally had a series of questions  about injuries to the head, the loss of consciousness, or behavior  changes\u2014symptoms that may indicate a potential brain injury. For  example:\nOfficials from three initiatives that screened victims for potential brain  injuries reported using a version of the HELPS screening tool. (See  fig. 4 for an example of a modified version of this screening tool used  by one initiative.) Officials from one initiative told us that screening  typically occurred at domestic violence shelters where staff and  advocates receive training on how to screen intimate partner violence  victims.\nOfficials from the other three initiatives told us they developed their  own screening methods. For example, staff at the Maricopa County  Collaboration on Concussions in Domestic Violence in Arizona screen  victims using a tool that measures near point of convergence, which  refers to an individual\u2019s ability to focus both eyes on a target, an  approach that can be used to detect a concussion. Police officers  from two participating departments in Arizona have used this tool to  screen individuals when they respond to a domestic violence call,  according to officials with the collaboration.\nTreatment. Two of the 12 initiatives included a treatment component.  Officials with the Barrow Concussion and Brain Injury Center in Arizona  and the Northside Hospital Duluth Concussion Institute in Georgia told us  they provided treatment to victims who were referred by local domestic  violence shelters. Providers affiliated with one of these initiatives told us  that treatment for brain injuries resulting from intimate partner violence  does not differ from treatment for other brain injuries. A provider with one  of these initiatives said that treatment could include exercises and  movements that decrease dizziness, vertigo, and imbalance;  occupational, physical, or speech therapies; or treatment for pain  management.\nAn Intimate Partner Violence Victim\u2019s  Brain Injury Treatment  Jane Doe was abused by her partner. An  advocate at a domestic violence shelter  screened Jane for a brain injury and referred  her for assessment. She was diagnosed and  began treatment for a brain injury. Jane Doe  told us that the treatments she received,  which included nerve blockers\u2014often used by  neurologists to lessen chronic pain\u2014helped to  relieve the persistent headaches and  debilitating migraines she experienced in the  aftermath of her abuse. She told us that as a  result of the treatment she received, she feels  better able to function.\nOfficials from the Barrow Concussion and Brain Injury Center told us that  individuals with brain injuries resulting from intimate partner violence may  face a longer period of recovery compared to others with brain injuries, in  part, because of living in unsafe home environments. As a result, special  considerations are sometimes needed due to additional barriers faced by  domestic violence victims. For example:\nVictims may need safety planning and housing. As a part of the  Barrow Concussion and Brain Injury Center\u2019s domestic violence  initiative, a social worker will help ensure that victims\u2019 other needs are  met.\nOfficials from the Northside Hospital Duluth Concussion Institute  noted that transportation could also be a barrier for victims of intimate  partner violence. As such, the Georgia Department of Public Health\u2019s  Injury Prevention Program, which partnered with the Northside  Hospital Duluth Concussion Institute, planned to use CDC grant  funding to provide domestic violence victims transportation from area  shelters to the concussion institute for treatment.\nOfficials from the Barrow Concussion and Brain Injury Center also told  us about other considerations, such as the need to have a flexible  appointment policy to account for the possibility of victims missing or  canceling appointments.\nOf the 12 initiatives we identified, eight received federal grants from HHS  or DOJ, while officials from the other four initiatives told us they were  funded with state, local, or private dollars. According to HHS and DOJ  officials, the grants did not have specific requirements to address the  intersection of brain injuries and intimate partner violence. However,  based on our review of documentation, the eight initiatives used the  federal funds to focus on the intersection of these two issues. Six of these  eight initiatives received funding from HHS. Of them, four were funded by  HRSA or ACL grants that focused on TBI-related services and activities,  and two were funded by CDC grants focused on injury and violence  prevention activities. The other two initiatives were funded by DOJ\u2019s  Office of Justice Programs through grants that provide funds to support  victims of crime.\nIn addition to the federal funding received by some of the 12 initiatives,  we identified other efforts and grants funded by HHS and DOJ. These  efforts made educational materials on intimate partner violence and brain  injuries accessible online, made ad-hoc or internal trainings available to  external parties, or provided education that touched on the connection  between intimate partner violence and brain injury, according to HHS and  DOJ officials. For example:\nACF has funded the National Resource Center on Domestic Violence  and Futures Without Violence\u2019s National Health Resource Center on  Domestic Violence, which provide information related to intimate  partner violence and brain injuries via websites.\nACF, in collaboration with HRSA, funded an effort led by Futures  Without Violence, which includes some information on TBI and  strangulation in trainings for select state leadership teams working to  address intersections of health, intimate partner violence, and human  trafficking.\nDOJ\u2019s Office on Violence Against Women provided grant funds to  support the Training Institute on Strangulation Prevention, which  offers training to individuals and outside entities to help them  understand, recognize, and appropriately serve strangulation victims,  as well as investigate and prosecute strangulation cases.\nDOJ\u2019s Office on Violence Against Women has also provided grant  funds used by local organizations, such as police departments, to  provide ad-hoc or internal training activities on brain injuries and to  serve victims with brain injuries, including those caused by  strangulation.\n\n\tData on the Overall Prevalence of Brain Injuries Resulting from Intimate Partner Violence Are Limited; Improved Data Could Help Target HHS Public Health Efforts\n\nBased on our review of the literature, as well as interviews with HHS  officials and other non-federal stakeholders, we found that data on the  overall prevalence of brain injuries resulting from intimate partner violence  are limited.\nSpecifically, available data do not provide an overall estimate of the  prevalence of brain injuries resulting from intimate partner violence  nationwide. While there are studies that estimate the prevalence of these  injuries, these studies are also limited. Specifically, among the 28 articles  we reviewed, six included an objective to estimate the prevalence of brain  injuries resulting from intimate partner violence, while the remaining 22  articles examined other areas, such as health effects or awareness of  brain injuries resulting from intimate partner violence, but did not have an  objective to estimate prevalence. The six articles are also specific to a  certain subpopulation or certain geographic locations and used different  approaches to identify individuals with brain injuries. As a result, the  range of reported prevalence rates on victims of intimate partner violence  with brain injuries (brain injuries caused by trauma or strangulation)  varied greatly (from 11 percent to about 79 percent) and were based on a  range of sample sizes, from 95 people to about 1,000 people.\nHHS agencies also have some data collection and research efforts  related to this issue; however, these efforts are limited as well. For  example, CDC and NIH have efforts that may assist in better  understanding the connection between brain injuries and intimate partner  violence, but CDC\u2019s efforts do not account for all causes of brain injuries  and NIH has only one study focused on this connection. Further, HHS  agencies treat brain injuries and intimate partner violence as separate  public health issues and pursue their efforts separately\u2014which limits their  ability to better understand the connection between the issues and the  overall prevalence of brain injuries that result from domestic violence.\nCDC officials told us that the agency\u2019s data on the connection between  brain injuries and intimate partner violence are limited, but the agency  plans to address some of the limitations. For example, the officials said  CDC analyzes health care claims data from emergency department visits  to determine the causes of TBI. However, CDC officials told us that these  data likely underestimate TBI among victims of intimate partner violence,  because many do not seek medical care; for domestic violence victims  who seek care, providers are unlikely to designate the individual as a  victim of intimate partner violence.\nCDC also collects data on intimate partner violence through its NISVS.  According to CDC reports, NISVS data are a key source of information on  intimate partner violence, but the survey does not collect data on all types  of brain injuries related to intimate partner violence. For example, the  NISVS estimates the prevalence of victims of intimate partner violence  who have been \u201cknocked out after getting hit, slammed against  something, or choked.\u201d However, published estimates are based on  responses to a survey question that asks individuals about being  \u201cknocked out,\u201d which is a colloquial term commonly used to indicate a  loss of consciousness. CDC officials stated that in most known incidents  of mild brain injury, people do not lose consciousness. As a result, NISVS  data likely understate the number of intimate partner violence victims who  may have brain injuries.\nIn order to better estimate TBIs resulting from intimate partner violence,  CDC officials told us they plan to add a survey question to the NISVS to  ask respondents about whether they have experienced a concussion\u2014a  common term for mild forms of TBI\u2014due to a current or ex-partner.  CDC officials told us that they have begun initial testing on several  aspects of the survey, including on the additional question with the goal to  begin data collection by the end of 2022, plans which are pending  approval. Once the NISVS data are collected and analyzed, CDC officials  said the data could help them provide a nationally representative  prevalence estimate of intimate partner violence victims\u2019 who experienced  a TBI in their lifetimes.\nHowever, adding the question to the NISVS may not ensure that these  data can provide a comprehensive estimate of the prevalence of brain  injuries resulting from intimate partner violence. In particular,  The NISVS question will focus on TBIs, and will not account for  individuals with brain injuries caused by strangulation. According to  educational materials developed by the Training Institute of  Strangulation Prevention and used by HRSA in the training of  providers and advocates, more than two-thirds of intimate partner  violence victims are strangled at least once. CDC officials told us  that they are able to measure acts of choking or suffocation through  the NISVS, but this measure cannot be used to account for brain  injuries resulting from strangulation.  Additionally, CDC officials told us  that the agency\u2019s priority is to focus on TBI specifically rather than  accounting for other brain injuries.\nDespite the focus on TBIs, CDC officials told us the NISVS data are  not designed to examine whether intimate partner violence is a  leading cause of TBI in comparison with other causes, such as sports  or motor vehicle crashes. CDC officials said that some research and  NISVS data suggest that intimate partner violence is not as large a  contributor of TBIs when compared to other contributors.  However,  they noted that they do not have data on the proportion of TBIs  resulting from intimate partner violence. Absent the ability to compare  intimate partner violence as a cause of TBI against other contributors  through the NISVS or other representative studies, CDC officials will  continue to lack an understanding of the full scope of TBIs, their  primary causes, and who is affected by them.\nNIH officials identified two agency efforts that could help improve what is  known about the connection between brain injuries and intimate partner  violence.\nNIH began funding a study in September 2019 that will use advanced  brain imaging, blood analyses, and cognitive and psychological  testing to study the effects of multiple brain injuries on women  subjected to intimate partner violence. The objectives of the study are  not to measure prevalence, but to examine the health effects of brain  injuries resulting from intimate partner violence. NIH officials told us  that this is the first study funded by NIH using brain images to  investigate brain injuries resulting from intimate partner violence.\nNIH is also developing blood biomarkers\u2014which are clinical diagnosis  tools\u2014for identifying mild TBI. Currently, mild TBI is generally  diagnosed by taking an inventory of symptoms, but symptoms can  lead to misdiagnoses, including for mental illness or a substance use  disorder. NIH officials said they are in the initial stages of developing  these biomarkers, which could take the place of screening tools in  diagnosing a brain injury. While this effort was not initiated to better  understand brain injuries among victims of intimate partner violence,  biomarkers have the potential to improve the identification of TBIs,  provided they are applied to domestic violence victims.\nTwo other HHS agencies\u2014ACL and HRSA\u2014also have efforts that  address brain injuries or intimate partner violence. However, these  agencies\u2019 efforts are generally not focused on the connection of the two  issues, so they are not likely to result in more complete data on the  prevalence of brain injuries resulting from intimate partner violence.  Specifically:  ACL provides grants to states to establish support services for individuals  with brain injuries through its TBI State Partnership Program. As part of  these efforts, ACL officials told us that they have begun to gather  information to determine how many TBI grant recipients are using the  funds to support particular populations, including individuals with TBI  resulting from intimate partner violence. As of December 2019, ACL  officials told us that two states (Idaho and Iowa) have used the grants to  focus on individuals with TBI as a result of intimate partner violence.\nHRSA has proposed an effort to collect data that may assist in further  understanding the health consequences of intimate partner violence. As  part of its strategy to address intimate partner violence, HRSA officials  recently began requiring federally qualified health centers to capture  International Classification of Diseases-10 codes for intimate partner  violence on health care claims beginning in 2020. This effort is not aimed  at the intersection of intimate partner violence and brain injuries; the  purpose of this data collection is to better understand the effect of  intimate partner violence on victims\u2019 health outcomes. While these data  may currently underestimate the number of individuals affected by  intimate partner violence, HRSA officials told us that their goal in  collecting these data is to underscore the significance of intimate partner  violence and help position providers to assist victims. Further, knowing  the prevalence of brain injuries resulting from intimate partner violence  and using these data could help officials further target education  campaigns to providers on the potential injuries associated with intimate  partner violence.\nOfficials from HHS agencies acknowledge that the lack of prevalence  data on brain injuries resulting from intimate partner violence is a  challenge in addressing the intersection of these issues. However, HHS  and its agencies do not have a plan for how they would collect better  prevalence data, including a plan that specifies the extent to which HHS  agencies should collaborate on data collection efforts. Although HHS  agencies have some efforts underway, these efforts are limited or do not  examine the connection between the issues. For example, CDC is  working to add a question to NISVS to improve what is known about the  prevalence of TBIs among victims of intimate partner violence; however,  this effort overlooks brain injuries resulting from strangulation\u2014which  HRSA reports is often also experienced by these victims\u2014because  CDC\u2019s priorities are to focus on TBIs specifically. Further, the newly  funded NIH study is not intended to estimate the overall prevalence of  brain injuries resulting from intimate partner violence.\nHaving complete data on the prevalence of brain injuries resulting from  intimate partner violence could strengthen HHS\u2019s efforts to address this  public health issue. HHS and its agencies acknowledge that enhancing  the health and well-being of Americans is critical to their public health  mission and intimate partner violence and TBIs are both prominent injury  and violence issues. As part of this mission, CDC uses its Public Health  Approach to guide its public health related efforts. The first step of this  approach is to define the problem, which includes collecting prevalence  data to understand the magnitude of the problem, where the problem  exists, and whom it affects. According to CDC, such data are critical to  ensuring that resources are focused on the individuals most in need.\nCollecting data on the prevalence of brain injuries resulting from intimate  partner violence is a critical first step. With better data comes a better  understanding of the overall prevalence of brain injuries resulting from  intimate partner violence. This would give HHS and its agencies the  information necessary to inform their efforts and allocate resources,  including grant funding, to address victims of brain injuries resulting from  intimate partner violence.\n\n\tConclusions\n\nIntimate partner violence affects over 30 percent of women and men in  the United States, and research has raised concerns about brain injuries  sustained by these domestic violence victims. Officials from HHS  agencies acknowledge the lack of overall prevalence data on brain  injuries resulting from intimate partner violence and the adverse effect this  lack of data has on understanding the intersection of these two issues.  While HHS agencies have some efforts underway to address brain  injuries and intimate partner violence, they are limited and address these  issues separately. Therefore, HHS and its agencies have missed an  opportunity to improve their public health efforts to address this issue,  particularly the prevalence of the problem, where the problem exists, and  whom it affects. By working together, HHS and its agencies can identify  ways that each agency\u2019s efforts could result in better prevalence data and  a better overall understanding of brain injuries resulting from intimate  partner violence. Improved data, in turn, could also help ensure that  federal resources are allocated to the appropriate areas and used as  efficiently and effectively as possible to address this public health issue.\n\n\tRecommendation\n\nWe are making the following recommendation to HHS:  The Secretary of HHS should develop and implement a plan to improve  data collected on the prevalence of brain injuries resulting from intimate  partner violence and use these data to inform HHS\u2019s allocation of  resources to address the issue. (Recommendation 1)\n\n\tAgency Comment\n\nWe provided a draft of this report to HHS and DOJ for review and  comment. In its written comments (reproduced in app. III), HHS concurred  with our recommendation and noted that it is coordinating a plan amongst  its relevant agencies to augment data collection on the prevalence of  brain injuries resulting from intimate partner violence. HHS noted that  these data will continue to inform the needs of this vulnerable population.  HHS and DOJ also provided technical comments, which we incorporated  as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, Secretary of Health and Human Services, Attorney General,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http:\/\/www.gao.gov.\nIf 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  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.\n\nAppendix I: Description of Literature Review and Bibliography\n\nWe identified articles for our literature review through a search of  bibliographic databases, including Harvard Library Think Tank Search,  MEDLINE, and Scopus, using terms such as \u201cintimate partner violence,\u201d  \u201cdomestic violence,\u201d \u201ctraumatic brain injury,\u201d and \u201cstrangulation.\u201d We  determined there were 57 relevant articles from 2009 through August  2019 discussing brain injuries resulting from intimate partner violence.  We reviewed the 57 articles to examine brain injuries resulting from  intimate partner violence, including background information on the  concerns of brain injuries resulting from intimate partner violence and  challenges that researchers may have identified in conducting this work.\nOf the 57 articles, we identified 28 that had conducted their own data  analyses. We analyzed these 28 articles to examine data on prevalence  rates, as well as research on health effects, treatment, and screening  tools for identifying brain injuries resulting from intimate partner violence.  The following articles are based on an original analysis of data.\nBrown, Joshua, Dessie Clark, and Apryl E. Pooley. \u201cExploring the Use of  Neurofeedback Therapy in Mitigating Symptoms of Traumatic Brain Injury  in Survivors of Intimate Partner Violence.\u201d Journal of Aggression,  Maltreatment & Trauma, vol. 28, no. 6 (2019): 764-783.\nCampbell, Andrew M., Ralph A. Hicks, Shannon L. Thompson, and Sarah  E. Wiehe. \u201cCharacteristics of Intimate Partner Violence Incidents and the  Environments in Which They Occur: Victim Reports to Responding Law  Enforcement Officers.\u201d Journal of Interpersonal Violence (2017): 1-24.\nCampbell, Jacquelyn C., Jocelyn C. Anderson, Akosoa McFadgion,  Jessica Gill, Elizabeth Zink, Michelle Patch, Gloria Callwood, and Doris  Campbell. \u201cThe Effects of Intimate Partner Violence and Probable  Traumatic Brain Injury on Central Nervous System Symptoms.\u201d Journal of  Women\u2019s Health, vol. 27, no. 6 (2018): 761-767.\nCimono, Andrea, N., Grace Yi, Michelle Patch, Yasmin Alter, Jacquelyn  C. Campbell, Kristin K. Gunderson, Judy T. Tang, Kiyomi Tsuyuki, and  Jamila K. Stockman. \u201cThe Effect of Intimate Partner Violence and  Probable Traumatic Brain Injury on Mental Health Outcomes for Black  Women.\u201d Journal of Aggression, Maltreatment & Trauma, vol. 28, no. 6  (2019): 714-731.\nCrowe, Allison, Christine E. Murray, Patrick R. Mullen, Kristine Lundgren,  Gwen Hunnicutt, and Loreen Olson. \u201cHelp-Seeking Behaviors and  Intimate Partner Violence-Related Traumatic Brain Injury.\u201d Violence and  Gender, vol. 6, no. 1 (2019): 64-71.\nGagnon, Kelly L., and Anne P. DePrince. \u201cHead Injury Screening and  Intimate Partner Violence: A Brief Report.\u201d Journal of Trauma &  Dissociation, vol. 18, no. 4 (2017): 635-644.\nHigbee, Mark, Jon Eliason, Hilary Weinberg, Jonathan Lifshitz, and  Hirsch Handmaker. \u201cInvolving Police Departments in Early Awareness of  Concussion Symptoms during Domestic Violence Calls.\u201d Journal of  Aggression, Maltreatment & Trauma, vol. 28, no. 7 (2019): 826-837.\nHunnicutt, Gwen, Christine Murray, Kristine Lundgren, Allison Crowe, and  Loreen Olson. \u201cExploring Correlates of Probable Traumatic Brain Injury  among Intimate Partner Violence Survivors.\u201d Journal of Aggression,  Maltreatment & Trauma, vol. 28, no. 6 (2019): 677-694.\nHux, Karen, Trish Schneider, and Keri Bennett. \u201cScreening for traumatic  brain injury.\u201d Brain Injury, vol. 23, no. 1 (2009): 8-14.\nJoshi, Manisha, Kristie A. Thomas, and Susan B. Sorenson. \u201c\u2018I Didn\u2019t  Know I Could Turn Colors\u2019: Health Problems and Health Care  Experiences of Women Strangled by an Intimate Partner.\u201d Social Work in  Health Care, vol. 51, no. 9 (2012): 798-814.\nLinton, Kristen Faye. \u201cInterpersonal violence and traumatic brain injuries  among Native Americans and women.\u201d Brain Injury, vol. 29, no. 5 (2015):  639-643.\nMessing, Jill T., Kristie A. Thomas, Allison L. Ward-Lasher, and Nathan  Q. Brewer. \u201cA Comparison of Intimate Partner Violence Strangulation  Between Same-Sex and Different-Sex Couples.\u201d Journal of Interpersonal  Violence, vol. 00, no. 0 (2018): 1-19.\nMessing, Jill T., Michelle Patch, Janet S. Wilson, Gabor D. Kelen,  Jacquelyn Campbell. \u201cDifferentiating among Attempted, Completed, and  Multiple Nonfatal Strangulation in Women Experiencing Intimate Partner  Violence.\u201d Women\u2019s Health Issues, vol. 28, no. 1 (2018): 104-111.\nMittal, Mona, Kathryn Resch, Corey Nichols-Hadeed, Jennifer Thompson  Stone, Kelly Thevenet-Morrison, Catherine Faurot, and Catherine Cerulli.  \u201cExamining Associations between Strangulation and Depressive  Symptoms in Women with Intimate Partner Violence Histories.\u201d Violence  and Victims, vol. 33, no. 6 (2019): 1072-1087.\nNemeth, Julianna M., Cecilia Mengo, Emily Kulow, Alexandra Brown, and  Rachel Ramirez. \u201cProvider Perceptions and Domestic Violence (DV)  Survivor Experiences of Traumatic and Anoxic-Hypoxic Brain Injury:  Implications for DV Advocacy Service Provision.\u201d Journal of Aggression,  Maltreatment & Trauma, vol. 28, no. 6 (2019): 744-763.\nPritchard, Adam J., Amy Reckdenwald, Chelsea Nordham, and Jessie  Holton. \u201cImproving Identification of Strangulation Injuries in Domestic  Violence: Pilot Data From a Researcher-Practitioner Collaboration.\u201d  Feminist Criminology, vol. 12, no. 2 (2018): 160-181.\nRalston, Bridget., Jill Rable, Todd Larson, Hirsch Handmaker, and  Jonathan Lifshitz. \u201cForensic Nursing Examination to Screen for Traumatic  Brain Injury following Intimate Partner Violence.\u201d Journal of Aggression,  Maltreatment & Trauma, vol. 28, no. 6 (2019): 732-743.\nReckdenwald, Amy, Ketty Fernandez, and Chelsea L. Mandes.  \u201cImproving law enforcement\u2019s response to non-fatal strangulation.\u201d  Policing: An International Journal (2019): 1-15.\nReckdenwald, Amy, Chelsea Nordham, Adam Pritchard, and Brielle  Francis. \u201cIdentification of Nonfatal Strangulation by 911 Dispatchers:  Suggestions for Advances Toward Evidence-Based Prosecution.\u201d  Violence and Victims, vol. 32, no. 3 (2017): 506-520.\nShields, Lisa B.E., Tracey S. Corey, Barbara Weakley-Jones, and Donna  Stewart. \u201cLiving Victims of Strangulation.\u201d American Journal of Forensic  Medicine and Pathology, vol. 31, no. 4 (2010): 320-325.\nSt. Ivany, Amanda, Linda Bullock, Donna Schminkey, Kristen Wells,  Phyllis Sharps, and Susan Kools. \u201cLiving in Fear and Prioritizing Safety:  Exploring Women\u2019s Lives After Traumatic Brain Injury From Intimate  Partner Violence.\u201d Qualitative Health Research, vol. 28, no. 11 (2018):  1708-1718.\nSt. Ivany, Amanda, Susan Kools, Phyllis Sharps, and Linda Bullock.  \u201cExtreme Control and Instability: Insight Into Head Injury From Intimate  Partner Violence.\u201d International Association of Forensic Nursing, vol. 14,  no. 4 (2018): 198-205.\nSt. Ivany, Amanda, and Donna Schminkey. \u201cRethinking Traumatic Brain  Injury from Intimate Partner Violence: A Theoretical Model of the Cycle of  Transmission.\u201d Journal of Aggression, Maltreatment & Trauma, vol. 28,  no. 7 (2019): 1-23.\nSullivan, Karen A, and Christina Wade. \u201cAssault-Related Mild Traumatic  Brain Injury, Expectations of Injury Outcome, and the Effects of Different  Perpetrators: A Vignette Study.\u201d Applied Neuropsychology: Adult, vol. 26,  no. 1 (2019): 58-64.\nSullivan, Karen A, and Christina Wade. \u201cDoes the Cause of the Mild  Traumatic Brain Injury Affect the Expectation of Persistent  Postconcussion Symptoms and Psychological Trauma?\u201d Journal of  Clinical and Experimental Neuropsychology, vol. 39, no. 4 (2017): 408- 418.\nValera, Eve M., Aihua Cao, Ofer Pasternak, Martha E. Shenton, Marek  Kubicki, , Nikos Makris, and Noor Adra. \u201cWhite Matter Correlates of Mild  Traumatic Brain Injuries in Women Subjected to Intimate-Partner  Violence: A Preliminary Study.\u201d Journal of Neurotrauma, vol. 36 (2019):  661-668.\nValera, Eve, and Aaron Kucyi. \u201cBrain Injury in Women Experiencing  Intimate Partner-Violence: Neural Mechanistic Evidence of an \u201cInvisible\u201d  Trauma.\u201d Brain Imaging and Behavior, vol. 11 (2017): 1664-1677.\nZieman, Glynnis, Ashley Bridwell, and Javier F. Cardenas. \u201cTraumatic  Brain Injury in Domestic Violence Victims: A Retrospective Study at the  Barrow Neurological Institute.\u201d Journal of Neurotrauma, vol. 33, (2016): 1- 5.\n\nAppendix II: Nonfederal Initiatives Focused on Intimate Partner Violence and Brain Injury\n\nThe following table provides a brief overview of each of the 12 initiatives  we identified based on information provided by the Department of Health  and Human Services, the Department of Justice, and other stakeholders.  These initiatives engage in various efforts to address intimate partner  violence and brain injuries, including traumatic brain injury and anoxic  injuries resulting from strangulation. Our list includes those efforts  identified during the course of our review and may not be exhaustive. The  descriptions of initiatives are based on our review of documentation and  information obtained from interviews with officials.\n\nAppendix III: Comments from the Department of Health and Human Services\n\nAppendix IV: Staff Acknowledgements and GAO Contact\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Shannon Slawter Legeer  (Assistant Director), Danielle Bernstein (Analyst-in-Charge), and Ashley  Dixon made key contributions to this report. Also contributing were Leia  Dickerson, Kaitlin Farquharson, Drew Long, and Ethiene Salgado- Rodriguez.","output":null}
{"id":"gao_GAO-20-46","pid":"gao_GAO-20-46_0","input":"\tBackground\n\n\t\tBSA\/AML Requirements and Key Agencies Involved in Their Enforcement\n\nThe BSA established reporting, recordkeeping, and other AML  requirements for financial institutions. As the delegated administrator of  the BSA, FinCEN has issued implementing regulations. In complying with  BSA\/AML requirements, U.S. financial institutions assist government  agencies in detecting and preventing money laundering and terrorist  financing by, among other things, establishing and maintaining  compliance programs, conducting ongoing monitoring of customers and  transactions, and reporting suspicious activity. Oversight and  enforcement of compliance with the BSA involve several federal  agencies, including FinCEN and the Internal Revenue Service (IRS).  FinCEN has overall authority for administering and enforcing compliance  under the BSA and may seek civil penalties and injunctions to compel  compliance. In addition, each of the federal banking regulators has  independent authority to initiate enforcement actions against supervised  institutions for violations of law and to seek civil money penalties for BSA  violations, among other things. FinCEN has delegated authority to IRS to  investigate most criminal violations of the BSA. The Department of  Justice prosecutes violations of federal criminal money-laundering  statutes, including violations of the BSA, and several law enforcement  agencies conduct BSA-related criminal investigations.\nThe federal banking regulators have also issued BSA\/AML regulations  that require banks to establish and maintain a BSA\/AML compliance  program that includes, among other things, policies, procedures, and  processes to identify and report suspicious activity. The banking  regulators are required to review banks\u2019 compliance with BSA\/AML  requirements and regulations, which they generally do every 1 to 2 years  as a part of their routine safety and soundness examinations. FinCEN has  also delegated examination authority for BSA\/AML compliance for certain  entities, including money transmitters, to IRS. In general, money  transmitters must register with FinCEN and provide certain information on  their structure and ownership. According to Treasury, in all but one state,  money transmitters are required to obtain licenses from states in which  they are incorporated or conduct business. State supervisory agencies  also may conduct BSA\/AML examinations of licensed money transmitters.\nTo ensure consistency in the application of BSA\/AML requirements, in  2005 the federal banking regulators collaborated with FinCEN on  developing an examination manual that was issued by FFIEC for federal  bank examiners conducting BSA\/AML examinations of banks. The  examination manual has been revised several times since its release, and  the most recent comprehensive revision was released in 2014. According  to the examination manual, a key function of the federal banking  regulators\u2019 BSA\/AML examinations is to assess whether banks have  established the appropriate policies, procedures, and processes based on  their BSA\/AML risk to identify and report suspicious activity. The  supervisory process also assesses whether banks provide sufficient detail  in reports to law enforcement agencies to make the reports useful for  investigating suspicious transactions that are reported. Moreover, federal  banking regulators conduct risk-focused BSA\/AML examinations of  banks\u2014that is, they review key BSA\/AML risks or specific risk areas  identified by the bank and tailor examination procedures based on each  bank\u2019s risk profile. Among other things, examiners review whether banks have an adequate system of internal controls to ensure ongoing  compliance with BSA\/AML regulations. Similarly, in 2008 FinCEN issued  a BSA examination manual to guide reviews of money transmitters and  other types of MSBs, including reviews by IRS and state regulators.  Both the FFIEC and FinCEN examination manuals are publicly available.\n\n\t\tComponents of BSA\/AML Compliance Programs for Money Transmitters and Banks under the BSA\n\nMoney transmitters and banks are subject to requirements under the  BSA. They are generally required to design and implement a written AML  compliance program, report certain transactions to Treasury, and meet  recordkeeping (including identity documentation) requirements for  transfers of $3,000 or more. At a minimum, each AML compliance  program must establish a system of AML compliance policies, procedures, and  internal controls to ensure ongoing compliance; 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.\nAdditionally, banks must include appropriate risk-based procedures for  conducting ongoing customer due diligence as part of their AML  compliance program.\nBSA\/AML regulations require that each bank or money transmitter tailor a  compliance program that is specific to its own risks based on factors such  as the products and services offered and the customers and locations  served. BSA\/AML compliance programs for banks\u2014including those that  service money transmitters\u2014are expected to include the following:\nCustomer 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, such as a Social Security number or a  passport number. Banks\u2019 customer identification programs must also  include risk-based procedures for verifying the identity of each  customer to the extent reasonable and practicable. Additionally, a  bank\u2019s customer identification program should contain procedures for  circumstances when a bank cannot verify the customer\u2019s identity,  including procedures for when the bank should not open an account  and when the bank should close an account.\nCustomer due diligence procedures. These procedures assist  banks in determining when transactions are potentially suspicious.  Procedures must be designed to achieve two minimum regulatory  requirements: (1) understanding the nature and purpose of customer  relationships so customer risk profiles can be developed and (2)  conducting ongoing monitoring, based on the level of risk associated  with the customer, to identify and report suspicious activity and to  maintain and update customer information on a risk-basis.\nAdditional due diligence procedures. Due diligence procedures  also should define when and what additional customer information will  be collected for customers who banks determine may pose a higher  risk for money laundering or terrorist financing. Procedures should be  based on each customer\u2019s risk profile and specific risks posed. 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.\nIn addition, banks and money transmitters must also have policies and  procedures to monitor transactions and identify suspicious activity.  Monitoring generally includes (1) manual review of transaction summary  reports to identify suspicious transactions or (2) automated monitoring  systems that use computer algorithms to identify patterns of unusual  activity. As we previously reported, banks with large transaction volumes  typically use automated monitoring systems.\nBanks and money transmitters also must comply with certain reporting  requirements:\nCurrency Transaction Reports. Banks and money transmitters must  electronically file this type of report for each transaction or a  combination of transactions in a single day\u2014such as a deposit,  withdrawal, exchange, or other payment or transfer\u2014in currency of  more than $10,000.\nSuspicious Activity Reports (SAR). Under FinCEN regulation,  banks and money transmitters are required to 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.\nIn addition, banks\u2019 compliance programs generally include policies and  procedures that describe criteria for deciding to close or not to open an  account. 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 criteria in policies and procedures that indicate when it will  escalate issues identified through repeat SAR filings on accounts,  including criteria on when to close an account. The federal banking  regulators generally do not direct banks to open, close, or maintain  individual accounts.\n\n\t\tTransfers through Money Transmitters\n\nThe money transfer industry is diverse, ranging from Fortune 500  companies with numerous outlets worldwide to small, independent money  transmitters. Some money transmitters are in communities with  population concentrations that do not necessarily have access to  traditional banking services. Money transmitters may send and receive  funds domestically\u2014intrastate or interstate\u2014or internationally. Money  transmitters typically work through agents\u2014separate business entities  generally authorized to send and receive money transfers. Most money  transfers are initiated in person at retail outlets. Money transmitters  generally operate through their own retail storefronts or through grocery  stores, financial service outlets, convenience stores, and other retailers  that serve as agents.\nIn one common type of money transmitter transaction\u2014known as a cash- to-cash transfer\u2014a sender enters a money transmitter agent location and  provides cash to cover the transfer amount and fees (see fig. 1). For  transfers at or above $3,000, senders must generally provide basic  information about themselves (including name and address) at the time of  the transfer request. The agent processes the transaction, and the money  transmitter\u2019s headquarters screens it to validate BSA\/AML compliance.  The money is then transferred to a recipient via a distributing agent or  bank. In an international money transfer, the money may be distributed  through an agent in the destination country, wired through the money  transmitter\u2019s bank to the distributor agent\u2019s bank, 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.\n\n\t\tMoney-Laundering and Terrorist-Financing Risks Posed by Money Transmitters\n\nMoney transfers can pose money-laundering and terrorist-financing risks,  as funds related to illicit activity may go undetected due to the large  volume of transactions or to money transmitters\u2019 inadequate oversight of  the various entities involved. We and others have identified money- laundering and terrorist-financing risks associated with money  transmitters, including risks related to agents, customers, geographic  location, and products.\nAgents. Money transmitters often work with multiple agents, and  maintaining adequate oversight can be challenging, given the  decentralized nature of the agent system. According to data collected  by the Conference of State Bank Supervisors, as of December 31,  2018, 204 money transmitters reported that they had more than  440,000 agents\u2014with nine of these money transmitters reporting that  they had at least 10,000 agents. These agents present money- laundering risks if they knowingly or unknowingly fail to follow  BSA\/AML requirements or the policies and programs established by  the money transmitter. For example, an agent may not follow the  recordkeeping requirements for transfers above the regulatory funds  transfer threshold or above lower thresholds that a money transmitter  has self-imposed. MSB principals are required to conduct risk-based  monitoring of their agents.\nCustomers. Certain customers may pose heightened risk because of  the nature of their business, occupation, or anticipated transaction  activity. Additionally, in certain instances, they may be able to launder  money while remaining anonymous. For example, customers may use  false identities or straw men (individuals hired to conduct transfers on  behalf of others) to keep from being identified as the original source of  the funds. Examples of suspicious customer activity that may indicate  money laundering include identification documents that cannot be  easily verified; the use of different taxpayer identification numbers with variations of the same name; frequent or large transactions with no  record of past or present employment; and reluctance to provide  identification for transactions subject to identification requirements.\nGeographic location. Certain geographic locations may be more  vulnerable to money laundering or terrorist financing via money  transfers. High-risk geographic locations can be either international or  domestic. According to FinCEN\u2019s MSB examination manual,  examples of international high-risk geographic locations include  countries subject to sanctions by the Office of Foreign Assets Control  or countries and territories identified as being noncooperative.  Domestic high-risk geographic locations include High Intensity Drug  Trafficking Areas (HIDTA) and High Intensity Financial Crime Areas  (HIFCA).\nProducts. According to the FFIEC and FinCEN MSB examination  manuals, certain products and services, such as money transfers,  may pose a higher risk of money laundering because of the degree of  anonymity they can offer. For example, the Financial Action Task  Force identified money-laundering and terrorist-financing risks  associated with mobile payments because these services can  sometimes allow for anonymous transactions, depending on the level  of AML measures the mobile payments provider has in place. The  task force also reported that virtual currency\u2014digital representations  of value such as Bitcoin that are not government-issued legal  tender\u2014could facilitate international remittances as virtual-currency- based products and services are developed.\nFederal agencies and international organizations have identified  instances where money transfers have been used to launder proceeds  from illicit activities such as human smuggling and trafficking, drug  trafficking, and consumer fraud, including the following examples:  In 2017, a large money transmitter entered into a $586 million  settlement with the Department of Justice, the Federal Trade  Commission, and the U.S. Attorney\u2019s offices for several states after it  was accused of, among other things, processing money transfers that  were suspected of being used to pay human smugglers in China.\nIn 2012, the Department of Justice found that a large money  transmitter\u2019s agents knowingly participated in a scheme in which  victims wired funds to the transmitter\u2019s agents and outlets in response  to fraudulent claims such as promising victims they would receive  large cash prizes or lottery winnings, falsely offering various high- ticket items for deeply discounted prices, falsely promising  employment opportunities, or posing as a relative of the victim and  claiming to be in trouble and in urgent need of money.\nIn a 2011 case, seven people were sentenced for money laundering  and drug trafficking involving the transfer of funds from the U.S. Virgin  Islands to Alaska. Hundreds of thousands of dollars in payment for the  drugs were sent using a large money transmitter in amounts  averaging less than $2,000 per wire transfer, a money-laundering  method known as structuring. See figure 2 for an illustrated example  of structuring.\n\n\tRequirements to Assess and Manage Money-Transmitter Risk Present Challenges for Some Banks\n\n\t\tBanks Are Required to Assess Money-Transmitter Risks and Manage Risks through Due Diligence and Monitoring\n\nIn April 2005, FinCEN and the federal banking regulators issued  interpretative guidance to further clarify BSA\/AML requirements to banks  that provide banking services to MSBs (including money transmitters)  operating in the United States. According to the interagency guidance, a  bank\u2019s level and extent of due diligence beyond the minimum  expectations should be based on an assessment of the individual  customer\u2019s BSA\/AML risks. If a particular MSB relationship indicates a  low risk of money laundering or other illicit activity, the bank may not be  routinely expected to perform further due diligence beyond minimum  expectations. Minimum expectations include applying the bank\u2019s  customer identification program and confirming FinCEN registration (if  required), agent status (if applicable), and state and local licensing  requirements (if applicable). Banks are also to conduct a basic BSA\/AML  risk assessment to determine the level of risk associated with the account  and whether further due diligence is necessary. In order to properly  assess risks, the interpretive guidance clarifies that banks should  consider the purpose of the account, the types of products and services  offered by the MSB, the locations and markets it serves, and the  anticipated account activity (see text box).\nExamples of Basic Information Banks Should Consider When Assessing a Money  Transmitter\u2019s Money-Laundering Risk, According to the Interagency Guidance  Purpose of account: Whether the money transmitter needs the bank account to  transfer funds to its principal U.S. account or to foreign-based agents in other countries.\nProducts and services offered: Whether the money transmitter is a principal with a  fleet of agents, or is it an agent itself, and whether money transmission the customer\u2019s  primary or ancillary business (such as a grocery store that derives a small fraction of its  overall revenue from providing money transmission services).\nLocations served: Whether the money transmitter\u2019s market domestic or international  and whether it targets local residents or broad markets.\nAnticipated account activity: Relevant considerations include the expected transaction  amounts and whether the money transmitter is operating out of one location and using  one bank branch, or whether it has several agents making deposits at multiple branches  throughout the bank\u2019s network.\nIf a bank concludes from its risk assessment that the MSB customer  presents a higher level of money-laundering or terrorist-financing risk, it  will be expected to conduct additional due diligence in a manner  commensurate with the heightened risk. According to the interagency  guidance, the appropriate amount of due diligence depends in part on the  level of perceived risk and the size and sophistication of the particular  MSB. Appropriate due diligence can include reviewing the MSB\u2019s  BSA\/AML compliance program, the results of the MSB\u2019s independent  testing of its program, and written agent management and termination  practices for the MSB, as well as conducting on-site visits to the MSB.\nThe interagency guidance also provides examples of \u201crisk indicators\u201d to  assist banks with their risk assessments. Examples of potentially lower- risk indicators include a money transmitter that primarily markets to  customers that conduct routine transactions with moderate frequency in  low dollar amounts; is an established business with an operating history;  or only remits funds to domestic entities. Examples of potentially higher- risk indicators include a money transmitter that allows customers to  conduct transactions in higher dollar amounts with moderate to high  frequency; is a new business without an established operating history;  offers only, or specializes in, cross-border transactions, particularly to  countries posing heightened risk for money laundering or terrorism  financing; or is located in an area designated as a HIFCA or HIDTA. The  guidance notes that in determining the level of risk, a bank should not  focus on any single indicator. Rather, an effective risk assessment should  be a composite of multiple factors, and depending on the circumstances,  certain factors may be weighed more heavily than others.\nBanks\u2019 customer risk assessments also determine the level of ongoing  monitoring for suspicious activity they must perform on each customer.  The interagency guidance states that, based on the bank\u2019s assessment of  the risks of its MSB customers (including money transmitters), monitoring  should include periodic confirmation that initial projections of account  activity have remained reasonably consistent over time. Examples of  potentially suspicious activity include a money transmitter transferring  funds to a different jurisdiction than expected or depositing currency  significantly in excess of expected amounts without any justifiable  explanation, such as an expansion of business activity or new locations.\nOfficials from several banks we spoke with described their additional due  diligence procedures for implementing BSA\/AML requirements when  accepting new money transmitter customers or monitoring existing ones.  These include obtaining and reviewing the money transmitter\u2019s BSA\/AML  policies, using questionnaires and interviews to collect detailed  information from the money transmitter on its business operations\u2014such  as services offered, transaction volume, and cash activity\u2014and site visits  to verify the information collected.\nOfficials from one bank told us that additional due diligence includes a  review of the money transmitter\u2019s business location, longevity, principal  owners, transaction volume, and cash activity. Bank staff collect this  information via a questionnaire administered through an in-person  interview at a branch. After reviewing the information, the bank\u2019s  BSA\/AML compliance department may choose to speak one-on-one with  the potential money transmitter customer or conduct a site visit. When  monitoring a new money transmitter customer for suspicious activity,  compliance staff compare answers from the due diligence questionnaire  against the customer\u2019s cash log and wire activity to determine if the  activity is outside normal parameters. The compliance department  investigates any suspicious leads and reports them to the bank\u2019s SAR  committee to decide whether to file a SAR.\n\n\t\tFederal Banking Examiners Determine Whether Banks Adequately Incorporate BSA\/AML Risk into Their Compliance Programs\n\nFederal banking examiners determine whether a BSA\/AML examination  should include a review of a bank\u2019s money transmitter accounts based on  the overall risk profile of the bank. The FFIEC examination manual directs  examiners to tailor the BSA\/AML examination scope and procedures to  the specific risk profile of the bank. Examiners begin a BSA\/AML  examination by reviewing and assessing the adequacy of the bank\u2019s  BSA\/AML risk assessment. This review includes determining whether  bank management has developed an accurate risk assessment that  identifies significant risks to the bank (see text box). This determination is  based on factors such as whether management has adequately  considered all products, services, customers, transaction number and  volume, and geographic locations, and whether management\u2019s  assessment methodology within these specific risk categories was  adequate.\nBank Secrecy Act\/Anti-Money Laundering (BSA\/AML) Examination Procedures for  Banks  In order to effectively apply resources and ensure compliance with BSA requirements, the  Federal Financial Institutions Examination Council (FFIEC) examination manual is  structured to allow examiners to tailor the BSA\/AML examination scope and procedures to  the specific risk profile of the bank.\nAt a minimum, examiners are expected to follow core examination procedures to ensure  that the bank has an adequate BSA\/AML compliance program commensurate with its risk  profile. The core procedures encompass four areas:\nScoping and planning: Identifying the bank\u2019s BSA\/AML risks, developing the  examination scope, and documenting the plan.\nBSA\/AML risk assessment: Assessing the BSA\/AML risk profile of the bank and  evaluating the adequacy of the bank\u2019s BSA\/AML risk assessment process.\nBSA\/AML compliance program: Determining whether the bank has developed,  administered, and maintained an effective program for compliance with the BSA and  all of its implementing regulations.\nDeveloping conclusions and finalizing the examination: Formulating conclusions,  communicating findings to management, preparing report comments, developing an  appropriate supervisory response, and closing the examination.\nIn addition to the core examination procedures, the examination manual also contains  sections of expanded examination procedures that address specific lines of business,  products, customers, or entities that may present unique BSA\/AML compliance challenges  and exposures for which banks should institute appropriate policies, procedures, and  processes. As examples, the examination manual contains expanded examination  procedures with respect to nonbank financial institutions, electronic banking, and funds  transfers.\nThe examination manual indicates that not all of the core and expanded examination  procedures are likely to be applicable to every bank. The specific examination procedures  that need to be performed depend on the BSA\/AML risk profile of the bank, the bank\u2019s  history of BSA\/AML compliance, and other relevant factors.\nExaminers also review the bank\u2019s written BSA\/AML compliance program  and determine whether the bank has adequately incorporated the risk it  identified through its risk assessment into its BSA\/AML compliance  program. This review and determination include completing relevant core  examination procedures for assessing key elements of the bank\u2019s  compliance program, such as the customer identification program and  policies, procedures, and processes related to customer due diligence,  suspicious activity reporting, and currency transaction reporting. As part  of these core examination procedures, examiners conduct risk-based  transaction testing, which OCC staff noted allows examiners to evaluate  the adequacy of the bank\u2019s compliance with regulatory requirements;  determine the effectiveness of its policies, procedures, and processes;  and evaluate suspicious activity monitoring systems. For example,  examiners might determine to select and review a sample of customer  accounts in testing the bank\u2019s compliance with its policies, procedures,  and processes or for possible suspicious activity.\nThe FFIEC examination manual contains an expanded examination  section for banks with significant relationships with nonbank financial  institutions, which include MSBs. This expanded section references and  incorporates the April 2005 interagency guidance for providing banking  services to MSBs and includes related examination procedures.  Consistent with this guidance, these procedures direct examiners to  assess whether the bank has minimum due diligence policies,  procedures, and processes in place for new or existing MSB accounts.  Examiners are then to determine whether the bank\u2019s policies, procedures,  and processes to assess MSB risks effectively identify higher-risk  accounts and the amount of further due diligence necessary.\nTo assist in this effort, the manual directs examiners to perform risk- focused transaction testing on a sample of higher-risk MSB accounts. In  discussion groups held with federal bank examiners, examiners from all  discussion groups noted that their review of the transaction activity of  money transmitter accounts is essential to determining whether the bank  understands the money transmitter\u2019s business and has appropriately  assessed the risk. For example, one examiner said that customer due  diligence procedures at account opening should include the appropriate  qualitative and quantitative questions so that the bank can make a  reasonable determination of the types and volumes of transactions that  will be flowing in and out of the account.\nExaminers from all discussion groups said that when assessing the  bank\u2019s risk assessment of a money transmitter, they focus on whether the  bank has considered the risk factors discussed in the examination  manual, including geography, customer type, products, services, and  transactional volume. In some discussion groups, examiners noted that  they may review money transmitter accounts if these accounts are  included in the sampling of bank customer accounts as part of the core  examination procedures. One examiner said that because banks in her  region do not tend to specialize in money transmitters or have a  significant degree of risk from them, the only time she reviews money  transmitter accounts is if they are included in her sample for transaction  testing. Examiners from one discussion group said that they may review  money transmitters as part of expanded examination review procedures  for nonbank financial institutions if the bank has a large portfolio of money  transmitter accounts. For example, one examiner said he generally does  not set out to look for and review money transmitter accounts when  conducting a BSA\/AML examination, but in one case his examination  team learned that during the course of a merger, a bank acquired a  number of nonbank financial institutions, including MSBs. As this bank did  not have prior experience with these kinds of customers, the examination  team decided to include them in the scope of their review. Examiners in  all discussion groups said that they neither instruct nor recommend that  banks close accounts with money transmitters or other types of MSBs.\nAlthough IRS and state agencies also examine money transmitters and  other MSBs, examiners from all discussion groups said that BSA\/AML  requirements and guidance do not allow banks to rely on IRS or state  oversight. These examiners said these reports could provide banks with a  useful additional source of information when conducting their due  diligence on MSB customers. However, these examiners added that the  reports would not substitute for or reduce the due diligence expected of  banks in complying with BSA\/AML compliance program requirements..  Examiners from most discussion groups observed that they know very  little about the quality of state or IRS examinations of MSBs and their  frequency.\n\n\t\tExaminers Identified BSA\/AML Compliance Challenges for Some Banks with MSB Customers, Including Money Transmitters\n\nExaminers in our discussion groups said the challenges that some banks  face in ensuring BSA\/AML compliance for their MSB customers include  those related to customer due diligence, risk assessments, customer  identification, and BSA\/AML compliance staff and resources.\nCustomer due diligence. Examiners from most discussion groups  said that some banks do not fully understand the customer due  diligence requirements for banking MSBs. Examiners in some  discussion groups said that banks do not always fully review or  understand the documents and information obtained from their MSB  customers in conducting due diligence. One examiner described an  instance where bank staff could not understand documentation  collected from MSB customers in a foreign language. Examiners in  some discussion groups said banks do not understand the need to  conduct ongoing monitoring of MSB accounts, including of the flow  and volume of customers\u2019 transactions. For example, one examiner in  a different discussion group described an instance of a community  bank that was unaware that an MSB account had $2 billion flowing  through annually even though the bank had only $1 billion in assets.  Examiners in some discussion groups said that banks also may not  fully understand their automated software for monitoring suspicious  activity or how to set the proper software parameters for capturing  potentially suspicious transactions. One examiner in a different  discussion group said that without proper monitoring, a bank would  not know when sudden changes in MSB customers\u2019 transaction types  or volumes would be considered suspicious and should be reported.\nRisk assessment. Examiners in many discussion groups said some  banks do not appropriately assess their MSB customers\u2019 risk, either  because they do not consider relevant risk factors or they rate all MSB  customers at the same risk level. One examiner in a discussion group  said he examined a bank with many money transmitter customers that  transmitted funds to several countries and found that the bank did not  assess the risk levels of the countries to which the money transmitters  sent funds. An examiner in a different discussion group said that  banks often assess all MSBs at the same level of risk because they  do not understand the difference between the various risk levels.  Another examiner in the same discussion group added that banks  often do not understand the guidance clarifying that banks should  assess each customer\u2019s risk individually. This statement was  corroborated by our review of several banks\u2019 BSA policies that  stipulated that all money transmitters and other MSBs should be  considered high risk, contrary to the 2005 guidance.\nCustomer identification. Examiners from many discussion groups  said banks do not always identify their MSB customers\u2014for example,  when a bank acquires another bank without being aware that the  acquired bank has MSB customers. Examiners in some discussion  groups said that failure to properly identify MSB customers stems  partly from inadequate due diligence or risk assessment.\nBSA\/AML compliance staff and resources. Examiners in many  discussion groups said that some banks do not have sufficient  BSA\/AML compliance staff or resources to manage their BSA\/AML  compliance programs. For example, an examiner in one discussion  group described a bank with nearly 70 money transmitters and more  than 200 check cashers but only four staff in its BSA\/AML compliance  department, which the examiner considered inadequate.\nExaminers in many discussion groups said that BSA\/AML deficiencies  generally stem from overall weakness in a bank\u2019s BSA\/AML compliance  program or internal controls, and not from providing services to money  transmitters or any particular customer type. An examiner from one  discussion group noted that a bank with weak internal controls around  money transmitters likely has weak internal controls across its BSA\/AML  compliance program. Examples of deficiencies provided by examiners  across discussion groups include banks failing to follow written policies  and procedures, rating entire categories of customers as high-risk rather  than assessing individual customer risk, not conducting on-site customer  reviews, failing to conduct other due diligence, and not properly  monitoring and reporting suspicious activities. Moreover, our review of  bank examination documents found that BSA\/AML-related deficiencies  mostly stemmed from weakness in banks\u2019 BSA\/AML compliance  programs and internal controls overall\u2014for example, in customer  identification programs, customer due diligence procedures and practices,  and risk assessments\u2014and not from a bank providing services to MSBs  or any other customer type.\nAccording to examiner discussion groups and examination documents we  reviewed, not all banks with MSB customers experience BSA\/AML  compliance challenges. Examiners in some discussion groups noted that  banks that successfully provide accounts to MSBs, including money  transmitters, tend to have a strong BSA\/AML compliance program. For  example, examiners in some discussion groups said that such banks  have internal controls commensurate with the BSA\/AML risks of the MSB  customers, including conducting appropriate monitoring and due diligence  of customers, and understand the full scope of MSB customers\u2019 activities.\nThe examiners stated that these banks also have sufficient BSA\/AML  compliance staff who received training. Similarly, our review of bank  examination documents included examples of banks with MSB customers  that complied with BSA\/AML compliance program requirements, such as  a community bank with 80 money transmitters. In the examination  documents we reviewed, examiners noted that although the bank  engaged in higher-risk business, it was managing the risk appropriately.\n\n\tSome Examiners Identified Challenges in Assessing Banks\u2019 Due Diligence for Money Transmitters\n\nWhile views among examiners in our discussion groups varied,  examiners in some discussion groups identified challenges in assessing  banks\u2019 customer due diligence for money transmitters and other MSB  customers. As discussed earlier, the FFIEC examination manual includes  an expanded examination section for nonbank financial institutions that  provides procedures and guidance for examiners when assessing banks\u2019  compliance controls for MSB customers, including money transmitters.  The procedures direct examiners to determine whether the banks\u2019  policies, procedures, and processes to assess risks posed by MSB  customers allow the banks to effectively identify higher-risk accounts and  the amount of further due diligence that is necessary. The expanded  examination guidance provides examples of actions banks can take to  meet the additional due diligence requirement for customers they deem to  be higher risk. Examiners from many discussion groups said they believe  these procedures and guidance are sufficient. One examiner noted that  assessing controls is the same for a bank\u2019s MSB customers as for any  other type of customer.\nHowever, examiners from some discussion groups said it was unclear  how much due diligence is reasonable to expect banks to conduct for  their money transmitters and other MSB customers. An examiner in one  discussion group said it was not clear from the examination procedures  and guidance how much banks were expected to question and request  information from their MSB customers or monitor their MSB customers\u2019  due diligence efforts without expecting banks to act as the de facto  regulator for MSBs. Other examiners noted that although banks are  responsible for understanding the kinds of transactions that flow through  an MSB, to some extent banks do not have visibility into these individual  transactions, as they are aggregated before flowing into the account at  the bank. Similarly, another examiner said there was uncertainty about  how critical an examiner should be of a bank\u2019s due diligence efforts in  cases where a bank\u2019s documentation on an MSB customer\u2019s BSA\/AML  compliance program is lacking. One examiner noted that while the  examination guidance provides examples of due diligence actions banks  can consider performing, those actions are not requirements. The  examiner said it was therefore not clear to what extent examiners should  apply these examples as criteria and expect banks to have implemented  them.\nFurther, examiners in some discussion groups said that it can be difficult  to evaluate banks\u2019 risk assessments, including processes for identifying  higher-risk customers that require additional due diligence. One examiner  said that it is unclear from the examination procedures how to determine  whether banks\u2019 risk assessment processes for identifying higher-risk  customers are adequate. An examiner in a different discussion group said  that in evaluating banks\u2019 risk assessment of new money transmitter  customers, he looks for whether banks ask why new customers switched  banks. However, other examiners in the same discussion group noted  that this is not a standard question.\nOur review of the expanded examination section found a lack of  examples of specific steps or processes that examiners can take in  assessing banks\u2019 compliance for additional due diligence. For example,  this section\u2019s procedures contain only a general reference that examiners  should determine whether the banks\u2019 policies, procedures, and processes  effectively allow the banks to identify and conduct risk-based due  diligence for higher-risk customers and lack specific examples to assist  examiners in evaluating additional due diligence activities. The section\u2019s  guidance states that examiners could take actions, including reviewing an  MSB\u2019s BSA\/AML compliance program or conducting on-site visits to help  evaluate a bank\u2019s compliance. But neither the guidance nor the  procedures clarify what these reviews or visits might entail. In  comparison, the expanded section\u2019s guidance and procedures include  examples of specific steps that examiners can take when assessing  banks\u2019 compliance with minimum due diligence requirements for MSB  accounts, such as applying the bank\u2019s customer identification program  and confirming FinCEN registration status and state licensing, if  applicable.\nOfficials from the Federal Reserve and OCC said that the examination  manual is not intended to provide explicit criteria for examiners when they  are assessing the adequacy of a bank\u2019s program. They said that  establishing explicit criteria would result in a \u201ccheck the box\u201d approach to  BSA\/AML compliance, such that banks are given a uniform set of  requirements to follow, irrespective of the money-laundering or terrorism- financing risks associated with their banking activities. They said that if  banks only needed to meet specific requirements, such an approach  would encourage banks to do the minimum to establish a BSA\/AML  compliance program and would not effectively detect and deter money  laundering and terrorism financing. As discussed earlier, the examination  manual is instead structured to allow examiners to tailor the BSA\/AML  examination scope and procedures to the specific risk profile of the bank.  Staff from the federal banking regulators said that as a result, examiners  are expected to apply their judgment in evaluating banks\u2019 BSA\/AML  compliance programs.\nHowever, while regulators want compliance programs to be tailored to the  unique risks a bank\u2019s operations present, examiners need sufficient  guidance to determine whether a given bank\u2019s BSA\/AML-related policies,  processes, and procedures are adequate. Regulators and FinCEN issued  the 2005 interagency guidance to clarify BSA\/AML requirements and  supervisory expectations for banks when providing banking services to  money transmitters and other MSBs. Since then, examiners have relied  on this guidance when reviewing banks\u2019 MSB customer accounts.  However, the examination procedures and related guidance may not  provide all of the information examiners need to conduct their  assessments, as indicated by the examiners in some of our discussion  groups who reported that it is not clear to them how to determine whether  banks\u2019 due diligence efforts are adequate. Providing clarifying information  would not compromise examiners\u2019 ability to exercise judgement during an  examination. Rather, it would provide them with greater certainty that they  are evaluating banks\u2019 compliance with BSA\/AML requirements  appropriately.\nFederal internal control standards state that agencies should identify,  analyze, and respond to risks related to achieving the defined  objectives. Unless federal banking regulators take steps to improve  examiners\u2019 ability to evaluate banks\u2019 compliance controls with respect to  money transmitter accounts, examiners may not be fully achieving the  BSA\/AML examination objectives of identifying and assessing risks and  banks\u2019 ability to manage risks, as set out in the examination manual in  assessing banks\u2019 compliance with BSA\/AML requirements. Internal  control standards also state that agencies should internally communicate  the necessary quality information to achieve their objectives. With respect  to examiners, such communication could include providing updates to  examination procedures, examiner training, or a combination of methods.\n\n\tTerminating or Limiting Bank Accounts with Money Transmitters May Raise Derisking Concerns and Can Affect Their Operations\n\n\t\tSurvey Results Suggest That a Number of Banks Terminated or Limited Money Transmitters\u2019 Accounts in 2014\u20132016\n\nWe estimate that 32 percent of banks nationwide provided accounts to  money transmitters from 2014 through 2016, based on the results of a  survey we conducted jointly with other GAO work on derisking. For  calendar year 2016, of the 91 banks that reported having money  transmitters as customers, 71 banks of varying asset sizes reported  having 41,089 money transmitter accounts (see table 1).\nOverall, of the 91 banks that reported having money transmitters as  customers, close to half of them (40 banks) terminated at least one of  their money transmitter accounts and almost one-third of them (29 banks)  limited the number of accounts with money transmitters, both for reasons  related to BSA\/AML risk, from 2014 through 2016 (see table 2).\nBecause extra-large banks reported having a much greater number of  accounts with money transmitters, these banks also reported a greater  proportion of account terminations, compared with small and medium  banks. Specifically, 18 banks of all sizes that responded to the survey  reported that they terminated 1,098 accounts in 2016\u2014with 89 percent of  these account closures (976 out of 1,098) reported by six extra-large  banks. In particular, one extra-large bank accounted for more than half  (601 out of 1,098) of the account terminations in that year. See table 3 for  more information on account terminations in 2016. See appendix II for  more information on account terminations and limitations.\n\n\t\tAlthough Some Account Terminations and Limitations Are Associated with Managing BSA\/AML Risk, Some Raise Derisking Concerns\n\nSome terminations and limitations of money transmitters\u2019 bank accounts  appear to be associated with managing BSA\/AML risk. However, some  terminations and limitations raise derisking concerns.\n\n\t\t\tSome Reasons for Terminating or Limiting Accounts Are Associated with Managing BSA\/AML Risk\n\nSome reasons that banks reported for terminating accounts were  associated with managing BSA\/AML-related risk, including the filing of  SARs associated with the account and customers failing to provide  information necessary for the bank to conduct adequate BSA\/AML due  diligence. Some banks also reported terminating accounts to reduce the  risk that a customer\u2019s activity could harm a bank\u2019s reputation, known as  reputational risk (see table 4). These survey results are consistent with  the results of our prior work on banks in the Southwest border region.\nThe most commonly cited reason in our survey for terminating accounts  was the filing of SARs. Officials we interviewed from one bank told us that  they investigate customers that have triggered multiple SAR filings and  considered setting up controls to limit account activities. Officials of  another bank told us that a federal bank examiner suggested that the  bank consider closing an account with a money transmitter customer  because of SAR filings associated with it.\nThe second most commonly cited reason for terminating accounts was  that a customer failed to provide information requested by a bank for  conducting BSA\/AML due diligence. Officials we interviewed from two  banks told us that customers may not be able to provide information and  documentation or may not disclose that they are an MSB when opening  new accounts. Officials of a bank that maintained accounts with money  transmitters told us they terminated accounts in instances where a money  transmitter did not submit required documentation.\nAnother commonly cited reason for terminating accounts was reputational  risk\u2014the potential that negative publicity regarding an institution\u2019s  business practices, whether true or not, will cause a decline in the  customer base, costly litigation, or revenue reductions. One bank\u2019s  officials said in an interview that when examiners inquired as to whether  bank officials factor reputational risk into their decision-making about  money transmitters, they viewed such inquiries as implicit suggestions  that the bank had an issue with reputational risk that needed to be  addressed.\nExaminers in our discussion groups also shared similar comments on  suspicious activity monitoring and banks\u2019 requests for information.  Specific to suspicious activities, one examiner noted that banks generally  have an internal policy stating that if a specific number of SARs are filed  on the customer, the bank will automatically terminate the account.  Regarding banks\u2019 information requests, examiners in some discussion  groups said they observed that banks may terminate an MSB\u2019s account if  the MSB does not comply with the bank\u2019s request for due-diligence- related documentation.\nThree of the most common reasons banks reported for limiting accounts  with money transmitters were that (1) the cost of BSA\/AML compliance  made the customer type unprofitable, (2) the banks were unable to  manage the BSA\/AML risk associated with the customer type, and (3) the  customer type fell outside of a bank\u2019s risk tolerance (see table 5).\nOne of the most commonly cited reasons for limiting the number of  accounts with money transmitters was compliance costs associated with  managing BSA\/AML risk. Officials of about two-thirds of the banks we  interviewed said their BSA\/AML compliance costs had increased over  time, with eight institutions specifically citing past or planned upgrades to  their monitoring software systems as one source of increasing costs.  Moreover, officials of one bank said their compliance costs had increased  in recent years as a result of regulatory scrutiny, which they said had  increased as MSBs came to comprise a larger portion of their customer  base. In response to this heightened scrutiny, officials said the bank had  installed a new transaction-monitoring platform, which incurred a one-time  migration cost and would incur higher monthly fees, and was considering  expanding its compliance department.\nOfficials of three banks told us in interviews that 50 percent of their  compliance costs stem from BSA\/AML compliance. As we have reported  previously, money transmitters are generally low-profit customers for  banks, in that the revenue from their accounts may not be sufficient for  some banks to offset the associated costs of BSA\/AML compliance. For  example, officials of one bank said the bank spent about $250,000  annually to maintain its BSA-related monitoring software and training,  which they believed was a significant portion of the bank\u2019s $25 million  annual income. These officials told us that unlike the bank\u2019s other  customers, which use the bank\u2019s other products and refer business,  money transmitters are not the bank\u2019s core customers and do not use  other products or services, so the bank would rather focus its time and  resources on its core customers. Similarly, officials of another bank said  they decided not to bank MSBs because any revenue generated would  not cover the additional resource and compliance costs.\nBanks\u2019 inability to manage BSA\/AML risks associated with money  transmitter customers was another commonly cited reason for limiting the  number of accounts. For example, officials of one bank we interviewed  said they did not accept any MSB customers, including money  transmitters, because they were not willing or able to take on the required  risk and level of BSA\/AML monitoring. Another commonly cited reason for  limiting accounts was that a customer type fell outside of a bank\u2019s risk  tolerance. In interviews, banks expressed concerns about their MSB  customers\u2019 ability to maintain an adequate BSA\/AML compliance  program. One bank\u2019s officials told us that owners of gas stations may  offer check cashing or money transmission services to generate  additional revenue, but they may not be aware that offering such services  would subject their business to BSA\/AML compliance requirements.  Another bank\u2019s officials also said that many business owners do not know  that they have to register with FinCEN to operate as an MSB. Officials  from a third bank said that some MSBs may not understand the BSA\/AML  regulations and, at their customers\u2019 request, may inadvertently commit a  violation such as structuring that may generate a SAR (for example, by  breaking up a money transfer in excess of $10,000 into multiple transfers  to avoid generating a Currency Transaction Report).\nSimilarly, examiners in many discussion groups said that the staffing and  resource costs required for adequate monitoring and due diligence on  MSB customers, including money transmitters, are reasons why some  banks may choose not to bank MSBs. Moreover, examiners in many  discussion groups also said some banks offer MSBs accounts and then  find out that they do not have the necessary BSA\/AML expertise or that  the business is not profitable for them. For example, one examiner said  that when a larger bank in his area terminated all of its money transmitter  accounts, a number of smaller banks looking for profit offered accounts to  these money transmitters. However, the examiner added that the smaller  banks did not understand the level of customer due diligence and  monitoring that was required for these accounts and the associated costs,  and they terminated the accounts. In contrast, examiners in some  discussion groups said that some community banks have accepted  money transmitter customers as a way to generate potentially substantial  fee income.\n\n\t\t\tSome Account Terminations and Limitations Raise Derisking Concerns\n\nAccording to survey responses from banks, the most commonly cited  reason for limiting the number of money transmitter accounts was that the  customer type drew heightened BSA\/AML regulatory oversight\u2014behavior  that would indicate derisking. Banks also commonly cited this reason for  terminating money transmitter accounts.\nFor example, officials from one bank told us that the bank no longer  offered services to MSBs because it wanted to be viewed favorably by  regulators. Officials of another bank said that money transmitter account closures were generally the result of onerous regulatory requirements and  increased regulatory scrutiny. Officials from two banks we spoke with said  that they received greater regulatory scrutiny after increasing their  number of MSB customers, which affected their willingness to open  additional accounts with MSBs. According to officials of one of the two  banks, when the bank increased its MSB customers from one to two, the  institution was assessed as high risk by examiners.\nRelated to heightened regulatory oversight, some banks\u2019 officials we  interviewed also expressed concerns that some examiners\u2019 expectations  go beyond what is described in the examination manual. For example,  they said examiners expected banks to know their customers\u2019  customers\u2014although BSA\/AML regulations do not require banks to  obtain information on their customers\u2019 customers. Bank officials said  ascertaining such information was difficult because money transmitters\u2019  customers are one step removed from the bank. Some banks\u2019 officials  also told us that they felt obligated to follow examiners\u2019 verbal  suggestions, even when the suggestions did not appear in the final  examination report as recommendations. Other banks\u2019 officials we  interviewed stated that although examiners did not explicitly recommend  that banks exit certain lines of business, officials felt pressure from the  examiners to do so. For example, officials from one bank said examiners  suggested that if the bank exited certain lines of business, the bank would  not have deficiencies in its BSA\/AML compliance program.\nWe reported similar concerns in our March 2018 report. About half of the  banks we interviewed for that report said that the fear of regulatory  scrutiny served as a disincentive for banks to maintain accounts with  money transmitters. Some banks\u2019 officials expressed uncertainty about  the amount of due diligence required for regulatory purposes because  regulations included ambiguous language or because examiner practices  exceeded regulations. These bank officials suggested that regulators  could provide more specific guidance for banks on risk management,  such as by including example scenarios and answers to frequently asked  questions.\nConversely, some banks we interviewed had a different experience. For  example, officials of one bank told us that examiners\u2019 interpretation of  BSA\/AML principles did not differ from the bank\u2019s understanding of those  principles. Officials added that when they initially began preparing risk  assessments, they sought feedback and advice from their examiners and  that examiners now use the bank\u2019s risk assessment as an example for  other banks. Moreover, these officials said that if they need clarification  on BSA\/AML compliance requirements, they contact FinCEN, which has  been responsive to their questions. Officials of another bank told us they  have a good relationship with their federal regulator and said that  examiners follow BSA guidance and have been consistent in conducting  their examinations. Officials of two other banks told us that their BSA\/AML  examinations have been consistent with guidance and requirements and  that examiners have not told officials what types of customers to avoid.\nWe also reported in February 2018 that recent BSA\/AML law enforcement  and regulatory enforcement actions have caused some banks to become  more conservative in the types of businesses to which they offer  accounts. In our interviews for the February 2018 report, officials of  three banks and an industry group expressed concerns about potential  enforcement actions, including civil penalties, if banks\u2019 employees make  mistakes in BSA\/AML monitoring. In 2012, federal regulators assessed  civil money penalties\u2014including a $500 million penalty assessed by OCC  and a $165 million penalty by the Federal Reserve\u2014against HSBC Bank  for, among other things, failing to maintain an effective BSA\/AML  compliance program and failing to conduct appropriate due diligence on  foreign correspondent bank account holders. As another example, in  March 2018, OCC issued consent orders for civil penalties against three  senior executives of the Merchants Bank of California for violations of  consent orders related to monitoring BSA\/AML compliance. In our  interviews, officials of an industry association told us that fines associated  with BSA violations are especially difficult for community banks to absorb  and could result in the bank going out of business.\nSimilarly, examiners from a discussion group said some banks may  decide not to offer accounts to MSBs to avoid heightened regulatory  scrutiny. For example, examiners said some banks likely want to avoid  BSA\/AML risk entirely when they decide not to offer MSBs accounts. One  examiner thought that some banks lack understanding regarding the  business models of MSBs and that it is easier for them not to provide  them accounts. In some cases, banks offer MSBs bank accounts but on a  limited basis. For example, examiners from one discussion group said  that in some cases, banks manage their BSA\/AML risks by maintaining  existing MSB accounts but not offering accounts to new MSB customers.\nIn a 2015 speech, a senior Treasury official noted banks\u2019 concerns about  the cost of complying with BSA\/AML requirements, uncertainty about  supervisors\u2019 expectations regarding appropriate due diligence, and the  nature of the enforcement and supervisory response if they make a  mistake. Moreover, the official stated that the banks held the perception  that supervisory and enforcement expectations lack transparency,  predictability, and consistency. The official also said that this perception  feeds into higher anticipated compliance costs and may eclipse any  potential economic gains of taking on new MSB customers. To address  these concerns, the senior official stated that policymakers needed to  continue to improve their understanding of the scope, nature, and drivers  of the problem through better data collection and continue to explore  ways to improve the effectiveness of their communication.\n\n\t\tEffects of Account Terminations and Limitations on Money Transmitters Include Ceasing of Operations and Higher Costs for Services\n\nAccording to money transmitters we spoke with, effects of account  terminations due to derisking include ceasing of operations, loss of  revenue, higher costs for services provided, and failure of the business.  For example, officials from one large money transmitter that operates in  the United States and internationally said that in recent years, about 100  of the money transmitter\u2019s agents have lost accounts with their local and  regional banks each month. The officials added that when banks  terminate accounts with the money transmitter or its agents, the money  transmitter cannot conduct the necessary transactions with its agents to  facilitate the cash transfer. As a result, officials told us, account  terminations can cause the money transmitter to cease operations in a  particular country or cause the agents to go out of business. These  officials also told us that some banks have terminated accounts with their  institution while maintaining accounts with other money transmitters.  These officials said they obtained legal injunctions for unfair competitor  treatment in some of these cases.\nOfficials of a smaller, regional money transmitter said that they have  experienced 10 account terminations since 2006. Moreover, the officials  said that they have to switch banks every 2 to 3 years because of account  terminations and that it is getting more difficult to find a bank willing to  take on money transmitters as customers. For example, the officials said  that they called about 300 banks in a state and only two banks were willing to open accounts with them. The money transmitter\u2019s officials said  it has had to cease operations in three states due to account  terminations. The officials said that the money transmitter now focuses on  opening accounts with community banks and credit unions, but these  institutions may be too small to handle the money transmitter\u2019s volume of  deposits. Another money transmitter told us that it takes about 3 months  to open an account with a bank. Moreover, as a result of account  terminations and limitations by banks, the money transmitter has had to  reduce its number of employees from 220 to 180 and has not been able  to open new locations. Another money transmitter said that account  terminations have affected its ability to obtain accounts with other banks.\nIn our March 2018 report, we found that some money transmitters\u2014those  that may be considered higher risk based on the 2005 interagency  guidance\u2014may utilize nonbank channels for transferring money as a  response to account terminations. Specifically, we reported that as a  result of banks\u2019 account terminations and limitations, some money  transmitters serving fragile nations have relied on nonbank channels,  such as cash couriers and armored trucks, to transfer money domestically  and abroad. We further reported that using cash couriers or armored  trucks to move money increases costs and risks of theft and safety.\nAccount terminations and limitations by banks also affect money  transmitters that do not serve customers abroad\u2014money transmitters that  could be considered lower risk based on the 2005 interagency BSA  guidance. For example, a company that acquired another business  offering money transmission services to customers within the United  States also experienced account terminations. When the company  acquired the new business and thus the business\u2019s money transmission  license, its bank refused to service the company because of its newly  acquired status as a money transmitter. In another example, officials of a  money transmitter that serves only U.S. customers told us they have  difficulty opening accounts and have experienced account terminations  often. Officials said that their business has stopped at times because they  did not have any bank accounts to facilitate money transmission.\nAdditionally, account closures also may affect money transmitters\u2019  customers. For example, some money transmitters we interviewed said  they passed on increased costs resulting from account closures to their  customers. Specifically, officials of one large money transmitter said that  because of derisking, banks that still do business with them are charging  higher fees. The officials added that they try to absorb the higher fees but  have passed on the increased costs to their customers in some markets.  In contrast, some money transmitters told us in interviews that although  their costs have increased, they have not increased customer fees.\nSeveral money transmitters told us that banks did not always provide  reasons for terminating their accounts. Some said they believe that banks  terminate accounts due to regulatory pressure, compliance costs, or  changes in a bank\u2019s policy or risk appetite. One money transmitter stated  that the problem of account terminations due to derisking stems from  banks being too afraid to bank MSBs, including money transmitters.\nIn response to banks\u2019 account terminations and limitations, some money  transmitters\u2014including those with characteristics considered to be higher  and lower risk according to the 2005 interagency guidance\u2014now  maintain accounts with multiple banks to help ensure they can continue  operating should a bank close their account. For example, officials of the  company that acquired another business offering domestic money  transmission services told us they maintain accounts with more than one  bank, but they said it is difficult and costly to do so. Officials of another  money transmitter said that to help prevent disruptions to their ability to  transfer funds when they experience an account closure, they try to have  back-up accounts at other banks.\nSome money transmitters also engage with their banks\u2019 management to  better understand what banks expect from them in meeting compliance  requirements. For example, an official from one money transmitter said  the money transmitter tries to meet with its banks\u2019 financial crimes teams  to better understand how it can help minimize the risk of facilitating  money transfers for terrorist-financing and money-laundering purposes.  Officials of another money transmitter told us that as a result of meeting  with bank management, the money transmitter added additional  employees to its compliance department and bought new monitoring  software to fulfill its bank\u2019s requirement for monthly monitoring of  transactions.\n\n\tFinCEN and the Federal Regulators Have Taken Some Steps to Address Derisking Concerns but Have Not Fully Addressed Our Prior Recommendation\n\n\t\tFinCEN and the Federal Regulators Have Issued Guidance to Banks Related to the Derisking of Money Transmitters\n\nFinCEN and the federal banking regulators have responded to concerns  about the derisking of money transmitters and other MSBs on a national  level by issuing guidance to banks to clarify expectations for providing  banking services to these customer types. In March 2005, the federal  banking regulators and FinCEN issued a joint statement noting that MSBs  were losing access to banking services as a result of concerns about  regulatory scrutiny, the risks presented by MSB accounts, and the costs  and burdens associated with maintaining such accounts. According to  the joint statement, these concerns might have stemmed, in part, from  banks\u2019 misperception of the requirements of the BSA and the erroneous  view that MSBs present a uniform and unacceptably high risk of money  laundering or other illicit activity. The joint statement recognized that the  MSB industry provides valuable financial services, especially to  individuals who may not have ready access to the formal banking sector.  It further noted that it is important that MSBs comply with the  requirements of the BSA and applicable state laws and remain within the  formal financial sector and be subject to appropriate AML controls. The  joint statement announced the intent of the regulators and FinCEN to  issue the interagency guidance for banks on providing services to MSBs,  which, as previously discussed, was intended to clarify BSA requirements  and supervisory expectations as applied to accounts opened or  maintained for MSBs.\nMore recently, in November 2014, FinCEN issued a statement reiterating  that banks can serve the MSB industry while meeting their BSA  obligations and referring to the interagency guidance to banks on  providing services to MSBs. The statement noted concerns that banks  were indiscriminately terminating the accounts of all MSBs, or refusing to  open accounts for any MSBs, thereby eliminating them as a category of  customers. It noted, similar to the March 2005 joint statement, that  regulatory scrutiny, the perceived risks presented by MSB accounts, and  the costs and burdens associated with maintaining such accounts  appeared to play a part in these decisions.\nIn the 2014 statement, FinCEN cautioned that a wholesale approach to  MSB customers runs counter to the expectation that financial institutions  can and should assess the risks of customers on a case-by-case basis.  Similarly, it noted that a blanket direction by U.S. banks to their foreign  correspondents not to process fund transfers of any foreign MSBs, simply  because they are MSBs, runs counter to the risk-based approach.  FinCEN stated that refusing financial services to an entire segment of the  industry can lead to an overall reduction in financial sector transparency,  and that such transparency is critical to making the sector resistant to the  efforts of illicit actors. Federal banking regulators also issued separate  statements addressing BSA\/AML risk posed by MSBs and foreign banks.  See table 6 for a summary of key statements and guidance related to  MSBs issued in recent years by FinCEN and the federal banking  regulators.\n\n\t\tRegulators Have Taken Some Steps to Address Concerns That May Be Influencing Banks to Derisk but Have Not Reviewed the Full Range of Factors\n\nIn 2018, we reported that regulators had taken only limited steps to  understand how banks\u2019 regulatory concerns and BSA\/AML compliance  efforts may be influencing banks to derisk. We reported that regulators  had taken some actions in response to derisking, including issuing the  guidance previously discussed, and that some agencies took steps aimed  at trying to determine why banks may be terminating accounts. We also  reported that regulators had conducted retrospective reviews on some  BSA\/AML requirements. We noted that actions regulators had taken to  address concerns raised in BSA\/AML retrospective reviews had focused  primarily on the burden resulting from the filing of Currency Transaction  Reports and SARs. However, we noted that these actions had not been  aimed at addressing\u2014and, if possible, ameliorating\u2014the full range of  factors that influence banks to engage in derisking, particularly how  banks\u2019 regulatory concerns and BSA\/AML compliance efforts may be  influencing their willingness to provide services.\nWe concluded that without a broader assessment of the full range of  BSA\/AML factors that may be influencing banks to derisk, FinCEN, the  federal banking regulators, and Congress do not have the information  needed to determine if BSA\/AML regulations and their implementation are  achieving their regulatory objectives in the most effective and least  burdensome way. Therefore, we recommended that FinCEN and the  federal banking regulators conduct a retrospective review of BSA  regulations and their implementation for banks, with a focus on how  banks\u2019 regulatory concerns may be influencing their willingness to provide  services.\nAccording to the federal banking regulators and FinCEN, they and  Treasury established an interagency working group in early 2018 that  they believe will address our recommendation. The interagency working  group is intended to identify ways to improve the efficiency and  effectiveness of BSA\/AML regulations, supervision, and examinations  while continuing to meet the requirements of the BSA and its  implementing regulations, supporting law enforcement, and reducing  BSA\/AML compliance burden. Staff from FinCEN and the federal banking  regulators identified several interagency statements that the working  group has completed.\nInteragency Statement on Sharing BSA Resources (issued on  October 3, 2018): This statement clarified how banks may reduce the  costs of meeting BSA requirements effectively by sharing employees  or other resources in a collaborative arrangement with one or more  banks. The statement highlighted potential benefits to sharing  resources and provided examples of resources that may be  appropriate to share, such as certain internal controls, independent  testing, and BSA\/AML training functions. The statement also  highlighted potential risks of sharing resources and cautioned that any  collaborative arrangements should be designed and implemented  according to each bank\u2019s risk profile.\nJoint Statement on Innovative Efforts to Combat Money  Laundering and Terrorist Financing (issued on December 3,  2018): This statement clarified the working group\u2019s position with  respect to innovative approaches in BSA\/AML compliance and  encouraged banks to consider such approaches. For example,  some banks are experimenting with artificial intelligence and digital  identity technologies applicable to their BSA\/AML compliance  programs. The statement notes that these innovations and  technologies can strengthen BSA\/AML compliance approaches and  that the regulators welcome these types of innovative approaches to  further efforts to protect the financial system against illicit financial  activity. According to the statement, pilot programs undertaken by  banks to test and validate the effectiveness of innovative approaches  should not subject banks to supervisory criticism even if the pilot  programs ultimately prove unsuccessful.\nJoint Statement on Risk-Focused Bank Secrecy Act\/Anti-Money  Laundering Supervision (issued on July 22, 2019): This statement  was intended to improve the transparency of the risk-focused  approach used for planning and performing BSA\/AML examinations.  In this statement, FinCEN and the banking regulators emphasized  that they scope their examinations in response to the unique risk  profile for each bank because banks vary in focus and complexity.  The regulators also clarified common practices for assessing a bank\u2019s  risk profile, including leveraging available information such as the  bank\u2019s own risk assessment, contacting the banks between  examinations, and considering the bank\u2019s ability to identify, measure,  monitor, and control risks.\nFederal banking regulators and FinCEN staff said the working group\u2019s  focus on regulatory reform and on reducing the burden associated with  BSA\/AML compliance may indirectly address derisking concerns,  including those related to money transmitters. In particular, they said  these efforts may help agencies as they clarify their supervisory  expectations for banks with respect to managing BSA\/AML risk. For  example, the staff said that the joint statement on the risk-focused  approach to supervision clarifies that the role of the examiner is not to  determine what level of risk a bank should assume. Instead, the  examiners should review risk management practices to evaluate whether  a bank has effective processes to identify, measure, monitor, and control  risks and to assess the effectiveness of a bank\u2019s processes. They said  that reminding examiners and institutions of the risk-focused approach  will help dispel the perception that banks will be criticized for taking certain higher-risk customers when the bank is properly managing that  risk. Similarly, they said that the joint statement on innovation could help  address derisking concerns because it allows banks to leverage new  technologies and innovative approaches to help reduce costs of  implementing the strong risk management practices that may be  necessary to provide banking services to some higher-risk customers.\nThe actions taken to date by the interagency working group are important  steps toward improving the efficiency and effectiveness of BSA\/AML  regulations and supervision. As previously discussed, one reason some  banks reported terminating or limiting money transmitter accounts was  because of the cost associated with BSA\/AML compliance. The  interagency statements on sharing BSA resources and innovative efforts  to combat money laundering and terrorist financing could help reduce  banks\u2019 implementation costs associated with providing banking services  to potentially higher-risk customers.\nHowever, consistent with our prior work, our evidence demonstrates that  banks terminate or limit customer accounts not only as a way to address  legitimate money-laundering and terrorist-financing threats, but also as a  way to manage regulatory concerns, which may indicate derisking.  Reminding examiners and banks of the risk-focused examination  approach may help to dispel the perception that banks will be criticized for  taking certain higher-risk customers when the bank is properly managing  that risk and may indirectly address some factors that influence banks to  derisk. Nevertheless, the working group has not yet considered whether  there are other supervisory concerns that factor into banks\u2019 decisions to  derisk. As we stated in our prior work, it is important to evaluate and  address the full range of factors that may be influencing banks to derisk.  Therefore, we maintain that FinCEN and the banking regulators should  continue to work toward implementing our prior recommendation to  conduct a retrospective review of BSA\/AML regulations focusing on how  banks\u2019 regulatory concerns may be influencing their willingness to provide  services.\n\n\tConclusions\n\nRegulators and FinCEN issued the 2005 interagency guidance to clarify  BSA\/AML requirements and supervisory expectations with regard to  accounts banks open or maintain for money transmitters and other MSBs.  However, some examiners in our discussion groups said they were  unclear about how much due diligence is reasonable to expect banks to  conduct for their money transmitters. Improving examiners\u2019 ability to  evaluate banks\u2019 BSA\/AML compliance controls with respect to money  transmitter accounts would help ensure that such evaluations are done in  accordance with BSA\/AML examination objectives of identifying and  assessing risks and banks\u2019 ability to manage risks, as set out in the  examination manual. Options for making such improvements could  include providing examiners with more detailed examination procedures,  enhanced information, additional training, or a combination of methods.\n\n\tRecommendations\n\nWe are making a total of four recommendations to the Federal Reserve,  OCC, FDIC, and NCUA:  The Board of Governors of the Federal Reserve System should, in  coordination with the other federal banking regulators, and with input from  BSA\/AML examiners and other relevant stakeholders, take steps to  improve examiners\u2019 ability to evaluate the effectiveness of banks\u2019  BSA\/AML compliance controls with respect to money transmitter  accounts. Steps may include providing updates to examination  procedures, examiner training, or a combination of methods.  (Recommendation 1)\nThe Comptroller of the Currency should, in coordination with the other  federal banking regulators, and with input from BSA\/AML examiners and  other relevant stakeholders, take steps to improve examiners\u2019 ability to  evaluate the effectiveness of banks\u2019 BSA\/AML compliance controls with  respect to money transmitter accounts. Steps may include providing  updates to examination procedures, examiner training, or a combination  of methods. (Recommendation 2)\nThe Chairman of the Federal Deposit Insurance Corporation should, in  coordination with the other federal banking regulators, and with input from  BSA\/AML examiners and other relevant stakeholders, take steps to  improve examiners\u2019 ability to evaluate the effectiveness of banks\u2019  BSA\/AML compliance controls with respect to money transmitter  accounts. Steps may include providing updates to examination  procedures, examiner training, or a combination of methods.  (Recommendation 3)\nThe Chairman of the National Credit Union Administration should, in  coordination with the other federal banking regulators, and with input from  BSA\/AML examiners and other relevant stakeholders, take steps to  improve examiners\u2019 ability to evaluate the effectiveness of banks\u2019  BSA\/AML compliance controls with respect to money transmitter  accounts. Steps may include providing updates to examination  procedures, examiner training, or a combination of methods.  (Recommendation 4)\n\n\tAgency Comments\n\nWe provided a draft of this report to the Federal Reserve, FDIC, NCUA,  OCC, and Treasury\u2019s FinCEN for review and comment. The federal  regulators provided technical comments on the draft report, which we  have incorporated as appropriate. The Federal Reserve, FDIC, NCUA,  and OCC also provided written comments (reproduced in appendixes III  through VI). They agreed with GAO\u2019s recommendations and expressed a  commitment to implement them.\nWe are sending copies of this report to the appropriate congressional  committees, the Director of the Financial Crimes Enforcement Network,  the Chairman of the Board of Governors of the Federal Reserve System,  the Chairman of the Federal Deposit Insurance Corporation, the  Comptroller of the Currency, and the Chairman of the National Credit  Union Administration. The report will also be available at no charge on  our website at http:\/\/www.gao.gov.\nIf you or your staffs 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 are listed on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix VII.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report (1) describes regulators\u2019 Bank Secrecy Act (BSA)\/anti-money  laundering (AML) supervisory expectations for banks that provide  services to money transmitters and other money services businesses  (MSB) and examiner views on bank challenges in complying with these  requirements; (2) examines challenges reported by examiners in  conducting BSA\/AML assessments; (3) examines the extent to which  banks are terminating or limiting money transmitters\u2019 access to banking  services and the effects on money transmitters; and (4) evaluates how  the Department of the Treasury\u2019s Financial Crimes Enforcement Network  (FinCEN) and the federal banking regulators have assessed and  responded to concerns about the derisking of money transmitters. The  federal banking regulators included in our review are the Board of  Governors of the Federal Reserve System (Federal Reserve), the Federal  Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the  Currency (OCC), and the National Credit Union Administration (NCUA).\nWe define \u201cderisking\u201d 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. We  developed this definition in our prior work addressing account  terminations and branch closures in the U.S. Southwest border region.\nTo describe regulators\u2019 BSA\/AML supervisory expectations for banks that  provide services to money transmitters and other MSBs and federal bank  examiners\u2019 views on banks\u2019 challenges in complying with these  requirements, we reviewed joint guidance issued by FinCEN and the  federal banking regulators in April 2005 on banking MSBs and the  Federal Financial Institutions Examination Council\u2019s (FFIEC) BSA\/AML  examination manual, which federal banking regulators use to examine  banks for BSA\/AML compliance.\nWe also interviewed the federal regulators named above. Further, we  interviewed representatives of 16 banks, six credit unions, and relevant  industry groups and trade associations. Because of our judgmental  sampling, the views expressed by these groups may not be  representative. To identify the universe of banks for interviews, we used  data from FDIC\u2019s Statistics on Depository Institutions database as of  December 31, 2016. Next, we excluded banks that did not offer the  product types relevant to our study, including credit card banks and banks  that offer nontraditional accounts; multiple subsidiaries of large holding  companies; and federal branches of foreign banks. We also excluded  banks with insufficient information to determine the types of accounts  offered. In addition, we excluded banks selected to participate in a web- based survey (we describe our survey methodology below). After these  exclusions, our initial list consisted of 5,922 banks.\nBecause the primary regulators (Federal Reserve, OCC, and FDIC) do  not track which banks have money transmitter customers, we used a  judgmental sample to randomly select banks to interview from each of the  primary regulators based on asset size (small, medium, and large). For  small and medium banks, we interviewed one bank of each size from  each of the three regulators. For large banks, all were regulated by OCC,  and we interviewed two of these banks. We defined banks\u2019 asset-size  categories as follows: (1) \u201csmall\u201d consisted of banks with assets of less  than $1 billion, (2) \u201cmedium\u201d consisted of banks with assets of $1 billion to  less than $10 billion, and (3) \u201clarge\u201d consisted of banks with assets of $10  billion to less than $50 billion.\nOnce we selected our sample, we contacted each bank to confirm that it  had money transmitter or other types of MSB customers. If a bank did not  have money transmitter or other MSB customers or declined to speak  with us, we selected another bank in the same asset-size category. We  initially selected nine banks to interview\u2014three in each asset-size  category\u2014but one large bank declined to speak with us. Because there  were no other large banks in our sample, we interviewed two large banks,  for a total of eight small, medium, or large banks. We also jointly  interviewed eight extra-large banks (with assets of $50 billion or more) in  coordination with our other work on derisking.\nBecause NCUA tracks which credit unions have money transmitter  customers, we obtained data from NCUA on credit unions that served  money transmitters as of April 2017 and stratified them according to  small, medium, and large asset-size categories. We defined credit unions\u2019  asset-size categories as follows: (1) \u201csmall\u201d consisted of credit unions  with assets of less than $100 million, (2) \u201cmedium\u201d consisted of credit  unions with assets of $100 million to $500 million, and (3) \u201clarge\u201d  consisted of credit unions with assets of more than $500 million. We  chose three credit unions with the largest numbers of money transmitter  customers and randomly selected one credit union from each asset-size  category, for a total of six credit unions. From our initial selection, we  emailed or called each of the six credit unions to ascertain if it had a  money transmitter customer. If a credit union did not have a money  transmitter customer or declined to speak with us, we selected another  credit union in the same asset-size category.\nWe then conducted two discussion groups per regulator with bank  examiners from the Federal Reserve, OCC, FDIC, and NCUA to  understand how they applied the FFIEC manual in assessing BSA\/AML  compliance controls of banks with money transmitter customers. To  determine the composition of the discussion groups, we identified  BSA\/AML specialists or subject-matter experts from the district and  regional offices of each federal banking regulator located in geographic  areas with relatively large numbers of money transmitters. To do this, we  first identified the states with the largest numbers of registered money  transmitters by analyzing FinCEN money transmitter registration data  from January 2015 through May 2017. We then requested rosters of staff  designated as BSA\/AML subject-matter experts and specialists from each  regulator for each district or regional office in those states.\nWe administered a questionnaire to the individuals on each roster asking  about their experience with examining banks with money transmitter  customers and other questions, such as years of experience in  conducting bank examinations. We excluded from consideration  BSA\/AML subject-matter experts and specialists who either self-identified  as supervisors or who had not examined a bank with a money transmitter  customer in the past 3 years. We then randomized and selected  BSA\/AML subject-matter experts and specialists for participation in our  discussion groups. Depending on scheduling and availability, the number  of participants for each discussion group ranged from six to 14. Each  session was digitally recorded and transcribed by an outside vendor, and  we used the transcripts to summarize participants\u2019 responses. An initial  coder assigned a code that best summarized the statements from  discussion group participants and provided an explanation of the types of  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.\nDiscussion groups were 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 BSA\/AML subject-matter experts and specialists  at the federal banking regulators. For purposes of this report, we used the  following terms to describe the number of discussion groups in which an  issue is mentioned: \u201csome\u201d to describe two to three groups out of the  eight discussion groups, \u201cmany\u201d to describe four to five discussion  groups, and \u201cmost\u201d to describe six to seven discussion groups.\nTo examine challenges reported by federal bank examiners in assessing  banks\u2019 BSA\/AML compliance controls around money transmitters, we  asked examiners in our discussion groups to identify any challenges they  encountered when assessing these compliance controls. We also reviewed examination guidance and procedures for assessing BSA\/AML  compliance controls around money transmitters. We assessed this  information against federal internal control standards related to identifying  risks and communicating information.\nWe also reviewed bank examination and related documentation from the  federal BSA\/AML examinations of 56 selected banks and credit unions to  gain additional context about BSA\/AML examinations, including BSA\/AML  compliance violations\u201410 from FDIC, 12 from the Federal Reserve, 22  from OCC, and 12 from NCUA. For the documentation review, we  selected a nongeneralizable sample of banks and credit unions based on  asset-size categories and geographic location (based on each regulator\u2019s  field, district, or regional offices) from each federal banking regulator. For  banks, we used the same asset-size categories described earlier for our  interview selection process. We also included six banks that were issued  final BSA\/AML enforcement actions\u2014two each from OCC, FDIC, and the  Federal Reserve\u2014for calendar years 2014 through 2016. For credit  unions, we selected randomly from the same asset-size categories we  used for selecting credit unions for interviews\u2014along with geographic  locations\u2014and randomly selected four credit unions from each asset-size  category, for a total of 12 credit unions. To obtain geographic  representation, we ensured that each bank and credit union selected  within each asset-size category also represented multiple geographic  locations.\nFor each of the 56 banks and credit unions, we requested and reviewed  bank examination reports and related workpaper documentation for 2014,  2015, and 2016, including scoping and planning memorandums, bank- or  examiner-prepared BSA\/AML risk assessments, and conclusion  memorandums or documents that summarized BSA examiner findings.  For some banks, we also received banks\u2019 BSA policies as part of the  examination report and supplemental documentation package.\nTo examine the extent to which banks are terminating or limiting money  transmitters\u2019 access to banking services and their reasons why, we administered a web-based survey to a nationally representative sample of  banks in the United States for a total survey sample of 406 banks. We did  not include credit unions in our sample. In the survey, we asked banks  about terminations of money transmitter accounts and limitations on  account offerings related to BSA\/AML risk and the reasons for these  decisions for the 3-year period from January 1, 2014, to December 31,  2016. We obtained a weighted survey response rate of 46.5 percent.  While we designed the survey to be nationally representative of all banks  in the United States, some results are statistically nongeneralizable  because of the relatively low number of banks that reported having  money transmitters as customers. For survey questions that are  statistically nongeneralizable, we present only the number of responses  to each survey question, and these results are not generalizable to the  population of banks. Moreover, not all banks responded to every survey  question or provided information for every year covered by our survey;  therefore, we are not able to provide trend information from 2014 through  2016. We administered the survey from July 2017 to September 2017.\nTo obtain information on the effects of bank account terminations on and  limitations in the number of accounts with money transmitters, we  interviewed a nongeneralizable sample of representatives from 11 money  transmitters. To select the money transmitters, we obtained money  transmitter licensure data from the Conference of State Banking  Supervisors\u2019 Nationwide Multistate Licensing System. Using the number  of state licenses as a proxy for the size of the money transmitter, we  developed five size categories and selected the top four money  transmitters in the first stratum (40 or more licenses) along with one  money transmitter in the second, third, and fourth strata (20\u201339, 10\u201319,  and 2\u20139 licenses, respectively) and four money transmitters in the fifth  stratum (one license).\nTo evaluate how FinCEN and the federal banking regulators have  assessed and responded to concerns about derisking of money  transmitters, we reviewed agency documentation and guidance the  agencies issued to banks related to derisking and MSBs, and we  interviewed agency management. We also reviewed a prior GAO report  that evaluated regulators\u2019 response to derisking along the Southwest  border and assessed actions regulators have taken to respond to a  recommendation we made in that report.\nWe utilized multiple data sources throughout our review. We assessed  the reliability of FDIC\u2019s Statistics on Depository Institutions database by  reviewing related documentation and conducting electronic testing for  missing data, outliers, or any obvious errors. Furthermore, we used  NCUA data that track which credit unions bank money transmitters, the  Nationwide Multistate Licensing System, and FinCEN\u2019s MSB registration  database to help select our nongeneralizable samples of credit unions  and money transmitters to interview. We did not assess the data reliability  of these sources because we used these data purely to inform our  sampling population, and once we selected our samples, we took  additional steps to confirm that the institutions we selected had MSB or  money transmitter customers and were willing to speak to us.\nFor FinCEN\u2019s MSB registration database, as previously discussed, we  used the data to help identify which states had the most money  transmitters registered. In analyzing the data, we found a clear difference  in the number of MSB registrations between the top five states (California,  Texas, Michigan, Florida, and Illinois) with the most MSBs (ranging from  close to 800 to almost 4,000 MSBs) and the remaining states (all with  fewer than 500 MSBs). Because we used these data to help facilitate the  identification of BSA\/AML subject-matter experts and specialists who had  experience examining banks with money transmitter customers, we did  not need to confirm the exact number of MSBs registered. As a result, we  did not assess the reliability of FinCEN\u2019s registration database. We  concluded that all applicable data were sufficiently reliable for the  purposes of describing BSA\/AML risks and compliance challenges and  identifying banks to survey on account terminations and limitations.\nWe conducted this performance audit from August 2016 to December  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.\n\nAppendix II: Responses to Selected Questions from GAO\u2019s Survey of Banks on Account Terminations and Limitations\n\nFrom July 2017 through September 2017, we administered a web-based  survey to a nationally representative sample of banks. In the survey, we  asked banks about account terminations and restrictions (also referred to  as limitations) for reasons associated with managing Bank Secrecy  Act\/anti-money laundering (BSA\/AML) risk; whether banks are  terminating or limiting accounts with money transmitters; and the reasons  for these decisions. We collected information for the 3-year period from  January 1, 2014, to December 31, 2016. Responses to selected  questions from our survey that are directly applicable to the research  objectives in this report are shown in tables 7\u201319 below. While we  designed the survey to be nationally representative of all banks in the  United States, results specific to money transmitters are statistically  nongeneralizable because of the relatively low number of banks that  reported having money transmitters as customers. Because these survey  questions are statistically nongeneralizable, we present only the number  of responses to each survey question, and the results are not  generalizable to the population of banks. Moreover, not all banks  responded to every survey question or provided information for every  year covered by our survey; therefore, we are not able to provide trend  information from 2014 through 2016. Our survey included multiple-choice  and open-ended questions. For a more detailed discussion of our survey  methodology, see appendix I.\n\nAppendix VII: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Stefanie Jonkman (Assistant  Director), Kun-Fang Lee (Analyst-in-Charge), Carl Barden, Lilia Chaidez,  Giselle Cubillos-Moraga, Joshua Garties, Toni Gillich, Shamiah Kerney,  Jill Lacey, Patricia Moye, Aku Shika Pappoe, Jennifer Schwartz, Jena Y.  Sinkfield, Tyler Spunaugle, Verginie Tarpinian, and Deme Yoo made key  contributions to this report.","output":null}
{"id":"crs_R45753","pid":"crs_R45753_0","input":"\tIntroduction\n\nThe United States has more nuclear power reactors than any country worldwide. The 98 operable nuclear generating units provide approximately 20% of the electrical generation in the United States. Uranium is the fundamental element used to fuel nuclear power production. The front-end of the nuclear fuel cycle comprises the industrial stages starting with uranium extraction from the earth and ending with power production in a nuclear reactor. Congressional interest in the front-end of the nuclear fuel cycle is associated with many factors, including (1) domestic uranium production and supply, (2) concerns about increasing reliance on uranium imports, and (3) the economic viability of U.S. nuclear power reactors.\nHistorically, the U.S. Atomic Energy Commission (AEC), a predecessor federal agency to the Department of Energy (DOE) and the Nuclear Regulatory Commission (NRC), promoted uranium production in the United States through federal procurement contracts between 1947 and 1971. The majority of domestic uranium concentrate production prior to 1971 supported the development of nuclear weapons and naval propulsion reactors. After 1971, uranium mill operators produced uranium concentrate primarily for use in commercial nuclear power reactors. \nBy the late 1980s, nuclear utilities and reactor operators in the United States purchased more uranium from foreign suppliers than domestic producers. By 2017, 93% of the uranium purchased by U.S. nuclear utilities and reactor operators originated in a foreign country. Nuclear utilities and reactor operators diversify uranium supplies among multiple domestic and foreign sources, intending to minimize fuel costs. For example, a nuclear utility in the United States may purchase uranium concentrate that has been mined and milled in Australia, converted in France, enriched in Germany, and fabricated into fuel in the United States. \nExamination of the current status of the front-end of the nuclear fuel cycle highlights broad policy questions about the federal government's role in sustaining or promoting nuclear fuel production in the United States. This report describes the front-end of the nuclear fuel cycle and the global uranium marketplace, analyzes domestic sources and imports of various types of uranium materials involved in the fuel cycle, and provides a discussion about the current issues. The back-end of the nuclear fuel cycle comprises the storage of spent nuclear fuel (SNF) after it is discharged from a nuclear reactor; however, issues associated with SNF storage and disposal are not discussed in this report. This report does not discuss potential environmental, public health, and proliferation issues associated with the front-end of the nuclear fuel cycle. \n\n\tFront-End of the Nuclear Fuel Cycle\n\nThe front-end of the nuclear fuel cycle is composed of four stages: \nUranium mining and milling is the process of removing uranium ore from the earth and physically and chemically processing the ore to develop \"yellowcake\" uranium concentrate. Uranium conversion produces uranium hexafluoride (UF 6 ), a gaseous form of uranium, from solid uranium concentrate. Uranium enrichment separates and concentrates the fissile isotope U-235 in the gaseous UF 6 form to produce enriched uranium capable of sustaining a nuclear chain reaction in a commercial nuclear power reactor. Uranium fuel f abrication involves producing uranium oxide pellets, which are subsequently loaded into reactor-specific fuel rods and assemblies, which in turn are loaded into a nuclear power reactor. \n\n\t\tPrimary Supply\n\nThe nuclear fuel produced from processing newly mined uranium ore through fuel fabrication is referred to as primary supply . The stages from uranium mining through uranium fuel fabrication are described in the following sections.\n\n\t\t\tStage 1: Mining and Milling\u00e2\u0080\u0094Production of Uranium Concentrate\n\nThe front-end of the nuclear fuel cycle begins with mining uranium ore from the earth, through conventional (surface mining, open pits, underground) or nonconventional, in-situ recovery (ISR) methods. The type of extraction method employed depends on geology, ore body concentration, and economics. The majority of uranium resources in the United States are located in geological deposits in the Colorado plateau, Texas gulf coast region, and Wyoming basins. The United States has a relatively low quality and quantity of uranium reserves compared to the leading uranium-producing countries. For example, the Nuclear Energy Agency and the International Atomic Energy Agency rank the United States' reasonably assured uranium resources as 12 th worldwide. \nUranium milling involves physical and chemical processing of uranium ore to generate uranium concentrate (U 3 O 8 ), commonly called \"yellowcake\" uranium. Uranium milling operations crush and grind the mined ore, which is chemically dissolved with acid or alkaline solutions and subsequently concentrated. Milling operations produce a large quantity of waste material, termed tailings , relative to the amount of uranium concentrate produced. NRC estimates 2.4 pounds of yellowcake uranium oxide is produced from 2,000 pounds of uranium ore. The tailings, or waste material, generated by uranium milling operations prior to the 1970s were largely abandoned, exposing radioactive sand-like particles to be dispersed into the air, surface, and groundwater by natural erosion and human disturbances. The enactment of the Uranium Mill Tailings Radiation Control Act (UMTRCA; P.L. 95-604 ) authorized a remedial action program for cleanup of abandoned mill tailings prior to 1978 and authorized a regulatory framework to manage tailings generated at sites operating after 1978. In the United States, ISR methods have replaced conventional mining and milling by pumping acid or alkaline solutions through an underground ore body. After uranium in the ore is dissolved in solution, it is pumped to the surface and processed to produce uranium concentrate.\nIn the first quarter of 2019, five ISR facilities are operating in the United States\u00e2\u0080\u0094all in Wyoming\u00e2\u0080\u0094with approximately 11.2 million pounds of annual production capacity, and one conventional uranium mill, located in Utah, in operation with an annual capacity of 6 million pounds of ore per day. Additionally, there are 13 million pounds of annual production capacity at 11 ISR operations permitted and licensed, partially permitted and licensed, developing, or on standby.\n\n\t\t\tStage 2: Conversion\u00e2\u0080\u0094Production of Uranium Hexafluoride\n\nUranium concentrate is shipped to a uranium conversion facility where UF 6 is chemically produced. At room temperature, UF 6 is a solid, and it transforms to a gas at higher temperatures. UF 6 is described as \"natural,\" as the isotopic composition has not been altered relative to the composition that exists in nature. According to the World Nuclear Association, there are six uranium conversion plants worldwide. The Honeywell plant in Metropolis, IL, is the only uranium conversion facility in the United States. It has not produced UF 6 since November 2017.\n\n\t\t\tStage 3: Enrichment\u00e2\u0080\u0094Production of Enriched Uranium\n\nAfter uranium conversion, the UF 6 is feed material for uranium enrichment . Natural uranium has an isotopic composition of approximately 0.71% U-235, the fissile isotope of uranium. Civilian nuclear power fuel is generally enriched to 3%-5% U-235. Uranium enrichment in the United States was largely performed using a gaseous diffusion technology until 2013. Currently, one uranium enrichment plant, which employs gas centrifuge technology, operates in the United States. The gas centrifuge technology is described below. \nInflow UF 6 gas\u00e2\u0080\u0094referred to as the feed \u00e2\u0080\u0094enters a gas centrifuge. The centrifuge spins at high speeds and centrifugal forces drive the slightly more massive U-238 isotopes outward, while less massive U-235 isotopes concentrate near the center of the centrifuge. The process repeats many times in a cascade of centrifuges, gradually increasing the isotopic composition of U-235 from 0.71% to 3%-5%. During this process, the chemical composition remains as UF 6 , while the isotopic composition of UF 6 has been modified. The product stream is enriched uranium hexafluoride (enUF 6 ) and the waste stream\u00e2\u0080\u0094called the tails\u00e2\u0080\u0094is depleted uranium (DU). \nThe greater the difference in the isotopic composition of U-235 in the product and tails, the greater the energy requirements. Separative work units (SWUs) describe the energy required to enrich a given feed quantity to a given assay. Uranium enrichment yields a relatively higher mass of depleted uranium as the enriched uranium product.\n\n\t\t\tStage 4: Fabrication\u00e2\u0080\u0094Production of Uranium Oxide, Fuel Rods, and Assemblies\n\nThe final step in producing usable nuclear fuel involves fuel fabrication . At fabrication plants, enriched uranium is converted to uranium oxide (UO 2 ) powder and subsequently formed into small ceramic pellets. The pellets are loaded into cylindrical fuel rods and then combined to form fuel assemblies specific to a particular reactor. The fuel assemblies are loaded into the nuclear reactor for power production. The precise enrichment level and types of fuel rods and assemblies are specific to each reactor.\n\n\t\tSecondary Supply\n\nSecondary supplies describe uranium materials which may not have been directly processed through the front-end of the nuclear fuel cycle. Secondary supply may describe excess uranium from underfeeding during commercial enrichment, uranium materials held in commercial inventories, uranium held in the federal government's excess uranium inventory, and from the downblending of higher enriched uranium. According to DOE, secondary sources of uranium produced from reenrichment of depleted uranium and underfeeding represent the two largest sources of secondary supply in the market. A uranium market analyst estimated that all secondary supplies account for more than a quarter of total annual world uranium supply (48 million pounds U 3 O 8 equivalent) as of December 2018. The relative contribution of secondary uranium supplies may vary from year-to-year. \n\n\t\t\tUnderfeeding\n\nUranium enrichment inherently involves a trade-off between energy requirements and quantity of product and tails produced. Enrichment operators aim to balance these requirements as the optimal tails assay. Under certain conditions, enrichment operators elect to underfeed , which generates tails with a lower assay relative to the optimal tails assay. Underfeeding allows the enrichment operator to supply the enriched uranium product at the assay desired, produce lower quantities of tails for storage and disposal, and use relatively less feed material. The trade-off is the higher energy requirement per enriched product. The excess feed material not enriched as a result of underfeeding is considered a secondary supply.\n\n\t\t\tTraders and Brokers\n\nUranium traders and brokers buy, sell, and store various types of uranium materials and have no direct operational role in producing or consuming nuclear fuel cycle material. The decision to buy, hold, and sell uranium materials is dependent on market conditions. For example, in 2014 the Senate Committee on Homeland Security and Governmental Affairs examined the activities of banks and bank holding companies in physical markets for commodities, including an examination of Goldman Sachs' involvement with buying and selling physical uranium products. Goldman Sachs described its activities in the uranium market as \"buying uranium from mining companies, storing it, and providing the uranium to utilities when they wanted to process more fuel for their nuclear power plants.\" Goldman's physical uranium inventory valuation peaked in 2013 at $242 million, and the company planned on exiting the market by 2018 when their contracts with utilities had ended. The current status of Goldman's holdings is not publicly known, as uranium sales contracts are privately negotiated. EIA provides a list of uranium sellers to owners and operators of U.S. civilian nuclear power reactors, which may include companies involved with uranium operations at various stages of the front-end of the nuclear fuel cycle. \n\n\t\t\tCommercial Inventories\n\nNuclear utilities and reactor operators stockpile inventories of various types of uranium materials. The primary reasons to maintain stockpiles are economic considerations and to insulate their operations from potential supply chain disruptions. According to the U.S. Energy Information Administration (EIA), total uranium inventories for owners and operators of U.S. civilian nuclear power reactors more than doubled from 2002 to 2016 ( Figure 2 ). EIA tracked inventory quantities of specific uranium materials from 2007 to 2016. During that time, owners and operators of U.S. civilian nuclear power reactors increased inventories of uranium concentrate and enriched UF 6 by the largest relative margin. As of 2016, EIA reported the total uranium inventory for U.S. utilities was 128 million pounds U 3 O 8 (eq).\n\n\t\t\tExcess Federal Uranium Inventory\n\nDOE maintains inventories of uranium both essential to, and excess to, national security missions. DOE maintains excess inventories of various types of uranium materials, which are sold on commercial markets to support cleanup services for former federal uranium enrichment facilities.\nSome have expressed concern that DOE's uranium transfers are depressing uranium prices by introducing federal uranium materials into an already oversupplied market. In 2015, the House Oversight and Government Reform Subcommittee on the Interior examined the impact of the sales of DOE's excess uranium inventory. The Government Accountability Office (GAO) raised concerns about the transparency of methodology used to determine uranium transfer quantities, and expressed legal concerns with some DOE uranium transfers from 2012 through 2013. The Secretary of Energy determines whether transfers of uranium will adversely affect the domestic production uranium industry. In FY2017, Secretary of Energy Rick Perry determined natural uranium hexafluoride transfer of up to 1,200 metric tons of uranium (MTU) per year would not cause adverse material impact on domestic uranium producers. \nExplanatory language in the conference report accompanying the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 , H.Rept. 115-929 ) directs DOE to end the uranium transfers and explains that $60 million above the budget request is appropriated in lieu of anticipated profits from those transfers. The DOE FY2020 budget request decreased funding requests for the Portsmouth cleanup by approximately $52 million, indicating DOE intends to resume uranium transfers in FY2020.\n\n\tGlobal Uranium Market and Fuel Supply Chains\n\nThe uranium market operates with multiple industries exchanging uranium products and services through separate, nondirect, and interrelated markets. Producers, suppliers, and utilities buy, sell, store, and transfer uranium materials. For example, a contract may be established between a nuclear utility and a uranium producer for a given amount of uranium concentrate production over a certain number of years. The uranium producer generates uranium concentrate, which is shipped to a conversion facility. The utility contracts with a conversion facility to convert uranium concentrate to UF 6 . Finally, the utility may arrange a contract for uranium enrichment services.\nUranium transactions occur through bilateral contractual agreements between buyers, sellers, and traders. Civilian nuclear power utilities purchase uranium through long-term multiyear contracts or through the spot market as a one-time purchase and delivery. For uranium materials delivered in 2018, roughly 84% were purchased through long-term contracts and about 16% through spot market purchases. \nIn the United States, utilities may simultaneously arrange contracts with multiple uranium producers or suppliers for a given number of years. For example, a U.S. nuclear power utility may decide to engage with a uranium producer in Canada, a uranium conversion facility in the United States, a uranium enrichment facility in Germany, and a uranium fuel fabricator in the United States ( Figure 3 ). That same utility may arrange another contract for uranium concentrate from Australia, uranium conversion in France, uranium enrichment in the Netherlands, and uranium fuel fabrication in the United States. At the same time, the utility may also decide to acquire uranium materials from a secondary supply source or through a trader or broker. Traders or brokers may not produce uranium products or services, but they buy, sell, and store materials to utilities and other suppliers. In this way, nuclear utilities and reactor operators may seek to diversify nuclear fuel sources between primary and secondary suppliers to avoid supply disruptions.\n\n\t\tUranium Imports and Exports\n\nThe U.S. International Trade Commission (ITC) categorizes imports and exports by the Harmonized Tariff Schedule (HTS). ITC reports uranium imports relevant to the nuclear fuel cycle in different HTS categories and subcategories (see Table 1 ). For this report, CRS provides data from only the top five importing or exporting countries from 1992 through January 2019. Other countries may have contributed lesser amounts of uranium imports or exports over that time period, but those data were not included in this report.\n\n\tAnalysis of Uranium Supply to U.S. Nuclear Power Reactors\n\nSince the late 1980s, U.S. nuclear utilities and reactor operators have purchased increasingly more foreign-origin uranium for reactor fuel than domestically produced uranium. Historically, the AEC, a predecessor federal agency to DOE and NRC, promoted uranium production through federal procurement contracts between 1947 and 1971. After 1971, uranium mill operators produced uranium concentrate primarily for the production of civilian nuclear energy. In 1987, about half of uranium used in domestic nuclear reactors was foreign origin; by 2018, EIA reported 93% of uranium used in domestic nuclear reactors was foreign origin. \nThe DOE recognizes the term domestic as physical facilities operating within the United States, regardless of a foreign corporation ownership. Several domestic uranium producers, suppliers, enrichers, and utilities operating in the United States have foreign ownership or are subsidiaries of foreign corporations. On the other hand, DOE does not consider brokers and traders of already milled, converted, or enriched uranium as part of the domestic industry, as they are not associated with physical production of those materials. The term foreign is used to describe any non-U.S. based facility or material origin. \nThe following sections describe domestic uranium sources and foreign imports associated with the front-end of the nuclear fuel cycle by year and country. Uranium materials sourced from various countries may be associated with that country's natural resources, operational fuel cycle facilities, and trade agreements with the United States. For example, Australia, one of the largest exporters of uranium concentrate to the United States, has the largest reasonably assured uranium resources worldwide, but it does not have a commercial nuclear power plant in operation. On the other hand, some overseas producers may not have the geologic resources to mine and mill uranium concentrate, but they may operate conversion or enrichment operations. \n\n\t\tUranium Ores and Concentrates\n\nUranium extraction worldwide has shifted away from conventional (underground or surface mining) to unconventional (ISR) methods. In 2016, ISR facilities produced about half of the annual global uranium concentrate. ISR methods are less capital-intensive operations relative to conventional mining methods, yet the uranium ore must be hosted within a geological formation suitable for extraction by ISR. \nPreliminary data for domestic uranium concentrate production in the United States in 2018 totaled approximately 1.5 million pounds, the lowest domestic uranium concentrate production since the early 1950s. Domestic uranium concentrate production outlook remains low for 2019. EIA estimated the first-quarter domestic production of uranium concentrate was 58,000 pounds, approximately four times lower than any reported quarter since 1996. \nUranium ore and concentrates are imported into the United States from countries with considerable uranium production programs. According to the World Nuclear Association, the largest uranium-producing countries in the world in 2017 were, in order of uranium concentrate production: Kazakhstan, Canada, Australia, Namibia, Niger, Russia, Uzbekistan, China, the United States, and Ukraine. \nUranium concentrate imports are presented in Table 2 and Table 3 . As a practical matter, CRS combines \"uranium ore and concentrates\" ( Table 2 ) and \"natural uranium oxide\" ( Table 3 ) as similar materials produced from uranium mining and milling. In 2018, the United States imported the largest quantities of uranium concentrate from Canada and Australia at 4.2 million kg (11 million pounds U 3 O 8 (eq)) and 1.1 million kg (2.9 million pounds U 3 O 8 (eq)), respectively. \nThe United States does not currently have an operational uranium conversion facility to convert uranium concentrate to UF 6 . Consequently, uranium concentrate imported into the United States must be exported to a foreign country capable of conversion and enrichment services or stored in inventories.\n\n\t\tUranium Hexafluoride\n\nThe production of UF 6 is the second stage of the front-end of the nuclear fuel cycle. The United States currently has one commercial conversion facility, the Honeywell International, Inc. plant in Metropolis, IL. The facility suspended operations in 2018 due to \"a worldwide oversupply of uranium hexafluoride\" and is currently being maintained at a \"ready-idle\" status. With the Honeywell facility on standby, the United States does not have a domestic uranium conversion facility in operation. The Honeywell facility in Metropolis continues to be operated by ConverDyn Corporation as a warehouse and international trading platform for UF 6 and uranium concentrate. According to ConverDyn, 62 million pounds of UF 6 are stored at the facility as of 2018. According to the World Nuclear Association, the majority of commercial uranium conversion capacity is located in Canada, China, France, Russia, and the United States. \nSince 1992, the United States' largest import source of UF 6 was from Canada (137 million kg). The next highest country providing UF 6 imports to the United States over that time period was the United Kingdom (5.6 million kg) ( Table 4 ).\nThe export trade data for UF 6 provide additional insight into the international flow of UF 6 , which is feed material for commercial uranium enrichment. The ITC has two types of export classifications, Domestic Exports and Foreign Exports . These definitions are not the same as the definitions for these terms as interpreted by DOE and described previously.\nDomestic exports are \"goods that are grown, produced, or manufactured in the United States and commodities of foreign origin that have been changed in the United States, including changes made in a U.S. Foreign Trade Zone, from the form in which they were imported, or which have been enhanced in value by further processing or manufacturing in the United States.\" ( Table 5 ) Foreign Exports \"(re-exports) consist of commodities of foreign origin that have previously been admitted to U.S. Foreign Trade Zones or entered the United States for consumption, including entry into a CBP [U.S. Customs and Border Protection] bonded warehouse, and which, at the time of exportation, are in substantially the same condition as when imported.\" ( Table 6 )\nThe incidence of domestic ex ports may demonstrate domestic uranium concentrate that has undergone uranium conversion in the United States prior to export. Another explanation is that the incidence of domestic ex ports may indicate foreign mined and milled uranium concentrate imported into the United States that was converted and exported.\nThe incidence of foreign ex ports may indicate UF 6 imported into the United States that was reexported for enrichment services in a foreign country. This interpretation is consistent with the comments provided by ConverDyn, which stated that Honeywell operates as a \"global trading warehouse.\" Since 2010, UF 6 foreign exports have totaled roughly 32 million kg to four countries: Russia, Germany, Netherlands, and the United Kingdom.\n\n\t\tEnriched Uranium\n\nHistorically, the federal government operated gaseous diffusion uranium enrichment facilities at Oak Ridge, TN, Paducah, KY, and Portsmouth, OH, which supplied enriched uranium for defense purposes during World War II and the Cold War. The federal government used uranium enrichment services at these sites to produce enriched uranium for private contracts to commercial nuclear power plants after 1967. As of 2019, these enrichment sites have ceased operations and are undergoing decontamination and decommissioning managed by DOE's Office of Environmental Management. DOE's estimated program life-cycle costs for decontamination and decommissioning collectively for the three sites range from $70.8 billion to $78.3 billion.\nAs of 2019, the Urenco gas centrifuge uranium enrichment facility near Eunice, NM, is the only operational uranium enrichment facility in the United States. The Urenco facility has the capacity to supply approximately one-third of the annual requirements for U.S. reactors. Several other domestic uranium enrichment facilities began NRC licensing, though no enrichment facilities are proceeding with construction.\nAccording to the World Nuclear Association, the majority of commercial uranium enrichment services are performed in China, France, Germany, the Netherlands, Russia, the United Kingdom, and the United States. Smaller-capacity uranium enrichment plants are located in several other countries. Urenco operates uranium enrichment facilities in the United Kingdom, Germany, and the Netherlands.\nAccording to the ITC trade data, the top five countries exporting enriched UF 6 to the United States in 2018 were the Netherlands (785,046 kg), Germany (591,108 kg), Russia (547,768 kg), and the United Kingdom (461,187 kg) ( Table 7 ).\nBetween 1993 and 2013, downblended Russian HEU supplied approximately half of the enriched uranium used in U.S. domestic reactors under the Russian HEU agreement, known as the Megatons to Megawatts program. This U.S.-Russian agreement provides for the purchase of 500 MT of downblended HEU from dismantled Russian nuclear weapons and excess stockpiles for commercial nuclear fuel in the United States. After the Megatons to Megawatts program expired in 2013, imports of enriched uranium from Russia decreased by approximately 50% ( Table 7 ). Today, the enriched uranium from Russia imported into the United States comes from mined and milled uranium concentrate, not from downblended uranium from weapons. The enriched uranium which is imported from Russia, or any other country, may have been mined and processed in various other countries, including material exported from the United States.\n\n\t\tFuel Fabrication\n\nThree fuel fabrication facilities are located in the United States: (1) Global Nuclear Fuel Americas plant in Wilmington, NC, (2) Westinghouse Columbia Fuel Fabrication Facility in Columbia, SC, and (3) Framatome facility in Richland, WA. Fuel fabrication facilities are located in multiple countries, and may offer various services (conversion, pelletizing, rod\/assembly) and capacity of those services.\n\n\t\tUranium Purchases vs. Uranium Imports\n\nITC data separates uranium material by the type and quantity that physically entered or exited the United States. ITC data does not estimate the amount of uranium materials purchased by utilities for a given year. ITC data does not infer the quantities of uranium materials used, stored, or processed by a nuclear utility and reactor operator. ITC data differs from the EIA data reporting, which may combine purchases by country for uranium concentrate, uranium hexafluoride, and enriched uranium as equivalents of U 3 O 8 . \nThe EIA data indicates the country of origin of uranium purchased by U.S. nuclear utilities and reactor operators. EIA data does not necessarily indicate that those materials were directly imported into the United States as a given uranium material from that country. \nComparing ITC and EIA data for the country of Kazakhstan provides some insight into the flow of uranium materials through the global nuclear fuel cycle. According to the World Nuclear Association, Kazakhstan has been the world's leading producer of uranium concentrate since 2009 and produced 21,700 tons of uranium in 2018.\nBetween 2013 and 2017, uranium concentrate imports from Kazakhstan into the United States were 18% to 54% of the uranium purchases by U.S. nuclear utilities and reactor operators ( Figure 4 ). The difference between the uranium purchased by utilities and the uranium concentrate imported into the United States may represent some portion of the origin material which was converted, enriched, and\/or stockpiled in other countries prior to being imported into the United States, in the same form or as a different uranium material. \nFor example, a portion of Kazakhstan uranium purchased by U.S. utilities may have been produced as uranium concentrate in Kazakhstan and subsequently transported to conversion facilities in France for the production of UF 6 . After conversion, the UF 6 may have been then transported to an enrichment facility in the Netherlands for the production of enriched UF 6 . Finally, the enriched UF 6 may have been imported into the United States for fuel fabrication and ultimately used in a U.S. nuclear reactor. This comparison of the reported EIA and ITC data with uranium purchases and imports from Kazakhstan illustrates how enriched UF 6 is imported from countries such as Germany, the United Kingdom, and the Netherlands, whereas U.S. nuclear utilities and reactor operators reportedly purchased no uranium originating from those countries. Uranium purchases and imports may vary from year to year.\n\n\tCurrent Issues\n\nOn January 16, 2018, two U.S. domestic uranium mining companies petitioned the U.S. Department of Commerce (DOC) to investigate whether uranium imports from foreign state-owned enterprises, such as those in Russia, China, and Kazakhstan, pose a threat to national security. The investigation into uranium import restrictions sparked a debate between uranium producers; uranium mine and mill operators; and nuclear utilities, reactor operators, and suppliers. Uranium producers asserted that a heavy reliance on foreign uranium constitutes a national security risk and threatens the viability of domestic uranium production. Conversely, nuclear utilities and reactor operators contended that increased fuel costs from trade restrictions would place additional financial burdens on nuclear utilities, potentially causing the premature shutdown of economically marginal nuclear power plants.\nStakeholders on both sides of the debate generally agreed that the proposed quotas would increase fuel costs for nuclear utilities and increase revenues for domestic uranium mining. For example, a report sponsored by the Nuclear Energy Institute (NEI) concluded that a 25% quota could increase fuel costs by $500 million to $800 million annually and potentially higher in the years immediately following implementation. An economic study funded by the petitioners estimated uranium mining revenues from a 25% quota would increase by $551 million to $690 million per year and would increase fuel costs by $0.41 per megawatt-hour (MWh). Another study estimated that the $0.41 per MWh increase in fuel costs for nuclear generators would translate to approximately $317 million per year.\nThe uranium Section 232 investigation also raised policy questions about Congress's role under Section 232. Under current federal law, trade actions imposed by the President under Section 232 do not require congressional approval apart from actions related to petroleum imports.\n\n\t\tSection 232 Investigation\u00e2\u0080\u0094Uranium Imports\n\nSection 232 of the Trade Expansion Act of 1962 (19 U.S.C. \u00c2\u00a71862) provides the President with the ability to impose restrictions on certain imports based on an affirmative determination by DOC that the product under investigation \"is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.\" The industry petition called for the President to enact a quota, pursuant to Section 232, on uranium imports such that \"25% of the average historical consumption will be reserved for newly produced U.S. uranium.\" On July 18, 2018, DOC began an investigation into uranium imports under Section 232. The Department of Commerce's Bureau of Industry and Security (BIS) accepted public comments until September 10, 2018.\nThe statute establishes a process and timelines for a Section 232 investigation, but does not provide a clear definition of \"national security,\" allowing the executive branch to use a broad interpretation, and the potential scope of any investigation can be expansive. DOC submitted a report to the President on April 14, 2019. The report has not been made public. \n\n\t\tPresidential Determination\n\nAccording to a presidential memorandum released by the Trump Administration on July 12, 2019, DOC determined \"uranium is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States as defined under section 232 of the Act.\" The President did not concur with DOC findings that \"uranium imports threaten to impair the national security of the United States as defined under section 232 of the Act.\" \nHowever, the President expressed significant concerns regarding national security, calling for a \"fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain....\" The memorandum established a Nuclear Fuel Working Group, cochaired by the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy, which will also include representatives from other executive branch agencies. The working group will \"examine the current state of domestic nuclear fuel production to reinvigorate the entire nuclear fuel supply chain,\" and provide a report to the President within 90 days of the memorandum.\nThe Department of Commerce conducted a Section 232 investigation for uranium imports in 1988. The investigation was initiated at a time when U.S. utilities imported 37.5% of the actual or projected domestic uranium requirements from foreign sources for two consecutive years. No trade actions were imposed as a result of that investigation.\n\n\t\t\tConcerns of Uranium Producers and Local Communities\n\nTrade restrictions on uranium imports were generally supported by domestic uranium producers, national and state mining associations, and other companies associated with uranium production. Some elected officials, including the U.S. Senators from Wyoming, one of the largest uranium-producing states, supported trade actions on uranium imports. The Section 232 petition asserts that the long-term viability of the domestic uranium production industry is threatened by unfair market practices by foreign state-owned enterprises. Supporters of the petition anticipate trade quotas would provide domestic uranium producers relief by increasing the price of uranium, and subsequently increasing domestic uranium production. According to advocates of this approach, increased uranium prices and production may offer direct and indirect employment opportunities and economic stimulus to local economies. \nThe Wyoming Mining Association (WMA) offered support to uranium import actions in its comment letter:\nWMA believes the petition sets forth a compelling case that the current state of the domestic uranium mining industry is not simply a result of foreign competition legitimately underpricing domestic producers. It now is clear that foreign, state-mandated and state-supported uranium production is thwarting our domestic industry's ability to compete in an oversupplied and underpriced market.\nOne of the domestic uranium producers who submitted the Section 232 petition to DOC expressed concern with the President's determination to not take actions on uranium imports. An Energy Fuels statement also suggests that the petition \"has been very successful.\" The company further stated, \"We are very pleased to have gained the attention and action of the Administration to address the energy and national security issues raised in the petition and Department of Commerce investigation.\"\nAnother U.S. uranium producer, Cameco, agreed with the President's determination to not take actions on uranium imports under Section 232. Cameco has uranium assets in the United States, Canada, and Kazakhstan. Cameco operates the largest operational uranium recovery capacity in the United States, the Smith Ranch-Highland ISR operation in Wyoming. \n\n\t\t\tConcerns of Nuclear Utilities and Reactor Operators and Suppliers\n\nRepresentatives from nuclear utilities and reactor operators, industry trade groups, think tanks, converters, enrichers, and foreign governments opposed the trade actions on uranium imports proposed by the petitioners. Nuclear utilities and reactor operators asserted that quotas on uranium imports may increase fuel costs, causing financially vulnerable nuclear reactors to shut down earlier than currently planned. The Ad Hoc Utilities Group (AHUG), collectively representing U.S. nuclear generators, asserted, \"Imports assure the security of nuclear fuel supply and the reliability of the electric grid. Nuclear generators source from a diverse set of suppliers at all stages of the nuclear fuel cycle with the majority of supply coming from the U.S. and our allies in Canada, Australia, and Western Europe.\" \nOperators of U.S. conversion and enrichment facilities in the United States publicly expressed concern with uranium import quotas. Malcolm Critchley, the marketing agent for ConverDyn, stated that quotas \"would undoubtedly cause suppliers to divert uranium [from Honeywell].... to other locations outside of the United States if the supplier did not have a known domestic customer at the time of import.\" \nU.S. uranium enrichers shared these concerns. Melissa Mann, the president of Urenco USA\u00e2\u0080\u0094the only uranium enrichment operation in the United States\u00e2\u0080\u0094noted that with the ceased operations at Honeywell and the Department of Energy termination of its barter program, \"there is currently no source of natural UF 6 in the United States.\" Urenco receives deliveries of UF 6 from Cameco's Port Hope facility in Canada and Orano's Comhurex II in France. She cautioned, \"Should remedies in the uranium Section 232 investigation be imposed that disrupt deliveries of UF 6 to [New Mexico], operation of the facility\u00e2\u0080\u0094and the $5 billion investment in the plant\u00e2\u0080\u0094could be jeopardized,\" and \"the lack of feed material to enrich would also jeopardize delivery of low enriched uranium to fuel fabricators, putting at risk utility reactor reload schedules and reactor operations.\"\nSome utilities have dismissed claims about the dependence on foreign-sourced uranium and vulnerability to supply chain disruptions. For example, Dominion Energy noted that concerns with foreign supply disruptions were exaggerated because \"in the past five years, our only delays or interruptions in nuclear fuel component deliveries have been from U.S. based fuel cycle suppliers.\"\n\n\t\tLegislation and Congressional Oversight\n\nIn March 2018, the Trump Administration imposed tariffs on foreign imports of steel and aluminum pursuant to Section 232. This was the first implementation of trade actions under Section 232 since 1986. Some Members of Congress have questioned whether the Administration's use of Section 232 on steel and aluminum imports is an appropriate use of the trade statute and relies upon broad interpretations of the definition of national security. Bills have been introduced in both chambers ( H.R. 1008 and S. 365 ) in the 116 th Congress that would amend Section 232 to provide for congressional disapproval of certain trade actions with the enactment of a disapproval resolution. \nThe uranium Section 232 investigation was discussed in a September 6, 2018, hearing by the Senate Appropriations Committee, Subcommittee on Commerce, Justice, Science, and Related Agencies. At that hearing, Richard Ashooh, Commerce Assistant Secretary for Export Administration at BIS, suggested that the uranium investigation had prompted the agency to consider \"creative ideas\" outside of using import restrictions. \nOn February 5, 2019, the House Committee on Natural Resources requested from the uranium producers that had submitted the petition to the Department of Commerce, \"All documents and communications ... relating to the Department of Commerce Section 232 Investigation on uranium.\"\n\n\tPolicy Considerations\n\nAs a broad policy matter, Congress may consider the federal role in issues associated with the front-end of the nuclear fuel cycle. The uranium materials and service industry delivers fuel for commercial nuclear power reactors, which is largely traded and purchased under private contracts in a global marketplace. Similar to other energy markets, uranium supply is an issue on which Congress may or may not elect to intervene.\nAs discussed previously, the United States ceased production of HEU for weapons in 1964, due to the determination of sufficient stockpiles. Fuel for nuclear naval propulsion is supplied by government HEU stockpiles, and the production of HEU for naval propulsion ended by 1992. Questions about the sufficiency of the defense uranium stockpile and future uranium requirements for defense and other purposes are beyond the scope of this report.\n\n\t\tDomestic Uranium Production Viability\n\nThe financial viability in the short term and long term for domestic uranium producers\u00e2\u0080\u0094uranium miners and millers\u00e2\u0080\u0094in the United States remains uncertain. Domestic uranium production experienced a sharp decline during the early 1980s, and has remained at comparatively low levels over the past 25 years. \nRecently, global demand for uranium has been depressed due to a number of factors, including the continued shutdown of most Japanese nuclear power reactors following the Fukushima Daiichi accident. In 2018, domestic uranium concentrate production was 1.5 million pounds, down approximately 40% from 2017, and at the lowest annual production levels since 1950. U.S. uranium producers have dealt with poor market conditions by decreasing production and imposing employment layoffs. Domestic uranium producers have reportedly engaged in purchasing uranium concentrate on the market at lower spot market prices to fill delivery obligations at relatively higher contract prices. States have proposed legislation intended to provide some financial relief for domestic uranium producers. \n\n\t\tNuclear Power Viability\n\nU.S. nuclear power plants face economic issues and a general uncertainty over their long-term economic viability. Of the 98 operating nuclear reactors, 12 are scheduled to shut down, prior to license expiration, by 2025. The Plant Vogtle nuclear expansion project in Georgia, currently the only new construction of nuclear power reactors in the United States, is reportedly billions of dollars over budget and years behind schedule. A 2018 report by the Union of Concerned Scientists asserts that roughly one-third of nuclear power plants are unprofitable and modest changes in costs may have profound impacts on other nuclear power plants' economic viability. \n\n\t\tTribes and Environmental Considerations\n\nSome Native American tribes and public interest groups in the United States opposed trade actions on uranium imports due to concerns that uranium import restrictions would promote increased domestic uranium mining and milling operations. These groups suggested the health and environmental issues associated with historical uranium mining and milling have not been adequately addressed. Persistent soil, surface and groundwater contamination associated with historical uranium mining and milling remains a concern for some communities. For example, federal, state, and tribal agencies manage environment impacts associated with historical uranium mining and milling operations that occurred on Navajo Nation lands.\nGiven environmental impacts associated with historical domestic uranium mining and milling operations, Congress may consider examining potential long-term environmental or public health consequences of expanding domestic uranium production and the adequacy of bonding and long-term financial assurance requirements for current or future uranium production operations undergoing site reclamation and decommissioning.","output":null}
{"id":"gao_GAO-20-366","pid":"gao_GAO-20-366_0","input":"\tBackground\n\nThe platform economy is relatively new. Its rise has been tied to the  development of the iPhone and Apple\u2019s app store, which launched in  2008. Smart phones and apps made it easier for people to develop online  marketplaces where buyers and sellers could connect to exchange  goods. Since then, more platform companies have emerged, expanding  into marketplaces for a host of services. This expansion has increased  the ways in which people could sell their services or goods and lowered  the barriers to entering this type of work.\nPlatform companies generally facilitate the match, transaction, and  payment between those seeking goods or services online and those  providing them. Platform companies can be divided into marketplaces for  services or goods and can be further divided into two types of services\u2014 transportation or other types of services\u2014and two types of goods\u2014retail  or short-term rental. See figure 1 for a description of the different platform  company marketplaces.\nTransportation platforms comprise the largest sector of the platform  economy\u2014by revenue and number of workers\u2014and include companies  like Uber and Lyft. Examples of platform companies providing other  types of services include Care.com (child or senior care) and Upwork (a  range of freelance services). Retail platforms like Etsy and eBay provide  an online marketplace for goods. Companies that facilitate short-term  rental include Airbnb (property) or Kerb (parking spaces).\nPlatform companies also vary by the number and degree of specialization  of services offered. For example, platform companies could be  differentiated by the range of services offered, from those that offer a  single service, such as transporting people and goods, to those that are a  one-stop source to access workers specializing in an array of fields such  as legal, information technology, marketing, writing, design, and  accounting. Further, companies have adopted different business models.  Some set prices while others allow the worker and customer to negotiate  a price for the good or service provided.\nWhile platform workers can choose whether to accept work, companies  are not committed to pay workers for a set number of hours, which allows  companies to more easily manage demand fluctuations. Many platform  companies classify workers providing services as independent  contractors rather than as employees. This classification has implications  for companies and workers. For independent contractors, companies are  not responsible for paying a minimum wage or overtime and do not  typically provide benefits such as paid leave, health insurance, or  retirement plans. Furthermore, numerous labor protections that apply to  employees do not apply to independent contractors.\nCompanies also do not have to withhold and remit federal income or  employment taxes for independent contractors. Instead, the worker is  responsible for estimating, saving, and remitting these taxes each quarter  to IRS. Furthermore, a platform company that operates as an  intermediary between buyers and sellers to transfer funds for  transactions\u2014for example, a ride-hailing company that matches drivers  and riders and processes those riders\u2019 payments to drivers\u2014may act as a  third party settlement organization (TPSO) under IRS regulations,  depending on its circumstances. Acting as a TPSO can further reduce  the tax reporting requirements for these companies.\nSB\/SE oversees taxpayers filing tax returns as self-employed individuals  with business income, such as independent contractors, and businesses  with less than $10 million in total assets. SB\/SE aims to promote  compliance among this population by raising awareness through outreach  and education about tax obligations and how to comply. SB\/SE also takes  enforcement actions such as audits to pursue noncompliance, although  with budget cuts, the number of audits has dropped considerably over  time.\n\n\tPlatform Work Has Some Unique Characteristics, but Lack of Data Complicates Efforts to Describe the Workforce Unique Characteristics of Platform Work Affect Tax Responsibilities and Information Reported\n\nWhile the nature of the work may be similar, key differences exist among  traditional independent contractors, platform workers, and employees. We  use the term platform worker for those workers that platform companies  classify as independent contractors, which is the focus of our report. A  major similarity is that all three types of workers provide services to  customers in a business transaction, regardless of whether the customer  is another business or an individual such as a homeowner. However, the  three types of workers differ in terms of payments, tax responsibilities,  and the information reported to IRS and workers. Figure 2 summarizes  these differences, which are discussed below.\nA major difference is how these workers provide their services and  receive payments. Traditional independent contractors directly provide  their services to and receive payments from a business or an individual  customer. Employees provide services through an employer who pays  them wages. Unlike the other two types of workers, the platform worker  provides services through a third party intermediary\u2014the platform  company\u2014that uses online tools to connect workers with customers and  facilitates payment between them.\nPlatform workers that are classified as independent contractors have  different tax obligations than employees. Independent contractors are  generally expected to pay the full amount of their personal federal income  and self-employment taxes\u2014which are comprised of Social Security and  Medicare taxes\u2014through quarterly estimated tax payments to IRS. For  employer-employee relationships, both the employer and the employee  each pay roughly half of the Federal Insurance Contribution Act (FICA)  taxes\u2014which are comprised of Social Security and Medicare taxes. An  employer is required to withhold income taxes and the employee portion  of FICA taxes from wage payments made to the employee and pay these  taxes to IRS. Additionally the employer is required to pay its own portion  of the FICA taxes to IRS.\nThese workers have different requirements for filing annual tax returns.  Generally, independent contractors, including those that are platform  workers, are to use Schedule C, Profit or Loss from Business (Sole  Proprietorship), to report their self-employment revenues and expenses,  and to calculate net income; the Schedule C is to be attached to their  Form 1040. Employees are to report wage amounts received on their  Form 1040.\nBusinesses also differ in information-reporting obligations for workers  classified as independent contractors and employees. Generally  speaking, when a business pays an independent contractor, the business  is required to report annual payments of $600 or more on Form 1099- MISC; for tax year 2020, businesses are to start using Form 1099-NEC to  report such payments. Instead of a Form 1099-MISC (or Form 1099- NEC), TPSOs are required to file Form 1099-K to report annual payments  made through their payment networks that exceed $20,000 and 200  transactions. When paying employees, businesses are to file a Form W- 2 annually to report all wages paid.\nA difference between platform workers and traditional independent  contractors is that platform companies often have information on workers\u2019  earnings and some expenses that could help workers file tax returns. For  example, a ride-hailing company has information on fares, tips, and miles  driven for each customer as well as fees and other charges. Traditional  independent contractors who provide rides to individuals typically have no  equivalent third party to provide such information.\n\n\t\tPlatform Workforce Size and Characteristics Are Uncertain but Many Believe It Is Growing\n\nThe population of platform workers is difficult to count, due in part to the  variation in terms and definitions used to describe these workers such as  gig, on-demand, sharing economy, contingent, and freelance, among  others. As a result of these and other barriers, efforts to measure the  size of the platform workforce through household surveys or  administrative data have produced estimates that lack certainty; these  estimates of the workforce size generally have ranged from around 1.5  million to 2 million for recent years and suggest that the platform  workforce may be growing.\nIn 2017, the Department of Labor\u2019s Bureau of Labor Statistics (BLS)  collected data on alternative employment. BLS\u2019s survey found there are  an estimated 1.6 million \u201celectronically-mediated workers,\u201d defined as  those obtaining work through mobile apps and websites that connect  workers with customers and arrange payment. However, in January 2019  we reported that several factors may have contributed to an undercount  of platform workers. For example, survey questions may not have  captured individuals who engage in platform work on a part-time or  sporadic basis. BLS has stated that it will not use the same questions  again and it is working with stakeholders and the Committee on National  Statistics of the National Academies of Science, Engineering, and  Medicine to address survey limitations.\nDespite the difficulties estimating the size of the workforce, two studies  and stakeholders we interviewed have concluded that the platform  workforce is growing. For example, in a review of customer checking  account transactions, the JP Morgan Chase Institute documented a five- fold increase between 2012 and 2018 to about 2.3 million families  receiving at least one payment from known platform companies.\nTwo studies have also found that the majority of platform workers work  part time, for a short time, for secondary income, and for relatively low  earnings. For its sample, the JP Morgan Chase & Co. Institute found that  platform work was not the primary source of income for most families that  participated in the platform economy between 2012 and 2018. Yet the  study also found that platform work can account for roughly 20 percent of  workers\u2019 income during months when they are actively engaged in  platform work. Also, while the number of platform workers who provide  transportation has increased, their average monthly earnings fell steadily  between 2014 and 2018.\nIn another study, IRS used tax data to attempt to estimate the population  of platform workers, which it termed \u201cgig workers.\u201d Similar to BLS, IRS  attempted to count workers who use websites and mobile apps to  connect with customers to obtain short-term work and to receive payment  through the company that owns the website or mobile app. IRS identified  the names and Employer Identification Numbers of companies providing  labor services and matched Forms 1099-MISC and 1099-K issued by the  companies to workers. IRS estimated the number of workers who  received a Form 1099-K or 1099-MISC from known labor platform  companies increased from roughly 20,000 in 2012 to 1.9 million in 2016,  then dropped to 1.3 million in 2017.\nHowever, IRS\u2019s methodology had limitations that make the study an  uncertain source for determining the number of platform workers. First,  IRS cannot easily identify the universe of platform companies because it  is rapidly changing and not well documented. Second, according to IRS,  an unknown number of platform workers receive neither a Form 1099- MISC nor a Form 1099-K, for reasons we discuss later in the report. In  sum, the data IRS receives do not allow it to accurately count the number  of platform workers or determine their tax reporting behaviors.\n\n\t\tCertain Tax Form Changes Could Help IRS Better Understand the Size, Characteristics, and Reporting Behaviors of the Platform Worker Population\n\nGiven the limited data IRS has on the platform workforce, IRS cannot be  assured that it knows enough about the size, characteristics, and  behaviors of this workforce to better understand how to help workers  comply with tax obligations. According to federal standards for internal  control, managers should collect and use quality information to achieve  an entity\u2019s objectives. IRS officials we interviewed acknowledged that  identifying platform workers is challenging given limitations within IRS\u2019s  data.\nIRS does not have a straightforward way for taxpayers to indicate on their  tax forms whether they performed platform work. For example, Schedule  C\u2014the form that independent contractors are to use to report profit or  loss\u2014includes a series of yes\/no checkboxes near the top of the form;  however, it does not have a checkbox to indicate whether any reported income or expenses are from platform work. Similarly, Schedule C has  a six-digit code to indicate the type of business or activity conducted, but  it does not include a code for all platform workers. Although this  information would be self-reported and imperfect, it would provide more  information than IRS has on platform workers.\nObtaining more information on the number of platform workers and their  tax filing and reporting behaviors could help IRS develop ways to assist  platform workers in complying with their tax obligations. For example, if  IRS had more data on the types of deductions that certain types of  workers were reporting, IRS would be better able to craft guidance on  such deductions or do outreach to help those types of workers comply.\nFurther, without changes to Schedule C, IRS cannot cross-check whether  workers who self-identify as platform workers are also identified as  platform workers on Forms 1099 filed by platform companies; a cross- check would enhance IRS\u2019s understanding of the platform workforce. For  example, if the cross-check shows that the number of workers who self- identify as platform workers significantly exceeds the number of Forms  1099 filed, IRS may have to work with platform companies to understand  the filing shortfall. Conversely, if the number of filed Forms 1099 is  significantly higher, IRS may need to enhance outreach efforts to make  platform workers more aware of their tax obligations.\n\n\tChallenges for Platform Workers Include Awareness of Tax Responsibilities, Limited Income Information, and Saving and Remitting Quarterly Taxes\n\nWe identified three areas of challenges for platform workers\u2019 compliance  with their tax obligations. First, according to our stakeholder interviews,  platform workers may be less aware of their tax responsibilities than  some independent contractors. Independent contractors typically have  to advertise or seek referrals to gain customers, develop a network of  peers, and learn about rules related to licensing or certifications. These  activities can educate them about the basic responsibilities of being self- employed, including their tax obligations. In contrast, entry into platform  work can be quick and workers may begin the activity without time to  learn how their tax obligations differ from those of employees.\nFor example, someone with a car, a valid driver\u2019s license, and a smart  phone can start working as a ride-hailing driver after they register with an  app. Likewise, some platform workers may approach platform work as a  hobby, an artistic endeavor, or something they do for a short time or in  addition to another job. They may not realize that the company is treating  them as an independent contractor, that the platform income may affect  their taxes owed, and that they may need to track their expenses and  make quarterly tax payments.\nAs a second challenge, platform workers may have limited information  about the payments they receive for their work. TPSOs are not required  to file information returns to report earnings information to workers or IRS  if the workers receive $20,000 or less in annual payments or have 200 or  fewer transactions. Available tax data from tax year 2016 suggest that  only around 30 percent of platform workers who were known to IRS had  gross platform-related earnings higher than $5,000. Hence, most platform  workers are likely not receiving an information return from the company.  As a result, workers may not be aware that their income is taxable and  IRS is less able to the check the workers\u2019 tax compliance.\nA third challenge, according to stakeholders, is the burden associated  with the steps platform workers must take to estimate, save, and remit  quarterly tax payments. Because earnings of some platform workers may  be low and earnings and expenses may fluctuate, they can have difficulty  estimating their taxes owed and setting aside money to pay the taxes.  They may also find it time consuming or costly to track expenses and  determine profit. To the extent these burdens and difficulties confuse  workers, they are less likely to pay the estimated tax payments fully and  on time and may incur a penalty as a result. One stakeholder from a large  tax preparation firm raised the concern that if the penalty or amount owed  is more than workers can afford, they are at risk of falling into a cycle of  noncompliance.\n\n\tIRS\u2019s Strategy to Promote Compliance by Platform Workers Features Enhanced Communication, but Lacks Key Details for Monitoring Feedback and Clarifying Guidance\n\nIn response to a February 2019 recommendation by the Treasury  Inspector General for Tax Administration, IRS formed a team of officials  from across the agency to develop a strategy to promote compliance  among platform workers. The strategy focuses on two challenges for  platform workers: (1) raising awareness about federal tax obligations, and  (2) easing burden by identifying improvements to instructions, guidance,  or forms that platform workers are likely to use. As part of the strategy,  IRS developed a communications plan that includes a redesign of IRS  web pages for platform workers and companies, outreach activities to the  workers and various stakeholders, and a review of IRS guidance and  related forms or instructions.\n\n\t\tIRS Redesigned Its Web Pages to Improve the User Experience for Platform Workers and Companies\n\nThe IRS Communications & Liaison office is managing the  communications plan to educate platform workers and companies about  their tax and reporting responsibilities. A key component of the plan is to  redesign IRS web pages that provide tax information for platform workers  and companies. IRS changed the name to the Gig Economy Tax Center  (previously it was called the Sharing Economy Tax Center) and launched  it in January 2020 before the start of the filing season (see fig. 3).\nAs part of this effort, IRS is working to make web pages more user  friendly for platform workers as well as platform companies. IRS\u2019s Online  Services (OLS) conducted research on the expectations, behaviors,  motivations, and needs of self-employed individuals. According to OLS  officials, IRS used insights about platform workers from the research  coupled with user testing of the new web pages to inform the redesign  effort. IRS\u2019s steps to redesign the web pages align with selected leading  practices for improving the online user experience, such as taking steps  to make the pages useful and findable (see table 1). It is too soon to  know whether the intended users find the new pages useful, usable,  findable, and credible, as envisioned by the practices.\n\n\t\tIRS\u2019s Outreach Activities for Increasing Awareness among Platform Workers and Companies Lack Key Details for Monitoring Their Feedback\n\nIRS\u2019s communications plan included outreach activities to raise  awareness. For example, to publicize the redesigned web pages, the plan  envisions targeting audiences such as platform workers and companies,  news media, national tax publications, tax professionals, government  agencies, IRS employees, and other groups. IRS created and distributed  products such as a national news release about the new web pages and  articles for newsletters and other products for tax professionals, small  businesses, and payroll providers. IRS created a one-page electronic  brochure to inform platform workers about their tax obligations and  available tools to help them (see fig. 4). IRS intends to encourage  platform companies to provide the brochure to workers.\nIRS is also using social media such as Twitter and Instagram to target  platform workers and direct them to the redesigned web pages through  posts such as those seen in figure 5.\nTo assess the effectiveness of its efforts to increase awareness, including  whether outreach efforts are driving people to the new web pages, IRS  plans to compare data analytics for the redesigned site with the previous  site. OLS plans to analyze changes in website traffic volume and taxpayer  behavior\u2014such as click patterns and how long users stay on the page\u20143  months after the launch of the redesigned pages and again 6 months  later, and make changes as warranted.\nIRS\u2019s office of Tax Outreach, Partnership, and Education (TOPE) is  supporting awareness efforts by building relationships with partners, such  as platform companies and organizations that advise platform workers.  The communications plan provides a high-level description of efforts to  engage with partners. Goals are to increase partner use of IRS social  media, develop more industry-specific content, and increase TOPE  involvement in virtual and face-to-face partner events and conferences,  among others. IRS also plans to leverage these new partnerships to  solicit feedback on its communication efforts to ensure they meet the  needs of platform workers and companies.\nHowever, the communications plan lacks details about how IRS will  monitor feedback from stakeholders. Specifically, IRS does not have a  process for documenting and evaluating feedback based on the various  communications efforts and products tailored for platform workers.  According to federal standards for internal control, management should  establish two-way reporting of quality information to achieve its  objectives. Management should monitor activities and periodically  evaluate the quality of information received to achieve its objective.  According to IRS officials, they do not have the time or staff to document  all feedback received. Further, they said the value of responding quickly  to stakeholder comments supersedes the value of documenting and  evaluating feedback.\nGiven limited resources, IRS could choose to do something simple like  creating a spreadsheet that captures feedback received, such as  stakeholder emails, and document whether it led to changes. IRS has  dedicated time and resources to better understand platform workers\u2019 tax- related challenges and has undertaken multifaceted communication  efforts to address them. Without a process to monitor feedback, IRS may  miss opportunities to find better ways to drive platform workers toward the  redesigned web pages, to ensure the redesigned web pages are meeting  platform workers\u2019 needs, or to strengthen communication efforts to  enhance tax compliance. These opportunities could become more  important as the platform worker population grows and evolves.\n\n\t\tIRS Guidance and Instructions Do Not Always Clarify Tax Obligations for Platform Workers\n\nIRS identified changes to forms, guidance, and other publications that  could make it easier for platform workers to understand which forms apply  to them. According to IRS officials, the Gig Strategy Team reviewed tax  forms, publications, instructions, and training materials relevant to  independent contractors, including platform workers. The team concluded  that it did not need to create new forms or publications, although it  identified 10 forms, instructions, guidelines, and publications that could be  updated to be more helpful to platform workers.\nFor example, the team suggested that IRS make several changes to  update the instructions for Form 1040, such as adding a reference to  Form 1099-K and clarifying that platform economy work can be a trade or  business. The team also suggested that IRS revise the Form 1099-K  instructions for payees to indicate how this form could clarify information  on business gross receipts. IRS did not approve the gig strategy team\u2019s  requested changes to clarify the instructions for Forms 1040 and 1099-K  for 2020. However, IRS is considering making these changes in 2021.  According to IRS officials, they want to ensure these changes  complement each other and the guidance is clear for taxpayers.\nAccording to federal standards for internal controls, management should  communicate both internally and externally information necessary to  achieve the entity\u2019s objectives. Moreover, research based on behavioral  insights has shown that introducing small interventions or removing small  obstacles can significantly improve effectiveness.For example,  interventions should be attractive (to draw people in) and easy (use  simple, plain language). Leading practices suggest that people respond to  information that is relevant to them. One way to do this is to include  examples that help people recognize when information is relevant. For  example, adding a brief reference to the gig or platform economy to the  Form-1099 K payee instructions, along with a simple description of what  the taxpayer should do, such as \u201cshow total payments from a company  that facilitated a match, transaction, and payment for goods or services,\u201d  could help platform workers understand that the forms apply to them.\nBy not including plain language for the Form 1099-K and 1040  instructions, platform workers are less likely to recognize which  information applies to them. Simplifying one aspect of the tax system for  platform workers by making the forms easier to understand could lead to  enhanced tax compliance.\n\n\tIRS and Congress Have Options to Improve Voluntary Tax Compliance, but Tradeoffs Exist\n\nAccording to our prior work, a good tax system should be equitable,  economically efficient, and simple, transparent, and administrable.  However, the challenges we have discussed\u2014such as the lack of  awareness and information\u2014are complicating the tax system for platform  workers and limiting IRS\u2019s ability to more effectively collect taxes. We  identified nine options from our literature review and stakeholder  interviews to address these challenges and enhance tax compliance for  platform workers (see table 2). For each option, we analyzed available  data on the potential design and tradeoffs, including the potential costs  and benefits. We discuss two options related to reporting and two options  related to withholding in the sections below. For five options related to  simplifying the reporting and filing processes, we found that the available  data and research did not support a full assessment of potential pros and  cons. We discuss those five options in appendix II.\n\n\t\tIncreasing Information Reporting on Payments Made to Platform Workers Could Help Improve Tax Compliance\n\nMany platform workers are not receiving a Form 1099 on their self- employment income, and therefore may be unaware of their tax reporting  obligations. It is difficult to estimate how many workers are not receiving  these forms because of limitations in available data. However, IRS found  that the number of workers receiving Forms 1099-K or 1099-MISC from  known labor platform companies dropped more than 30 percent from  2016 to 2017. Such a decline in information reporting for platform workers  can be attributed to three factors.\nFirst, reporting thresholds for TPSOs were set at a high level to prevent  unnecessary information reporting to IRS. When Congress enacted the  Housing and Economic Recovery Act of 2008, TPSOs applied mainly to  online marketplaces for goods, like eBay, and companies that facilitated  payments, like PayPal. The act required information reporting by TPSOs  for payments made through their payment networks only if those  payments exceed both $20,000 and 200 transactions annually.  Individuals who were generally not engaged in business or not producing  a profit, such as casual sellers of goods, would likely fall below these  thresholds.\nSecond, IRS created a \u201ctie-breaker rule\u201d to avoid duplicative reporting  which also led to no Form 1099 being filed in some cases. Businesses,  including TPSOs, are in general required to report certain transactions on  Form 1099-MISC, while TPSOs are also required to report certain  transactions on Form 1099-K. IRS instituted a rule to break the \u201ctie\u201d that  exists when a TPSO is required to report the same transactions on both  Forms 1099-MISC and 1099-K. Specifically, the rule states that payments  made through a TPSO\u2019s payment network are not required to be reported  on Form 1099-MISC, subject to an annual $600 threshold. Instead,  TPSOs\u2019 payments are required to be reported on Form 1099-K, subject to  the annual $20,000 and 200 transactions thresholds.\nThird, since 2008, new platform companies have emerged that fit the  TPSO designation but that facilitate payments for workers providing  services rather than goods. These payments often fall below the  combined annual $20,000 and 200 transaction thresholds.\nOptions to increase information reporting for platform workers would help  raise awareness about their tax obligations while lowering their burden.  As a result, platform workers would be more likely to comply with tax  obligations. The following sections discuss our analysis of two options.\n\n\t\t\tAmend the \u201cTie-Breaker Rule\u201d for TPSOs\n\nThe \u201ctie-breaker rule\u201d could be amended to reverse the rule for payments  made through a TPSO\u2019s payment network. This would result in more  reporting on Forms 1099-MISC under Internal Revenue Code (IRC)  Section 6041, rather than on Forms 1099-K under IRC Section 6050W.  Given the much lower threshold for the Form 1099-MISC versus the  thresholds for the Form 1099-K, more workers would receive reports on  their payments and IRS would receive more reports, too.\nInformation reporting under the regulations related to IRC Section 6041  would generally increase for TPSOs that facilitate the provision of  services. If the TPSO makes a payment for a service on behalf of another  and performs management or oversight for the payment, then that TPSO  would generally be responsible for filing a Form 1099-MISC, subject to  the annual $600 threshold. Also, TPSOs that facilitate payments of  rentals and also provide management or oversight of those payments  would likely be subject to the $600 threshold.\nReporting would remain unchanged for some types of companies.  Because payments for goods are generally not reportable under IRC  Section 6041, reporting would not change for online marketplaces that  facilitate the sale of goods only. Because of the management and  oversight requirements of IRC Section 6041, TPSOs that only facilitate  payments would also generally not be affected by a change to the tie- breaker rule (see fig. 6).\nIRS Counsel has discussed amending the tiebreaker rule, but has yet to  take action. According to IRS, Counsel has had to address other  priorities, such as reviewing rules and publishing guidance related to  Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of  2017. Without amending this rule, the lack of information-return  reporting for many workers complicates their efforts to comply with their  tax obligations and IRS\u2019s ability to ensure that these workers are correctly  reporting their income. When workers do not receive forms related to their  self-employment income, they have more difficulty determining how much  money they made for computing taxable income. IRS analysis indicates  that taxpayers are more likely to report their income that is subject to  some information reporting (an estimated 83 percent compliance)  compared to little or no information reporting (an estimated 45 percent).  Sending more information returns may add costs for some companies;  however, stakeholders had differing views on how significant those costs  would be.\n\n\t\t\tDetermine Appropriate Form 1099 Reporting Thresholds\n\nIn addition to amending the tie-breaker rule, stakeholders, as well as our  literature review, discussed changing the various reporting thresholds.  IRS and the Department of the Treasury (Treasury) have unique access  to tax data and could analyze whether the 1099-K and 1099-MISC  reporting thresholds are set at levels appropriate for tax administration.  The 1099-MISC threshold was enacted in 1954 and the 1099-K reporting  threshold was enacted in 2008; neither reflect the development of the  platform economy. These changes include the emergence of companies  that facilitate workers\u2019 earning income by renting their houses or by  providing transportation services, among many other activities.\nInformed stakeholders suggested that the current 1099-K thresholds may  be appropriate for some TPSOs, such as online marketplaces that  facilitate the sale of goods or companies with a primary function of  facilitating payments. Different thresholds may be more appropriate for  other activities facilitated by platform companies, such as renting houses  or other assets. For example, a lower dollar threshold and no transaction  threshold may be appropriate for home rentals because substantial  income could be generated from even one transaction and provider costs  may be limited. However, some service providers incur significant costs,  such as drivers who must pay to own and operate a vehicle. Some  stakeholders suggested that a threshold of $600 was more appropriate  than a threshold of $20,000 and 200 transactions. Even so, some  stakeholders suggested that typical costs to service providers may justify  a threshold higher than the $600 threshold set in 1954.\nWe found no available analysis of tax or other data showing whether the  reporting thresholds for Forms 1099-MISC and 1099-K are appropriate for  today\u2019s economy or what the thresholds should be. The NEW GIG Act of  2019, which was introduced in Congress in March 2019, would raise the  Form 1099-MISC reporting thresholds from $600 to $1,000. It would also  lower the Form 1099-K reporting threshold from $20,000 and 200  transactions to $5,000 or 50 transactions for TPSOs making payments to  those primarily engaged in the sale of goods, among other actions.  Aligning reporting thresholds with today\u2019s economy would support tax  administration for IRS, as IRS studies have shown that information  reporting increases tax compliance. It would also help reduce compliance  burden for workers, since they would have clear information on their  earnings.\n\n\t\tWithholding Estimated Taxes Owed Could Ease Burden for Platform Workers\n\nPlatform workers can be burdened in estimating, saving, and remitting  quarterly payments for income, Social Security, and Medicare taxes.  Companies are not allowed to withhold and remit these taxes for platform  workers who are treated as independent contractors and who want to  participate in voluntary withholding\u2014except where backup withholding is  required.  Voluntary tax withholding that satisfies quarterly tax payment  requirements could reduce the workers\u2019 burden and promote their tax  compliance. We identified two actions that IRS could take on voluntary  tax withholding.\n\n\t\t\tImplement Voluntary Withholding\n\nIRS could work with Treasury to implement voluntary withholding on  payments to independent contractors for services. Voluntary withholding  would be an option where it would be voluntary for companies to  participate; for those companies that choose to participate, it would be  voluntary for the independent contractor to participate. According to IRS  Counsel, IRS has the statutory authority to take this action if the  Secretary of the Treasury finds that withholding would be appropriate and  would improve tax administration, and if the company and independent contractor agree to such withholding. According to IRS officials, IRS and  Treasury have not determined whether they intend to pursue such an  action.\nVoluntary withholding could be implemented by adjusting existing  procedures and using the existing requirements for paying estimated  taxes each quarter as a foundation. For example, to enable companies to  solicit workers\u2019 choices on when and how much to withhold, IRS could  create a form similar to the Employee\u2019s Withholding Certificate, Form W- 4, which employees complete so that employers can withhold the correct  estimated federal income tax from employees\u2019 wages. Workers could  choose to vary the amounts withheld and the frequency of withholding as  long as they met the quarterly estimated tax requirements. Alternatively,  IRS could create guidance similar to what exists for workers who opt-in to  electronically receive tax forms from their companies. Companies could  use the existing procedures for tax withholding on wages paid or for  backup withholding to withhold and remit the taxes to IRS. Companies  would need to develop other design features, such as how they inform  workers about participation.\nIf the withholding is voluntary for companies, any burden is limited to  those companies that choose to participate. For workers who choose to  participate, they would still have the burden of estimating the amount of  taxes owed for each quarter, but their burden to save and remit those  taxes could be reduced. If some workers find that withholding is not  appropriate for them, they could continue to use the existing system for  quarterly tax payments. As long as workers choose withholding amounts  that satisfy these quarterly estimated tax requirements, IRS would not  need to design default percentages or dollar amounts to be withheld.\nWhile withholding could potentially help all types of independent  contractors, voluntary withholding would specifically address some  challenges that platform workers face. For example, platform workers  have had challenges meeting the quarterly estimated tax requirements  when their work is part time or sporadic. Giving workers and the  companies the flexibility to structure tax withholding would better ensure  that these challenges are addressed and the taxes are paid.\nFurthermore, this voluntary withholding regime would help those workers  who choose to participate set aside a sufficient amount of money for  taxes throughout the year, reducing the likelihood of an unanticipated  large tax bill and tax penalty at the end of the year. Tax withholding plays  a critical role in supporting voluntary compliance. IRS\u2019s analysis indicates  that withholding helps induce higher compliance in reporting income;  higher compliance can help to reduce the tax gap\u2014the difference  between tax amounts the taxpayers should have paid and what they paid  voluntarily and on time.\n\n\t\t\tAssess Requiring Companies to Offer Voluntary Withholding to Workers\n\nAnother option we reviewed involved Congress requiring companies to  offer the withholding of taxes for remittance to IRS. That is, the  companies must offer withholding; it would still be voluntary for the  independent contractor to participate. Given that IRS does not currently  allow for voluntary withholding on payments to independent contractors,  we could not determine the need for such a requirement. If IRS  implements withholding that is voluntary for companies, it would have the  opportunity to collect and assess information on the need for such a  requirement. For example, IRS could determine whether workers who  volunteer to participate in withholding are able to better meet their  estimated quarterly tax payments. IRS also could determine whether  companies are offering withholding. If IRS finds that voluntary withholding  bolsters compliance while reducing burden for workers, but that platform  companies are not offering it, IRS could recommend that Congress take  action.\nIn considering which platform companies could be required to offer  voluntary withholding, a starting point would be TPSOs. Focusing the  requirement on TPSOs would likely be less burdensome than on other  platform companies. TPSOs already settle payments to multiple parties;  withholding and remitting taxes to IRS would only be one more type of  payment that the TPSOs would process.\nThis requirement would benefit platform workers who wished to  participate in voluntary tax withholding and who work for TPSOs. More  workers would have the option to have their taxes withheld. Because  worker participation would remain voluntary, the need to determine  default percentages or dollar amounts for withholding could be avoided as  long as the worker met the quarterly requirement for paying estimated  taxes.\nSome stakeholders suggested the option of mandatory withholding for  platform workers to help them avoid a tax penalty. However, mandatory  withholding could be burdensome for workers who need to balance cash  flow and other spending priorities. Additionally, if participation in  withholding is mandated, IRS would need to determine minimum  withholding amounts. Because different businesses involve different  typical expenses, it may be difficult to create an appropriate withholding  rate across all business types. Creating multiple withholding rates for  different types of businesses instead could be complicated and  burdensome.\n\n\tConclusions\n\nThe platform economy is still relatively new but available evidence  suggests that it is growing and presenting tax-related challenges for both  workers and IRS. While IRS has addressed some of these challenges, it  could do more to promote voluntary compliance among platform workers  by further raising awareness and easing taxpayer burden. IRS developed  a communications plan to raise awareness among platform workers of  their tax responsibilities; however, the plan lacks details about how IRS  will monitor stakeholder feedback. Having a process for documenting and  evaluating feedback would help assure that IRS\u2019s communications efforts  are addressing platform workers\u2019 tax-related challenges, even as the  population grows and evolves. Additionally, IRS could better understand  the platform workforce if it had a straightforward way to collect data to  identify platform workers.\nIRS has identified changes to forms, guidance, and other publications that  could make it easier for platform workers to understand which forms apply  to them. However, IRS has not yet taken actions such as adding plain  language to instructions and publications that clearly indicate when a form  applies to a platform worker. Making instructions and publications easier  to understand by adding a simple description could help platform workers  comply with their tax obligations.\nIRS could help ease taxpayer burden by taking steps to increase  information reporting for these workers. Platform companies that act as  TPSOs do not have to report income information on many workers  because reporting thresholds are much higher than what most workers  earn. Amending IRS rules to require such reporting at lower thresholds  would provide workers with more information to comply with their tax  responsibilities and would give IRS additional information to support  enforcement efforts.\nTaxpayer burden could also be eased through a voluntary withholding  program for platform workers. IRS and Treasury have the statutory  authority to take such an action if the Secretary of the Treasury finds that  withholding would be appropriate; however, IRS and Treasury have not  determined whether they intend to pursue it. Voluntary withholding could  help platform workers save and remit their taxes to IRS. This would  address specific challenges platform workers face, such as low or  fluctuating income. Once a voluntary withholding program is created, IRS  would be able to assess its impacts and, if warranted, work with Treasury  on a proposal to Congress to require TPSOs to offer voluntary  withholding on payments for platform workers and other independent  contractors.\n\n\tRecommendations for Executive Action\n\nWe are making the following seven recommendations to IRS:  The Commissioner of IRS should change Schedule C or Form 1099-NEC  so that taxpayers can identify if they received payment for platform work.  (Recommendation 1)\nThe Commissioner of IRS should develop a process for monitoring  feedback on its communications efforts and products tailored for platform  workers, which should include documenting and evaluating feedback.  (Recommendation 2)\nThe Commissioner of IRS should clarify the instructions and publications  for Forms 1040 and 1099-K by adding plain language to clearly indicate  to platform workers that the forms apply to them. (Recommendation 3)\nThe Commissioner of IRS should work with the Secretary of the Treasury  to amend the 6050W \u201ctie-breaker rule\u201d that applies to duplicative reporting  requirements so that payments made through a TPSO\u2019s third party  payment network are reportable under Section 6041, rather than under  Section 6050W. (Recommendation 4)\nThe Commissioner of IRS should work with Treasury to determine what  thresholds would be the most appropriate for payment information  reporting and, if warranted, recommend that Congress adjust the  thresholds. (Recommendation 5)\nThe Commissioner of IRS should work with the Secretary of the Treasury  to implement withholding that is voluntary for companies making  payments for services to platform workers and other independent  contractors who choose to participate. (Recommendation 6)\nThe Commissioner of IRS should assess the impact of withholding that is  voluntary for companies, once implemented, and if warranted, work with  the Secretary of the Treasury on a proposal to Congress that would  require TPSOs to offer tax withholding to platform workers and other  independent contractors who choose to participate. (Recommendation 7)\n\n\tAgency Comments\n\nWe provided a draft of this report to Treasury and IRS for review and  comment. IRS provided written comments, which are reproduced in  appendix III and summarized below. Of our seven recommendations, IRS  agreed to implement or consider two recommendations, said it could not  agree with two recommendations due to other priorities, disagreed with  two, and said it could not implement a recommendation that flowed from  another recommendation. IRS also provided technical comments, which  we incorporated as appropriate.\nIRS agreed to refine its process for monitoring feedback on its  communication efforts and products but was silent on documenting and  evaluating the feedback (Recommendation 2). The value of monitoring  feedback will be minimized unless IRS has a process for documenting  and evaluating it over time. In addition, IRS agreed to consider clarifying  the language in the instructions and publications for Forms 1040 and  1099-K (Recommendation 3). We revised this recommendation by  deleting the word \u201cexamples\u201d from the clarifications to make.\nIRS stated that it could not agree to work with Treasury to (a) amend the  6050W \u201ctie-breaker rule\u201d and (b) determine appropriate thresholds for  payment information reporting and, if warranted, recommend that  Congress adjust the thresholds (Recommendations 4 and 5). For both  recommendations, IRS said it cannot commit to implementation dates  because of higher priority guidance projects, especially in light of the  many new tax provisions enacted by Congress. We acknowledge IRS\u2019s  need to prioritize guidance projects, but we do not understand why it does  not agree to address problems that will persist into the future absent  corrective actions or why IRS believes it cannot agree unless it commits  now to a future implementation date. In fact, IRS stated that it has a long- term guidance project under development for amending the rule to clarify  definitions. IRS said it would consider our recommendation on amending  the rule as it develops its 2020-2021 plan for guidance priorities. As for  our recommendation on determining reporting thresholds, IRS said it is  willing to meet with Treasury officials to discuss the need to analyze the  current thresholds.\nIRS disagreed with our recommendation to change Schedule C or Form  1099-NEC so that taxpayers can identify if they received payments for  platform work (Recommendation 1). IRS said it has no evidence that  platform workers pose a greater compliance risk and that the platform  worker designation, by itself, would not be a selection factor for  compliance actions. We found that IRS has not measured this risk, in  part, because it cannot easily identify the workers. Further, we did not  intend that IRS use the data to initiate compliance against the workers;  our report discussed using the data to identify workers and their reporting  behaviors to improve services and voluntary compliance. IRS concluded  that the additional taxpayer burden and its costs were not warranted at  this time. IRS did not identify the level of burden or costs, and the burden  from checking a box on Schedule C does not seem high. We asked about  the costs to revise the forms to add a checkbox but IRS did not provide  them. As for IRS\u2019s costs to capture the data, we note that IRS\u2019s costs to  transcribe the data would be zero for returns filed electronically. Individual  taxpayers (including platform workers) electronically filed 138 million of  156 million (89 percent) tax returns\u2014which includes the Schedule C\u2014 during 2019. If IRS intends to help these workers become more aware  and reduce their taxpayer burdens to comply, identifying them and their  tax behaviors would enhance those efforts.\nIRS disagreed with our recommendation to work with Treasury to  implement withholding that is voluntary for companies making payments  for services to workers who choose to participate (Recommendation 6).  IRS said that its role is to administer tax law rather than propose tax  policy changes. As we discuss in the report, IRS has the authority to take  this action if the Secretary of the Treasury agrees that the action would  improve tax administration and our recommendation focuses on working  with Treasury officials. IRS also stated that it cannot commit to an  implementation date for publishing guidance on a voluntary withholding  program due to higher priorities, including implementing various COVID- 19 relief programs. As stated above, we do not understand why current  higher priorities would prevent IRS from taking future corrective actions or  why IRS believes it must commit to an implementation date at this time.  We continue to believe that voluntary withholding has potential to improve  compliance and reduce taxpayer burden   Finally, IRS said it would not assess the impact of such voluntary  withholding and thus not work with Treasury on a proposal to Congress  that would require third party settlement organizations to withhold taxes  for workers who choose to participate (Recommendation 7). IRS\u2019s  rationale was that it disagreed with the voluntary withholding  recommendation. As stated above, we believe this proposal has potential  to improve compliance and an assessment would help inform  Congressional deliberations about additional statutory changes that could  enhance tax compliance among platform workers.\nAs 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 copies of this report to the relevant  congressional committees, the Secretary of the Treasury, the  Commissioner of IRS, and other interested parties. In addition, this report  is available at no charge on the GAO website at https:\/\/www.gao.gov.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nYou asked us to review issues related to platform workers and tax  compliance. This report (1) examines what is known about the platform  workforce and what can be done to improve the available Internal  Revenue Service (IRS) data, (2) identifies challenges platform workers  face complying with federal tax obligations, (3) assesses IRS actions to  promote tax compliance among this population, and (4) assesses  additional options to promote tax compliance.\nThis sector and its workers are referred to by different names including  sharing, on-demand, gig, and platform. We selected the term platform  because it was the most comprehensive and relevant to online work  arrangements. For example, neither sharing nor gig communicates that  the work could be full time and for income. Platform worker also clearly  communicates that workers are using an online app or other platform to  find and secure work. While platform workforce does not have a standard  definition, for the purposes of this report we defined it as workers who  provide goods or services to customers through an online platform  operated by a company that facilitates the match, transaction, and  payment.\nTo identify what is known about platform workers, we conducted a  literature review of peer-reviewed material; trade and industry articles;  government reports; conference papers; general news; association,  nonprofit, and think tank publications; hearings and transcripts; and  working papers that described the platform economy in the United States  and related tax issues. We searched publication databases such as  Proquest and Dialog for keywords like gig, contingent, sharing, or  platform, and tax, IRS, or compliance to identify studies that were relevant  to our research objectives.\nWe also conducted semistructured interviews with selected stakeholders  and reviewed documents provided by them to obtain information on and  descriptions of platform workers. Through these interviews, we obtained  stakeholder views on (1) the use of the term \u201cplatform workforce,\u201d (2) its  size and composition, (3) workers\u2019 understanding of and compliance with  tax obligations, and (4) federal, state, and private-sector-level efforts and  policy proposals to help workers comply with their tax obligations.\nWe conducted close to 30 interviews with knowledgeable individuals that  we selected to represent varied areas of expertise and perspectives  including Department of the Treasury and IRS officials; academics and  other researchers; state government tax and revenue officials from the  Massachusetts Department of Revenue, the California Franchise Tax  Board, the Maryland Department of Labor & Regulations, and the  Vermont Department of Taxation; private-sector and nonprofit tax  preparers; tax software developers; and platform company  representatives and workers. We interviewed representatives from four  companies\u2013Airbnb, Thumbtack, Etsy, and eBay; and two representatives  from professional associations, Technet and Internet Association, that  include platform companies among their members. Company  representatives from Uber, Lyft, Taskrabbit, Upwork, Snag, and  Postmates participated in the Technet group interview. We also  interviewed representatives from organizations that work directly with  platform workers such as the Freelancers Union, Center on Budget and  Policy Priorities and Creating Assets, Savings and Hope Campaign of  Maryland, National Association of Self-Employed, and the Independent  Drivers Guild (IDG). IDG also set up 30-minute phone calls for us with five  full-time drivers who use mobile apps to connect with customers.\nWe were also invited to attend a panel from the National Academies of  Science on the platform workforce. The panel included experts from the  Aspen Institute, JP Morgan Chase, the Federal Reserve Board, the  Census Bureau, and various think tanks and universities.\nWe identified potential interviewees through a literature search, and  recommendations from our initial interviews. We selected interviewees  based on their relevance to the scope of our review. We also aimed for  balance between those who could serve as a proxy specifically for low- income platform workers, and those who work with people across the  income spectrum. Although the results of these interviews are not  generalizable to the views of all stakeholders, they still provide important  insight into and illustrative examples of the challenges platform workers  face understanding and complying with federal tax obligations.\nTo assess IRS actions to promote tax compliance, we reviewed IRS  research on the platform workforce and other documents describing  current and planned actions to identify taxpayers who are platform  workers and to promote their tax compliance, including the Gig Economy  Compliance Strategy. We also interviewed IRS officials from the Small  Business\/Self-Employed Division; Research, Applied Analytics, and  Statistics Division; Communications & Liaison Office, including officials  from the Offices of Online Services and Tax Outreach, Partnership, and  Education; and the Office of Chief Counsel about their efforts to develop,  implement, and assess the impact of the new strategy. We identified  criteria for assessing elements of IRS\u2019s strategy such as its research,  communication materials, and evaluation plan. We based these criteria  on Standards for Internal Control in the Federal Government and leading  practices for designing web materials to improve the user experience.  The relevant internal control principles focus on information and  communication and monitoring. The leading practices posted at  usability.gov describe principles for creating a meaningful and valuable  online user experience.\nTo assess options to promote tax compliance, we identified options from  our literature review and our interviews of stakeholders and selected  those that were commonly cited as potential solutions for the challenges.  We then sent 39 stakeholders a list of the potential solutions to solicit  their views on these options, including whether they supported or  opposed the option. Twenty-eight stakeholders, including those from  academia, the research sector, government, platform companies, tax  preparation firms, and worker advocacy, provided their views. We  analyzed their responses to help us identify strengths, weaknesses, and  other considerations associated with each option. We also assessed each  option using \u201ccriteria for a good tax system\u201d described in our prior work.  These criteria state that a good tax system should be equitable,  economically efficient, and simple, transparent, and administrable. We  focused on whether individual options would increase simplicity by  reducing compliance burden; enhance transparency by helping taxpayers  better understand their tax obligations; and improve tax administration by  helping IRS more effectively collect taxes. We found that the available  data and research for some options did not support a full assessment of  the pros and cons that might be offered by the option. We describe these  options in appendix II.\nWe conducted this performance audit from February 2019 to May 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.\n\nAppendix II: Other Options to Help Platform Workers Comply with Their Federal Tax Obligations\n\nOne set of options we identified focused on simplifying aspects of the tax  system to help platform workers comply with their tax obligations. For all  of them, sufficient evidence did not exist on how the option would be  designed or on the tradeoffs such as costs and benefits. Some of the  options require legislative action, and other options could be costly for the  Internal Revenue Service (IRS) to implement. Balancing the pros and  cons is a policy decision for IRS and the Department of the Treasury  (Treasury) or Congress to make and more research would be needed.  The following discusses our analyses of these options including what  information would be needed to design the option and compare the  tradeoffs.\n\n\tCreate a Standard Business Deduction\n\nAccording to some stakeholders, properly tracking and deducting  expenses from gross income can be burdensome for self-employed  workers, including platform workers. A common feature of platform work  is using an asset, such as a car or house, for personal and business use;  for example, a car owner may use his or her personal car for occasional  ride-hailing work. Stakeholders and several articles from our review  discussed how the rules for apportioning expenses for personal and  business use and determining which ones are deductible can be  complicated, especially for part-time or short-term drivers or renters.\nSome stakeholders as well as some articles mentioned that Congress  could consider creating a standard business deduction that platform  workers could use. Platform workers, especially those who may not have  the necessary knowledge or experience, may not track all eligible  business deductions and overpay income and self-employment taxes.  They may improperly overstate their expense deductions to offset  income, contributing to the tax gap. Creating a standard business  deduction could reduce the complexity associated with the current  system.\nHowever, different businesses involve different expenses, and it may be  difficult to create an appropriate standard deduction across all business  types. Creating multiple standard deductions for different types of  businesses could be complicated and burdensome, and could ultimately  reduce tax revenue if the standard deduction exceeds actual expenses  for many platform workers. Additionally, a standard business deduction  limited to only platform workers would be difficult to design because no  regulatory or statutory definition of the term platform worker exists.  Further, providing the standard deduction option only for platform workers  would raise disparate treatment concerns. Given the limited data on the  number and tax reporting characteristics of platform workers, we could  not analyze the potential benefits and costs of creating a standard  deduction.\n\n\tRequire Platform Companies to Inform Workers about Federal Tax Obligations\n\nBecause platform workers may be unaware of their federal tax  obligations, Congress could consider requiring platform companies to  inform workers who are classified as independent contractors about their  tax obligations. While platform companies may incur some burden to  inform platform workers, some could leverage existing processes to  inform their workers. For example, when platform companies hire such  workers, they could inform them about their tax obligations.\nOfficials at platform companies we contacted raised concerns about the  legal risks for them to develop the information provided to the workers.  Platform companies would not necessarily need to develop the  information provided. IRS developed a one-page publication that platform  companies could provide to workers to inform them about tax obligations  (see fig. 4). The publication is available in an electronic format for sharing  with workers.\nHowever, no statutory or regulatory definition of a platform company  exists. Without a definition, IRS could not equitably enforce the  requirement. Alternatively, the requirement to provide the information  could be limited to third party settlement organizations (TPSO) which  have been defined. However, even a well-designed requirement could  have limited impact on awareness. IRS is collaborating with partners such  as platform companies to better inform workers about their tax  obligations. To the extent that this collaboration as well as other IRS  actions help make workers more aware, Congress may not need to  consider requiring platform companies to inform their workers.\n\n\tRequire Platform Companies to Provide Expense Information\n\nCongress could require platform companies to provide available payment  and expense information to platform workers who are independent  contractors. Multiple stakeholders suggested that sharing this information  is a best practice for raising awareness and helping workers comply with  tax obligations.\nSome platform companies already provide a dashboard to workers  showing total payments and other data, like miles driven. Platform  companies have visibility over the full range of payments and some  expenses for workers. While some companies would be providing data or  providing online access to data that they already have, requiring  information-sharing may increase their administrative burden to at least  some extent.\nHowever, we did not find information on how much more burden would be  created, which could vary based on the type of platform company.  Further, given no statutory or regulatory definition of a platform company,  a legal definition would need to be created or the requirement to provide  the information could be limited to a subset of companies, such as  TPSOs.\nBecause several prominent platform companies already provide expense  information, Congress may not need to add a legal obligation on the  companies. We did not find sufficient evidence to show that this legal  requirement would benefit most platform workers. Likewise, IRS  considered adding information to its website encouraging platform  companies to provide available payment and expense information their  workers, but decided not to do so. IRS officials explained that many  platform companies are already providing workers with this information.  They also expressed concerns that platform workers might rely on this  information, and not maintain their own records, which could cause  challenges if platform companies do not track all available expenses or  income. According to IRS officials, they will continue to update the  website to include tips for platform companies to help workers comply  with their tax obligations.\n\n\tClarify Form 1099-K Definition of Gross Amount\n\nThe Internal Revenue Service Advisory Council (IRSAC) found that the  definition of \u201cgross amount\u201d for reporting purposes on Form 1099-K  includes items that are not part of the economic transaction between the  purchaser and the seller or service provider. This includes refunds, fees,  discounts, and other items. IRSAC recently recommended that the  definition of \u201cgross amount\u201d for the purposes of reporting on Forms 1099- K should exclude these items, which are not taxable income for the  platform worker, and include only payments to the workers for their  service.\nIRS officials have identified some practical drawbacks to implementing  this proposal. For example, determining what is includable and what is  excludable from the \u201ceconomic transaction\u201d can vary from industry to  industry and from taxpayer to taxpayer. Depending on the industry or  activity, the gross transaction amount may not be itemized to specify what  is included; for example, many payment settlement entities would not  know whether sales tax is included in a transaction amount. IRS officials  stated that it is not clear whether this proposal would provide any value to  the worker or IRS given the variations.\n\n\tMake Electronic Delivery of Forms 1099 the Default\n\nIRS could work with Treasury to allow for electronic delivery of Forms  1099 by default. The default delivery method is mail, and workers must  opt-in to receive forms electronically. When a worker receives the form  electronically, the worker may receive an email notification that the  electronic form is available for download in a secure online account.  Platform company officials with whom we spoke said sending forms by  mail can be burdensome due to mailing costs and the costs of finding  accurate mailing addresses. However, they generally have accurate email  addresses because that is how they exchange information with platform  workers. Allowing electronic delivery of Forms 1099 by default could  reduce the burden for companies, while ensuring that more workers  receive their forms.\nHowever, new rules would be needed to ensure that workers are easily  able to opt-out of electronic delivery, and receive the forms on paper if  they wish. We were not able to collect sufficient data on the cost or  savings for companies and barriers for workers.\n\nAppendix III: Comments from the Department of the Treasury\n\nAppendix IV: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nJames R. McTigue, Jr. (202) 512-9110, mctiguej@gao.gov  Key contributors to this report include: Julie Anderson, Rob Gebhart,  Sarah Gilliland, Gina Hoover, Jesse Mitchell, Ed Nannenhorn, Jessica  Nierenberg, Robert Robinson, Eden Savino, Tom Short, AJ Stephens,  and Peter Verchinski.","output":null}
{"id":"crs_R45986","pid":"crs_R45986_0","input":"\tIntroduction\n\nPer- and polyfluoroalkyl substances (PFAS) are a large, diverse group of fluorinated compounds that have been used in numerous commercial, industrial, and U.S. military applications. Among other uses, PFAS have been used in fire-fighting foams and in the processing and manufacture of many commercial products (e.g., nonstick cookware, stain- and water-resistant fabrics). PFAS are persistent in the environment, and studies of several PFAS suggest that exposures above certain levels may lead to adverse health effects. \nDetections of PFAS contamination in drinking water and the environment, have increased in recent years with the availability of new analytical methods and increased monitoring. PFAS\u00e2\u0080\u0094primarily perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS)\u00e2\u0080\u0094have been detected in soil, surface water, groundwater, and public water supplies in numerous locations. These detections have been associated primarily with releases from manufacturing and processing facilities, and from U.S. military installations and other facilities that use firefighting foams (e.g., civilian airports and fire departments). These detections have prompted calls for increased federal action and authority to prevent and mitigate exposures to PFAS. \nFederal actions to address potential health and environmental risks of exposure to PFAS have been taken primarily under the authorities of the following federal statutes: \nToxic Substances Control Act (TSCA); Safe Drinking Water Act (SDWA); and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and related U.S. Department of Defense (DOD) response authorities. \nThe U.S. Environmental Protection Agency (EPA) has used the authorities of these three statutes to take most of its actions to address potential risks of PFAS. DOD and other federal agencies have also used CERCLA authorities to respond to releases of various PFAS at federal facilities. Some federal actions have involved the private sector in complying with reporting and other requirements. Other actions have involved voluntary measures taken by some companies. \nAlthough the federal government has taken a range of actions to address PFAS exposure, policymakers and stakeholders have urged federal agencies to act more quickly and broadly. For instance, some are calling for EPA to issue enforceable drinking water standards for some or all PFAS. Others want EPA to designate all PFAS as hazardous substances (and thus establish liability for responsible parties to pay response costs). \nMultiple bills introduced in the 116 th Congress would require EPA or other agencies to take various actions under existing law or would create new authorities. Some of these bills are incorporated into the House-passed and Senate-passed versions of the National Defense Authorization Act for FY2020 ( H.R. 2500 and S. 1790 ). For example, among other PFAS provisions, H.R. 2500 would establish liability for PFAS response costs through designation of PFAS as hazardous substances under CERCLA and also indirectly through listing PFAS as toxic pollutants under the Clean Water Act, whereas S. 1790 would expand DOD statutory responsibilities for response actions to include releases of any other pollutant or contaminant without establishing enforceable liability under CERCLA for such chemicals. S. 1790 also would direct EPA to issue drinking water standards for PFAS and to take various actions for other purposes. Bills related to the topics covered in this report are noted where relevant in the discussions, and these and other related bills are identified in this report in Table 2 .\nThis report focuses on federal authorities under which EPA and other agencies have taken actions to address potential risks of PFAS. It does not discuss other laws under which EPA or other agencies may take additional actions, or actions under state laws. The report begins with a brief discussion of the chemical properties, uses, and varying risks of PFAS, followed by discussions of federal actions, relevant legislation enacted in the 115 th Congress, and relevant legislation in the 116 th Congress.\n\n\tProperties and Uses of PFAS\n\nPFAS are a large group of synthesized chemical compounds that do not occur naturally. Chemical manufacturers have produced various types of PFAS for a range of commercial, industrial, and U.S. military applications since the 1940s. EPA identifies over 1,200 PFAS manufactured in the United States over time. The specific types and quantities of PFAS produced and used have varied over time and continue to change. \nPFAS are not a single chemical or a single compound, but refer to a group of compounds that share similar chemical structures. Any compound that has the chemical structure of at least one carbon atom attached to two or more fluorine atoms, or a chain of at least two carbon atoms attached to two or more fluorine atoms, may be considered a PFAS. Individual PFAS vary in terms of the numbers of fluorinated carbon atoms. The extent to which a chain of carbon atoms is fluorinated would determine whether a chemical may be considered a perfluoroalkyl substance or a polyfluoroalkyl substance. Given the possible variations in the length of the carbon chain, number of fluorinated carbon atoms, and other atoms attached to the chain, PFAS potentially could include thousands of chemical compounds if every possible combination were created. \nIndustry and government sources indicate that manufacturers have focused on producing PFAS with longer fluorinated carbon chains, primarily because they reduce the surface tension of liquids and resist heat. Some longer chain PFAS have been used in chemical manufacturing processes to produce fluoropolymers designed for multiple consumer uses, including\nnon-stick and heat-resistant coatings for cookware and food packaging, and treatment of clothing, leather, and other materials for soil, stain, and water resistance.\nIn some cases, PFAS may be used only as a processing aid to create a fluoropolymer-based product, and in other cases, PFAS may be a constituent in the resulting product. Fluoropolymer-based products may therefore contain varying amounts of PFAS depending on the manufacturing process. Fluoropolymers containing specific types of PFAS may also break down into other PFAS depending on the conditions. \nSome PFAS have also been used as an ingredient in a variety of products, including \nfire suppressants in Aqueous Film Forming Foam (AFFF) used by U.S. military installations, other federal agencies, civilian airports, and local fire departments as Class B agents to extinguish petroleum-based liquid fuel fires; and suppressants of oxidizing mist in industrial metal plating operations.\nSuch products generally contain relatively small concentrations of PFAS that require further dilution of the product for its intended use. For example, AFFF products that contain PFAS are designed to be diluted with water in their application to form an aqueous film that restricts oxygen to extinguish petroleum-based liquid fuel fires.\nPerfluorooctane sulfonate (PFOS), perfluorooctanoic acid (PFOA), and certain other related perfluoroalkyl substances accounted for most of the historical production of PFAS prior to their phase-out, discussed below in \"Regulation of PFAS in Commerce under TSCA.\" Manufacturers have transitioned away from these longer chain PFAS because of their potential toxicity and environmental persistence. Policymakers and stakeholders have continued to raise questions about the relative toxicity and persistence of shorter chain or less fluorinated PFAS in comparison to longer chain PFAS. Some policymakers and stakeholders have also expressed concern about the continued use and disposal of existing stocks of longer chain PFAS and products containing these chemicals, including the disposal of AFFF stocks by the federal government, civilian airport operators, and local fire departments, as they move to alternative firefighting foams.\n\n\tChallenges in Assessing Potential Risks\n\nSimilar to other commercial chemicals, releases of PFAS may occur in multiple ways that could result in exposures. PFAS may be released from \nchemical manufacturing or processing operations; intended uses (such as the application of AFFF as a fire extinguishing agent); disposal of products or wastes containing these chemicals; or accidental spills or other unexpected incidents.\nOccupational exposures may occur among workers in facilities that manufacture or process PFAS, among workers that use products containing these chemicals (such as firefighters that use AFFF), or among workers involved in disposal. \nExposures among the general public would depend on whether a release may move through the environment in a manner that an individual could come into contact with these chemicals. Exposures may also occur among individuals who use a product containing these chemicals. As with any chemical, potential risks to human health and the environment would depend on the properties of the specific PFAS, the conditions under which exposure may occur, and the characteristics of the exposed individual.\nHow PFAS interact in the environment and in humans or animals would vary depending on the structure, toxicity, persistence, and other properties of the individual chemical. The breakdown rate of a particular chemical once released would determine how long it persists before reacting with other chemicals in the environment or in a human or animal that would produce new chemicals with different properties. Although some have characterized PFAS as \"forever chemicals,\" persistence varies among longer chain versus shorter chain PFAS, and among more fluorinated versus less fluorinated PFAS. Toxicity and potential health effects may also vary. Whereas persistence would affect how long the properties of the chemical remain intact, the potential risks associated with exposure would depend on the toxicity of the specific chemical, the exposure pathway and other exposure factors. Given this variability, evaluating the potential risks of all PFAS as a singular category presents scientific (and regulatory) challenges. \nSimilarly, regulating all PFAS as a singular category would present challenges in developing a singular risk-based standard (i.e., a singular concentration level). Because of the diversity of the potential universe of these chemicals, designating all PFAS as a singular category for regulatory or reporting purposes would also present challenges in implementation to identify which chemicals would be subject to applicable requirements.\nStudies of the potential human health and environmental effects of PFAS have focused on PFOA, PFOS, and certain other longer chain perfluoroalkyls because of their more predominant manufacture and use. Fewer studies have examined shorter chain perfluoroalkyls or polyfluoroalkyls. Although scientific understanding of the potential risks of these chemicals has been evolving, uncertainties remain about health effects that may be associated with exposures to various PFAS. Much of the attention among policymakers, stakeholders, and the general public has focused on drinking water sources. Studies of these chemicals have mostly focused on drinking water or contaminated food sources. Less is known about risks that may be associated with other exposure pathways, such as dermal contact or inhalation. \nThe Agency for Toxic Substances and Disease Registry (ATSDR) and EPA have developed guidelines for assessing chemical exposure risks under various agency programs. The National Research Council of the National Academy of Sciences has also established risk assessment guidelines and has examined some of the challenges, such as uncertainty stemming from data quantity and quality. Each of these guidelines outlines factors to evaluate potential risks that may be associated with exposure to a specific chemical, including \ntoxicity and other properties of the chemical; frequency, concentration, and duration of exposure (i.e., the dose); pathway of exposure (e.g., inhalation, ingestion, or skin contact); interaction with other chemicals that may be present in the environment; and age, overall health, and genetic and behavioral characteristics of the exposed individual.\n\n\tFederal Actions to Address Potential Risks of PFAS\n\nFederal actions to address potential risks from PFAS have primarily been taken under the authorities of TSCA, SDWA, and CERCLA. Most of these actions have focused on PFOS and PFOA, because of predominant past uses, prevalence in the environment stemming from these uses, and the greater availability of scientific research on potential health effects than for other PFAS. Congress has also authorized specific federal actions in separate legislation. See the section on \" Relevant Legislation Enacted in the 115th Congress \" for a list of these laws.\nEPA has taken actions under TSCA over the past few decades to gather and assess existing information on the risks of PFOS, PFOA, and certain other PFAS. Based on the findings, TSCA authorizes EPA to require manufacturers to submit more information if needed to further evaluate potential risks, and the agency has done so. EPA has also required, or worked with, manufacturers to develop new information when existing information on a substance is insufficient to evaluate the risks. If EPA determines that the risks would meet the statutory threshold of \"unreasonable\" under TSCA, TSCA authorizes EPA to establish various regulatory controls if no other statute addresses the risks. EPA has not rendered a finding of unreasonable risk for any PFAS to date.\nFollowing a series of voluntary industry phase-outs in the United States for the manufacture of PFOS, PFOA, and other related substances, EPA used TSCA authority to promulgate multiple significant new use rules (SNURs) that require manufacturers to notify the agency prior to reintroducing these substances into commerce. TSCA also requires manufacturers to notify EPA of the intent to produce any new PFAS. When information on potential risks is insufficient, EPA has issued orders that restrict the manufacture, processing, distribution, use, disposal or any combination of these activities pending the development of new information on risks. EPA has used information on PFAS gathered under TSCA to inform its actions under SDWA and CERCLA. \nFor over a decade, EPA has been evaluating PFOA and PFOS under SDWA to determine whether an enforceable Maximum Contaminant Level (MCL) for drinking water provided by public water systems may be warranted. EPA has also included four other PFAS among emerging contaminants being evaluated for potential regulation under SDWA. In 2009, EPA issued provisional health advisories for short-term exposures to PFOA and PFOS in drinking water. In 2016, EPA issued additional health advisories for exposures to these chemicals in drinking water over an individual's lifetime. These health advisories are not enforceable standards for public water systems. However, SDWA grants EPA \"emergency powers\" to issue enforceable orders to abate an imminent and substantial endangerment to health from a contaminant in drinking water\u00e2\u0080\u0094whether or not the contaminant is regulated under the act. EPA has issued such orders at certain sites where releases of PFOA or PFOS have threatened drinking water sources.\nEPA and other federal agencies have also responded to releases of PFAS under CERCLA. DOD administers the vast majority of federal facilities where PFAS has been detected. DOD has been responding to releases of PFOA and PFOS from the use of AFFF at active and decommissioned U.S. military installations under the Defense Environmental Restoration Program. DOD has been phasing out the use of AFFF that contains PFOA or PFOS to reduce the risks of future releases. EPA has responded to releases of PFOA and PFOS under the Superfund program at some sites located on non-federal lands, in coordination with the states in which these sites are located. Sites addressed under the Superfund program have varied in terms of manufacturing or uses of PFAS.\nIn February 2019, EPA issued a PFAS Action Plan that established an administrative framework for multiple planned actions under TSCA, SDWA, CERCLA, and other related authorities, including \ndetermining whether to establish an MCL for PFOA and PFOS; proposing SDWA monitoring for additional PFAS under the fifth Unregulated Contaminant Monitoring Rule (UCMR5); proposing the designation of PFOA and PFOS as hazardous substances under CERCLA (or other related laws that trigger such designation); developing \"groundwater cleanup recommendations\" to guide decisions at Superfund sites and federal facilities under CERCLA (proposed in April 2019); proposing additional SNURs under TSCA for potential new uses; taking enforcement actions \"as appropriate\" under available authorities; and developing toxicity values and other risk assessment tools to inform decisions under multiple statutes.\nThe status of federal actions to address potential risks of PFAS under TSCA, SDWA, CERCLA, and other related authorities are discussed in greater detail below.\n\n\t\tHealth Effects Studies\n\nEPA and other federal agencies have been evaluating potential human health effects that may be associated with exposures to various PFAS. These agencies have revised some of their findings over time to reflect the developing scientific literature. EPA has gathered information about certain PFAS from manufacturers and others to evaluate whether regulation is warranted under TSCA. EPA has also been evaluating whether regulation is warranted under SDWA, and whether response actions are warranted under CERCLA at sites where certain PFAS have been released into the environment.\nEPA has reported that studies of exposures to PFOA and PFOS in laboratory animals have identified reproductive and developmental, liver and kidney, and immunological effects, and that exposures to both chemicals have caused tumors in laboratory animals. EPA has also referenced human epidemiology studies observing increased cholesterol levels among exposed populations, with more limited findings related to infant birth weights, effects on the immune system, cancer (for PFOA), and thyroid hormone disruption (for PFOS). Although some studies have identified potential cancer risks, EPA has not classified any PFAS as a likely or known human carcinogen. \nOther federal agencies have also been evaluating the risks of certain PFAS. The Centers for Disease Control and Prevention (CDC) has collected blood serum levels and other biomonitoring data from individuals selected for a long-term study of the prevalence of exposures to a range of chemicals, including several PFAS. The ATSDR, National Institute of Environmental Health Sciences (NIEHS), and the interagency National Toxicology Program (NTP), have also been researching potential health effects that may be associated with exposures to certain PFAS. Although the roles of these agencies are not regulatory, data and findings of these studies may be used to inform regulatory decisions of other federal or state agencies.\nThe following sections discuss the CDC biomonitoring program, ATSDR studies of the toxicological properties of certain PFAS, ATSDR site-specific studies, and related joint CDC\/ATSDR studies. EPA's actions to evaluate PFAS are discussed in \"Regulation of PFAS in Commerce under TSCA,\" \"Regulation of PFAS and Other Actions under SDWA,\" and \"Environmental Remediation.\"\n\n\t\t\tCDC Biomonitoring\n\nFor two decades, CDC has collected biomonitoring data for multiple environmental chemicals from a group of randomly-selected individuals intended to be representative of the general U.S. population. These data have included blood serum levels for PFOA and PFOS and 14 other PFAS. This effort is part of the National Health and Nutrition Examination Survey (NHANES). The biomonitoring data that CDC has collected generally indicate that blood serum levels for the selected group of perfluoroalkyl substances among participating individuals declined between 1999 and 2016 (the most recent year for which biomonitoring data are available for these specific chemicals). Declining blood serum levels for a particular chemical generally indicate reduced exposures. CDC tracks the biomonitoring data by age group, gender, and race\/ethnicity, but not occupation. CDC cautions that \"finding measureable amounts of PFAS in [blood] serum does not imply that the levels of PFAS cause an adverse health effect.\" The likelihood that a specific amount of PFAS in blood serum may be associated with an adverse health effect requires further study. The actual levels of PFAS in blood serum among the broader U.S. population is also uncertain, as the sample size is relatively small.\n\n\t\t\tATSDR Draft Toxicological Profile\n\nSection 104(i) of CERCLA authorizes ATSDR to prepare toxicological profiles for hazardous substances, pollutants, or contaminants found at contaminated sites that warrant federal attention. Over the last decade, ATSDR has issued three draft Toxicological Profiles for perfluoroalkyls (i.e., perfluoroalkyl substances) to identify potential health effects that may be associated with exposures to certain chemicals within this group of compounds. ATSDR typically issues drafts for public comment prior to finalizing a Toxicological Profile for an individual chemical or a group of chemicals. ATSDR has produced multiple drafts for perfluoroalkyls without issuing a final version so far, reflecting continuing developments in the scientific literature. ATSDR issued its first draft Toxicological Profile for perfluoroalkyls in May 2009, its second draft in August 2015, and its third draft in June 2018.\nFor its third draft, ATSDR determined that sufficient scientific information was available to evaluate 14 perfluoroalkyls, including PFOA and PFOS. ATSDR observed that scientific studies of this group of perfluoroalkyls have focused mostly on risks associated with ingestion, and less on inhalation or skin contact (i.e., dermal exposure). ATSDR determined that scientific information was sufficient to establish provisional ingestion Minimal Risk Levels (MRLs) for four of these 14 perfluoroalkyls:\nPFOA, PFOS, perfluorohexane sulfonic acid (PFHxS), and perfluorononanoic acid (PFNA).\nATSDR proposed the following values for these MRLs in milligrams per kilograms per day (mg\/kg\/day) to quantify an intermediate exposure level (i.e., daily exposure from 15 to 364 days) for each chemical that accounts for variance in bodyweight among exposed individuals.\nPFOA (3 x 10 -6 mg\/kg\/day or 0.000003 mg\/kg\/day) PFOS (2 x 10 -6 mg\/kg\/day or 0.000002 mg\/kg\/day) PFHxS (2 x 10 - 5 mg\/kg\/day or 0.00002 mg\/kg\/day) PFNA (3 x 10 -6 mg\/kg\/day or 0.000003 mg\/kg\/day)\nThese values are smaller than in previous draft Toxicological Profiles and are among the smallest MRLs for the body of chemicals that ATSDR has evaluated. Smaller values generally indicate greater toxicity in comparison to chemicals with larger values, given the same exposure. Although the proposed MRLs for the PFAS referenced above are relatively small, the values are based on conservative assumptions and incorporate uncertainty factors. The value of an MRL alone therefore does not necessarily indicate conclusiveness of the level of risk.\nMRLs are estimates of daily human exposure to a chemical that is not expected to present an appreciable risk of adverse non-cancer health effects over a specified route (i.e., pathway) and duration of exposure. MRLs are intended to serve only as screening levels to identify sites that warrant further evaluation to determine whether actions may be needed to mitigate risks. Some stakeholders have characterized the proposed MRLs as recommended standards for regulation or site remediation. However, ATSDR emphasized in its June 2018 draft that \"MRLs are not intended to define clean-up or action levels.\"\nAlthough some perfluoroalkyls have been detected in ambient air at certain locations, ATSDR noted in its June 2018 draft that scientific information on exposure through inhalation is relatively limited. ATSDR concluded that the data were insufficient to establish provisional MRLs for inhalation exposures for any of these 14 perfluoroalkyls. \nIn its June 2018 draft, ATSDR also noted that findings from epidemiological studies that examined potential associations between serum PFAS levels and the occurrence of adverse health effects were not consistent across studies. ATSDR examined a range of epidemiological studies, including those in which reported serum PFAS levels were hundreds or thousands of times that of the general population. Because the findings of epidemiological studies were inconsistent, ATSDR relied on animal studies to calculate provisional MRLs. \n\n\t\t\tATSDR Site-Specific Studies\n\nUnder Section 104(i) of CERCLA, ATSDR has also conducted or funded multiple site-specific studies to examine potential health effects where certain PFAS were released into the environment. State health departments performed some of these studies through cooperative agreements with ATSDR. These studies have focused on sites where PFOS, PFOA, and various other PFAS were manufactured, used, or disposed. ATSDR reports that the agency or a state health department has conducted site-specific studies for more than 20 sites across the United States. Some of these sites are federal facilities, such as U.S. military installations, whereas other sites are privately owned.\n\n\t\t\tJoint CDC and ATSDR Studies\n\nIn addition to ATSDR site-specific studies under CERCLA, Congress has authorized CDC and ATSDR to conduct joint scientific studies to better understand the potential risks associated with exposure to PFAS. Subject to annual appropriations, Section 316 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ), as amended, authorizes CDC and ATSDR to conduct a joint study in consultation with DOD on the \"human health implications\" from potential exposure in \"drinking water, ground water, and any other sources of water and relevant exposure pathways.\" Using appropriations made available to CDC and ATSDR for the joint study, the agencies have worked to develop procedures and methods for studying potential health risks at sites with PFAS contamination. In April 2019, ATSDR announced that it would fund epidemiological studies at multiple sites. Section 316 also authorizes CDC and ATSDR to conduct exposure assessments at no fewer than eight current or former U.S. military installations where PFAS contamination has been discovered in drinking water, groundwater, or any other sources of water, and relevant exposure pathways. In February 2019, CDC and ATSDR announced the selection of eight military installations for such exposure assessments. \n\n\t\tRegulation of PFAS in Commerce under TSCA\n\nEPA's PFAS Action Plan includes over 1,200 PFAS out of approximately 85,000 chemicals in the inventory. EPA added some of these PFAS to the inventory soon after the original enactment of TSCA in 1976, and added others over time as manufacturers notified the agency of the intent to introduce these PFAS into commerce. EPA reports that over 600 of these PFAS were produced in the United States between 2006 and 2016.\nUsing the information gathering authorities of TSCA, EPA has obtained information on the risks of various PFAS to assess if such risks may be unreasonable to warrant regulation under the statute. In 2000, the sole manufacturer of PFOS and related perfluoroalkyl sulfonate chemicals (3M) reported to EPA that information it had obtained on the potential risks of these chemicals justified a voluntary phase-out of their production. The phase-out occurred over several years. In 2006, EPA reached an agreement with a group of manufacturers that produced PFOA and related perfluoroalkyl carboxylate chemicals for the voluntary phase-out of these chemicals over a ten-year period. \nSubsequent to each phase-out, EPA promulgated \"significant new use rules\" (SNURs) under Section 5(a)(2) of TSCA to require any manufacturer to notify the agency before reintroducing these chemicals into commerce for historical uses. Promulgating SNURs for phased-out uses of existing chemicals is not uncommon. EPA also promulgated SNURs to require notification of entirely new uses of existing PFAS. SNURs give EPA the opportunity to evaluate risks associated with planned uses before they occur.\nUnder Section 5(a)(1), EPA has also continued to evaluate the risks of new chemicals, including new PFAS, as manufacturers have notified the agency of their intent to produce new chemicals. For some premanufacture notices, EPA has determined that the submitted information is not sufficient to assess whether risks associated with a new PFAS may be unreasonable. In such instances, EPA has issued orders under Section 5(e) to require the manufacturer to produce new information on the chemical. EPA has also used Section 5(e) orders to place restrictions on a new PFAS until the manufacturer submits the requested information to EPA.\nSection 6 of TSCA authorizes EPA to establish regulatory controls on any stage of the lifecycle of a chemical (i.e., manufacture, processing, distribution, use, and disposal) only if such controls would be necessary to mitigate \"unreasonable risk of injury to health or the environment.\" To date, EPA has not rendered such finding of unreasonable risk for any PFAS to warrant regulatory controls under Section 6. \n\n\t\t\tVoluntary Industry Phase-Out\n\nChemical manufacturers may choose to phase-out the production of a chemical as a business decision. Following negotiations with EPA, 3M\u00e2\u0080\u0094the sole manufacturer of PFOS and related perfluoroalkyl sulfonate chemicals\u00e2\u0080\u0094announced a voluntary phase-out of these chemicals in 2000 based on risk information that it had gathered. Pursuant to Section 8(e) of TSCA, the manufacturer had submitted this information to EPA after it determined that the information met the statutory criteria for reporting. In 2006, EPA initiated the PFOA Stewardship Program with eight major manufacturers to reduce the extent to which PFOA and related perfluoroalkyl carboxylate chemicals enters the environment by 95% below 2010 levels and to completely phase-out the manufacture of these chemicals by 2015. In 2017, EPA announced that all eight manufacturers had met their phaseout goals. \n\n\t\t\tInformation Gathering\n\nTo evaluate chemicals for potential regulation, other provisions of Section 8 also authorize EPA to gather existing information from manufacturers, processors, and distributors. For example, EPA has used Section 8(a) to gather information on manufacturing volumes of PFAS above particular thresholds at chemical manufacturing facilities. Under Section 8(d), EPA has required that chemical manufacturers, processors, and distributors submit lists of health and safety studies related to PFAS to the agency.\nIf EPA finds that existing information is insufficient to evaluate risks, Section 4 of TSCA authorizes EPA to require manufacturers or processors to test a chemical and submit the findings to the agency. In 2005, EPA determined that existing information on fluoropolymers and other fluorinated compounds that contain PFOA and related chemicals was insufficient to assess potential environmental effects. To obtain new information, EPA entered into Section 4 consent orders with two industry organizations requiring them to test various PFAS-containing resins, dispersions, paper, and textiles for environmental effects. In 2015, EPA concluded that the testing data were sufficient at that time to determine that these uses were unlikely to present unreasonable risks. \nEPA has promulgated multiple SNURs under Section 5(a)(2) to require notification of various PFAS for significant new uses. EPA promulgated a SNUR in 1987 for any use of hexafluoropropylene oxide other than as an intermediate in the manufacture of fluorinated chemicals in an enclosed process. Between 2002 and 2007, EPA promulgated SNURs that generally designated all uses of PFOS and 270 related perfluoroalkyl sulfonate chemicals as \"significant new uses,\" except certain specialized existing uses. In 2013, EPA promulgated a SNUR that designated uses of PFOA and related perfluoroalkyl carboyxlate chemicals in carpets or carpet treatments as significant new uses requiring notification. In 2015, EPA proposed a SNUR that would designate all uses of PFOA and related perfluoroalkyl carboyxlate chemicals as \"significant new uses.\" EPA's PFAS Action Plan states that it \"plans to follow up on the 2015 SNUR.\" \nSection 5(a)(1) authorizes the primary information gathering mechanism for new chemicals that have never been manufactured in commerce. Prior to producing a new chemical, a manufacturer must submit a premanufacture notice to EPA. In 1984, EPA determined under Section 5(h)(4) that most polymers entering into commerce do not present unreasonable risks and exempted them from premanufacture notification. This exemption is commonly referred to as the \"polymer exemption.\" In 2010, EPA determined that polymers containing perfluoroalkyl constituents may present unreasonable risk and promulgated a new rule requiring notification prior to their manufacture. This regulatory change became effective in 2012 and is intended to allow EPA to determine whether regulation of such polymers may be warranted. \nIf EPA were to determine that information provided in a premanufacture notice is insufficient to assess risks, Section 5(e) authorizes EPA to issue an order that requires the manufacturer to develop new information on the new chemical. EPA has issued Section 5(e) orders for specific PFAS. For example, EPA issued a Section 5(e) consent order in 2009 for hexafluoropropylene oxide dimer acid and its ammonium salt (i.e., the GenX chemicals). According to its manufacturer, the GenX chemicals are used to make fluoropolymers without the use of PFOA. \n\n\t\t\tRisk Assessment\n\nEPA has assessed the risks of PFOS, PFOA, and other PFAS on multiple occasions using information that the agency has collected under TSCA. In 2000, EPA's assessment of PFOS consisted of summarizing various animal studies and did not involve a formal determination on whether the risks were considered unreasonable. In 2002, EPA issued a draft assessment for PFOA using a similar approach it took for PFOS. As EPA has gathered more information, the agency has compared the findings of newer studies with those of existing studies to determine if the agency's understanding of the risks of PFAS warranted revision. For instance, EPA submitted an updated draft assessment for PFOA in 2005 to its Science Advisory Board for review. These assessments have informed the agency's subsequent consideration of whether regulation of certain PFAS may be warranted under TSCA.\n\n\t\t\tRegulatory Action\n\nIn 2009, EPA announced its intention to consider initiating a Section 6 rulemaking under TSCA to manage risks of long-chain PFAS. EPA noted its intent to develop more detailed assessments to support a finding of unreasonable risk. If EPA were to make such a finding, Section 6 authorizes EPA to promulgate a rule to mitigate the unreasonable risk. In promulgating the rule, EPA may select among several regulatory options, including \na prohibition or restriction on the manufacture, processing, distribution of the chemical or a limitation on the amount in which the chemical may be manufactured, processed, or distributed for all or particular uses; a requirement to label the chemical with clear and adequate warnings and instructions with respect to its use, distribution, or disposal; a requirement to track the processes used to manufacture or process the chemical or conduct tests that are reasonable and necessary to assure compliance with the rule; a prohibition or restriction on commercial use or disposal of a chemical; or a requirement for manufacturers and processors of the chemical to notify distributors, those in possession of, or exposed to, the chemical, and the public of the agency's unreasonable risk finding, and to replace or repurchase the chemical if requested. \nIf EPA were to find an \"unreasonable risk,\" Section 9 requires EPA to determine whether other federal authorities may be available to mitigate the risk before establishing regulatory controls. \nSince its announcement in 2009 to consider a Section 6 rulemaking, EPA has not made an unreasonable risk finding for any PFAS. Additionally, none of the 10 chemicals that EPA prioritized in 2016 for risk evaluation under Section 6 are PFAS. \nAlthough EPA has not restricted existing PFAS through Section 6 rulemaking, the agency has issued Section 5(e) orders to restrict the manufacture, processing, distribution, use, and disposal of new PFAS reported to the agency under Section 5(a)(1). These restrictions remain effective until the manufacturer submits the new information requested by EPA. As an example, the Section 5(e) consent order for the two GenX chemicals noted above requires the manufacturer to \"recover and capture (destroy) or recycle [both chemicals] at an overall efficiency of 99% from all effluent process streams and the air emissions (point source and fugitive).\" \n\n\t\t\tEnforcement\n\nAlthough EPA has not established Section 6 regulatory controls on any PFAS, the agency has used its enforcement authorities under TSCA to assess fines and penalties for violations of other statutory requirements. Section 15 of TSCA prohibits certain acts such as \nfailure or refusal to comply with any requirement, rule, order, or consent agreement under Title I, or any requirement, rule, or order under Title II; use of a chemical for commercial purposes that violates any requirements established under Sections 5, 6, or 7; failure or refusal to establish or maintain records, submit reports, notices or other information, or permit access to or copying records, as required by TSCA; and failure or refusal to permit entry or inspection under Section 11. \nSection 16 authorizes civil and criminal penalties for taking actions that are prohibited under Section 15. In 2005, EPA announced a settlement with DuPont for reporting violations under Section 8(e) of TSCA and the Resource Conservation and Recovery Act (RCRA) that involve PFOA. According to EPA, the settlement required DuPont to pay $10.25 million in civil penalties and perform Supplemental Environmental Projects valued at $6.25 million. EPA has continued to take enforcement actions for other violations related to PFAS. For example, EPA sent a Notice of Violation to Chemours in February 2019 for alleged violations of Sections 5 and 8 of TSCA involving GenX chemicals.\n\n\t\tRegulation of PFAS and Other Actions under SDWA\n\nSDWA authorizes EPA to promulgate national primary drinking water regulations for contaminants in water provided by public water systems. These regulations generally include an enforceable standard (MCL) and associated monitoring, treatment, and reporting requirements. For substances that are not regulated under SDWA, EPA is authorized to issue health advisories that identify non-enforceable levels of contaminants in drinking water that are expected to be protective of sensitive populations. For both regulated and unregulated contaminants, SDWA emergency powers authorize EPA to take actions to abate an imminent and substantial endangerment to public health.\nTo date, EPA has not promulgated drinking water regulations for any PFAS but plans to propose preliminary regulatory decisions for PFOA and PFOS in 2019. In 2016, the agency issued non-enforceable Lifetime Health Advisories for PFOS and PFOA. EPA also has used SDWA emergency powers to respond to releases of PFOA and PFOS detected in public water systems at several sites. The following sections further discuss these SDWA authorities and related actions.\n\n\t\t\tHealth Advisories\n\nSDWA authorizes EPA to issue health advisories for contaminants that are not regulated under the act. Health advisories include non-enforceable concentrations for contaminants in drinking water and often include values for different exposure durations (e.g., one day, a lifetime). These non-regulatory levels are intended to help water suppliers and others address contaminants for which EPA has not promulgated drinking water standards. Advisories provide technical guidance on identifying, measuring, and treating such contaminants. In May 2016, EPA established the Lifetime Health Advisory levels for PFOA and PFOS at 70 parts per trillion (ppt), separately or combined. In calculating the health advisory level, EPA applied a relative source contribution of 20% (i.e., an assumption that 20% of PFOS and\/or PFOA exposure is attributable to drinking water and 80% is from diet, dust, air or other sources). These levels are intended to protect the most sensitive subpopulations (i.e., nursing infants), with a margin of protection, over a lifetime of daily exposure. Previously in January 2009, EPA issued provisional health advisory levels of 400 ppt for PFOA and 200 ppt for PFOS to address short-term exposures to these substances from drinking water.\n\n\t\t\tNational Primary Drinking Water Regulations\n\nFor more than a decade, EPA has been assessing whether to promulgate national primary drinking water regulations for PFOA and PFOS. SDWA specifies a multistep process for evaluating contaminants to determine whether a national regulation is warranted. The evaluation process includes identifying contaminants of potential concern, assessing health risks, collecting occurrence data (and developing reliable analytical methods necessary to do so), and making determinations as to whether or not regulatory action is needed for a contaminant. \n\n\t\t\tIdentifying Emerging Contaminants That May Warrant Regulation\n\nEvery five years, EPA is required to publish a contaminant candidate list (CCL) that identifies contaminants that are known or anticipated to occur in public water systems and that may require regulation under the act. In 2009, EPA placed PFOA and PFOS on the third such list (CCL 3) for evaluation. In 2016, EPA published the fourth list, CCL 4, which carried over PFOA and PFOS. EPA carried forward these contaminants to continue evaluating health effects, gathering national occurrence data, and developing analytical methods.\n\n\t\t\tMonitoring for Emerging Contaminants in Public Water Systems\n\nSDWA Section 1445 requires EPA to promulgate, every five years, an unregulated contaminant monitoring rule (UCMR) that requires public water systems to test for no more than 30 such contaminants. A representative sample of systems serving 10,000 or fewer people is required to conduct monitoring. \nIn 2012, EPA issued the third UCMR (UCMR 3), under which 4,864 public water systems tested their drinking water for 6 PFAS\u00e2\u0080\u0094including PFOA and PFOS\u00e2\u0080\u0094between January 2013 and December 2015. Overall, 63 of the 4,864 (1.3%) water systems reported at least 1 sample with PFOA and\/or PFOS (separately or combined) concentrations exceeding EPA's health advisory level of 70 ppt. EPA estimates that these 63 water systems serve approximately 5.5 million individuals. \nAccording to EPA's PFAS Action Plan , the agency intends to propose monitoring requirements for other PFAS in the next UCMR in 2020. As of August 2019, EPA had developed an analytical method to detect 18 PFAS in drinking water supplies. The plan states that the agency would use the monitoring data gathered through UCMR 5 to evaluate the national occurrence of additional PFAS. The agency has been developing analytical methods for monitoring additional PFAS.\n\n\t\t\tRegulatory Determinations\n\nSDWA requires EPA, every five years, to make a regulatory determination (RD)\u00e2\u0080\u0094a determination of whether or not to promulgate a drinking water regulation\u00e2\u0080\u0094for at least five contaminants on the CCL. To determine that a national drinking water regulation is warranted for a contaminant, EPA must find that \na contaminant may have an adverse health effect; it is known to occur or there is a substantial likelihood that it 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 the contaminant presents a meaningful opportunity for health risk reduction for persons served by public water systems. \nTo meet the statutory criteria for making an RD, EPA requires a peer-reviewed risk assessment; a widely available analytical method for monitoring; and nationally representative occurrence data.\nDuring the third RD round in 2014, when EPA published preliminary RDs for contaminants on CCL 3 (which included PFOA and PFOS), UCMR 3 monitoring was underway and national occurrence data for PFOA and PFOS were not available. EPA would not have been able to include any PFAS for the third RD without such data. In 2016, EPA included PFOA and PFOS on the agency's list of unregulated contaminants that met EPA data availability requirements to make RDs. \nThe fourth round of RDs is scheduled for 2021. SDWA does not prevent EPA from making determinations outside of that five-year cycle. According to the Spring 2019 Unified Regulatory Agenda , EPA will propose preliminary RDs for PFOA and PFOS by the end of 2019 and make final determinations by the end of 2020. Several bills in the 116 th Congress would direct EPA to promulgate national primary drinking water regulations and establish an MCL for individual or total PFAS, including Senate-passed S. 1790 , National Defense Authorization Act for FY2020; S. 1507 ; S. 1473 ; H.R. 2377 , H.R. 4033 , and S. 2466 .\n\n\t\t\tStandard Setting\n\nOnce the EPA Administrator makes a determination to regulate a contaminant, SDWA requires EPA to propose a rule within 24 months and promulgate a \"national primary drinking water regulation\" within 18 months after the proposal. When proposing a regulation, EPA must also propose a non-enforceable maximum contaminant level goal (MCLG), at which no known or anticipated adverse health effects are expected to occur and which allows an adequate margin of safety. An MCLG is based solely on health effects data and does not reflect cost or technical feasibility considerations. EPA derives an MCLG based on an estimate of the amount of a contaminant that a person can be exposed to on a daily basis that is not anticipated to cause adverse health effects over a lifetime. This level is further reduced to be protective of sensitive populations.\nDrinking water regulations generally include an MCL\u00e2\u0080\u0094an enforceable limit for a contaminant in public water supplies. SDWA requires EPA to set the MCL as close to the MCLG as feasible. When assessing feasibility, the law directs EPA to consider the best available (and field-demonstrated) treatment technologies, taking cost into consideration. Regulations also include monitoring, treatment, and reporting requirements. EPA has promulgated regulations that cover several similar contaminants and typically establishes an individual MCL for each contaminant covered by the regulation.\nRegulations generally take effect three years after promulgation. EPA may allow up to two additional years if the Administrator determines that more time is needed for public water systems to make capital improvements. States have the same authority for individual water systems. The law directs EPA to review\u00e2\u0080\u0094and if necessary revise\u00e2\u0080\u0094each regulation every six years. A revision may maintain or provide greater health protection, but it may not reduce protection. \nSeveral bills in the 116 th Congress would direct EPA to promulgate national primary drinking water regulations and establish an MCL for individual or total PFAS, including Senate-passed S. 1790 , National Defense Authorization Act for FY2020; S. 1507 ; S. 1473 ; H.R. 2377 , and H.R. 4033 . Among other amendments to SDWA, S. 1790 , Title LXVII, Subtitle B and S. 1507 reported, would also establish a standard-setting process specifically for PFAS.\n\n\t\t\tEmergency Powers Orders\n\nSDWA Section 1431 grants EPA \"emergency powers\" to issue orders to abate an imminent and substantial endangerment to public health from \"a contaminant that is present in or is likely to enter a public water system or an underground source of drinking water,\" and if the appropriate state and local authorities have not acted to protect public health. This authority is available to address both regulated and unregulated contaminants. The EPA Administrator \"may take such actions as he may deem necessary\" to protect the health of persons who may be affected. Actions may include requiring persons who caused or contributed to the endangerment to provide alternative water supplies, or to treat contamination. When using this authority, EPA generally coordinates closely with states. \nEPA reports that it has used its emergency powers under Section 1431 to require responses to PFOA and\/or PFOS contamination of drinking water supplies in four cases, three of which involved DOD sites. Required actions included treating drinking water, offering connection to a public water system, or providing bottled water where PFOA or PFOS concentrations were above 70 ppt. \nSDWA Section 1431 emergency orders can require a person to perform an action to abate an imminent and substantial danger to public health. However, such orders do not establish liability in a manner comparable in scope to CERCLA, nor do such orders create or otherwise trigger liability under CERCLA.\nFor additional discussion of drinking water issues related to PFAS, see CRS Report R45793, PFAS and Drinking Water: Selected EPA and Congressional Actions , by Elena H. Humphreys and Mary Tiemann. \n\n\t\tEnvironmental Remediation\n\nAs with other chemicals, the federal role under CERCLA in remediating environmental contamination from releases of PFAS has focused on releases from federal facilities, and releases at sites on non-federal lands designated for priority federal attention under the Superfund program in coordination with the states in which the sites are located. The vast majority of PFAS known to be released from federal facilities has occurred from the use of AFFF at U.S. military installations, some of which have involved National Guard facilities. DOD has been responding to these releases under the Defense Environmental Restoration Program, pursuant to CERCLA and to SDWA emergency powers orders at the three U.S. military installations referenced above. The National Aeronautics and Space Administration (NASA) has also responded to releases of PFOA and PFOS from the use of AFFF detected at the Wallops Flight Facility in Virginia. As for other chemicals, the states have generally played a more prominent role under state law in responding to releases of PFAS at sites on non-federal lands that are not designated under the Superfund program. Authorities of CERCLA, and actions related to PFAS under the EPA Superfund program and DOD Defense Environmental Restoration Program, are discussed below.\n\n\t\t\tCERCLA Response Authority\n\nSection 104 of CERCLA authorizes the President to respond to releases of hazardous substances into the environment, and releases of other pollutants or contaminants that may present an imminent and substantial danger to public health or welfare. Response actions may include \"removal\" actions to address more immediate hazards and stabilize site conditions, and more extensive \"remedial\" actions intended to provide a more permanent solution. This Presidential response authority is delegated by executive order to EPA under the Superfund program for releases at sites on non-federal lands, and to other departments and agencies that administer federal facilities from which a release occurs. EPA is also responsible for designating sites on the National Priorities List (NPL) and for overseeing response actions at federal facilities performed by departments and agencies that administer those facilities.\nThe federal response framework involves coordination with the states in which the sites are located, and state cost-shares for the use of Superfund appropriations to pay for remedial actions at sites on non-federal lands. Section 104(c) of CERCLA generally requires states to match 10% of the construction costs of remedial actions, and 100% of the costs of operation and maintenance once a remedial action is in place and operating as intended, with the exception of the treatment of groundwater or surface water for which the federal government may pay 100% of the costs for the first 10 years. More limited \"removal\" actions are not subject to state cost-shares and may be fully federally funded. Response actions for releases from federal facilities are not subject to state cost-shares. The availability of federal funding at Superfund sites or federal facilities is subject to annual appropriations. Section 111 of CERCLA generally restricts the use of Superfund appropriations at federal facilities funded with separate appropriations.\n\n\t\t\tCERCLA Liability\n\nSection 107 of CERCLA establishes liability for response costs, natural resource damages, and the costs of ATSDR public health studies at release sites. Categories of parties who may be held liable for these costs generally include \ncurrent and former site owners and operators; persons who arranged for the treatment or disposal of a hazardous substance; persons who arranged for the transport of a hazardous substance for treatment or disposal; and persons who transported a hazardous substance for treatment or disposal and selected the receiving site.\nHowever, the statute exempts various categories of parties, including \npersons who acquired a site with preexisting contamination in certain circumstances and did not cause or contribute to the contamination; persons who contributed very small quantities or only household wastes to a site; persons who released a hazardous substance in accordance with a federal permit issued under certain other laws (including state permits issued with delegated federal authorities) referred to as \"federally permitted releases;\" and certain other categories of parties.\nSection 107 authorizes actions to recover response costs for which a party is liable. Section 106 also authorizes enforcement orders to require a liable party to perform a response action under federal oversight to avoid the need for federal and state funds upfront. Section 122 authorizes an additional mechanism under which liable parties may enter into negotiated settlements with the federal government to perform or pay for response actions. CERCLA Section 106 orders are similar in principle to SDWA Section 1431 emergency powers orders in terms of requiring a person to perform a specific action to mitigate potential risks. However, SDWA does not establish broader liability comparable to CERCLA and does not include cost-recovery or settlement authorities. CERCLA also is not limited to drinking water exposures and may address additional pathways through which exposures to contamination may occur.\nThe scope of liability under CERCLA is more limited than response authority under the statute. Liability only applies to releases of designated hazardous substances, and not to other pollutants or contaminants. EPA has not designated any PFAS as hazardous substances to date. CERCLA authorizes federal actions to respond to releases of PFAS as pollutants or contaminants, but does not establish liability for such releases to compel the party that caused or contributed to a release to pay for or perform response actions.\nThe scope of liability under CERCLA for hazardous substances does not include product liability, or liability for personal injury or property damages, both of which vary under state tort law. The Federal Tort Claims Act (FTCA) authorizes tort claims against the United States government for personal injury, death, or property damages that may be caused by negligent or wrongful federal acts or omissions, but authorizes a defense for discretionary functions of federal departments and agencies in carrying out their respective missions.\n\n\t\t\tCERCLA Hazardous Substances\n\nEPA's PFAS Action Plan indicated that the agency is developing a rule to designate PFOA and PFOS as hazardous substances under Section 102 of CERCLA or other related laws that trigger a hazardous substance designation. Section 101(14) of CERCLA defines the term \"hazardous substance\" to include chemicals designated for regulation or enforcement under the following federal statutes:\nhazardous substances designated under Section 311(b)(2)(A) of the Clean Water Act; toxic pollutants designated under Section 307(a) of the Clean Water Act; characteristic or listed hazardous wastes under Section 3001 of the Solid Waste Disposal Act (commonly referred to as the Resource Conservation and Recovery Act or RCRA); hazardous air pollutants designated under Section 112 of the Clean Air Act; and any imminently hazardous chemical substance or mixture for which EPA has taken a civil action in the appropriate U.S. District Court of jurisdiction under Section 7 of TSCA.\nContaminants for which EPA has promulgated an MCL under SDWA are not included in this definition. The designation of an MCL for any PFAS would therefore not trigger a hazardous substance designation under CERCLA.\nEPA's authority to designate hazardous substances is not restricted to chemicals designated under the laws referenced in Section 101(14) of CERCLA. Section 102(a) also authorizes EPA to promulgate regulations designating other chemicals as a hazardous substance if the chemical may present substantial danger to the public health or welfare or the environment when released into the environment. If PFAS were designated as hazardous substances, releases into the environment would be subject to liability and release reporting requirements under CERCLA to the same extent as other hazardous substances. Section 120 of CERCLA generally applies liability and other requirements of the statute to federal facilities to the same extent as other entities. \nMultiple bills introduced in the 116 th Congress would require EPA to designate PFAS as hazardous substances under CERCLA, whereas some bills requiring differing designations under other statutes would have the effect of a CERCLA hazardous substance designation. H.R. 535 and S. 638 would require EPA to designate \"all\" PFAS as hazardous substances under Section 102(a) of CERCLA within one year of the date of enactment. Section 330O of House-passed H.R. 2500 includes similar language. Section 330A of House-passed H.R. 2500 , H.R. 3616 , and H.R. 2605 would also have the effect of a CERCLA hazardous substance designation for PFAS. Section 330A of House-passed H.R. 2500 and H.R. 3616 would require EPA to list PFAS as toxic pollutants under Section 307(a)(1) of the Clean Water Act within 30 days of enactment, and would exempt PFAS from the listing criteria of that provision. H.R. 2605 would require EPA to list \"all\" PFAS as hazardous air pollutants under Section 112(b) of the Clean Air Act within 180 days of enactment. As noted above, Section 101(14) of CERCLA defines hazardous substances to include such pollutants designated under the Clean Water Act and Clean Air Act, and certain other statutes. The lists of hazardous substances, toxic pollutants, and hazardous air pollutants are codified in federal regulation. Revisions to these lists have been subject to federal rulemaking procedures.\nIf PFAS were designated as hazardous substances, some potentially responsible parties (PRPs) may include the federal government at U.S. military installations and other federal facilities, civilian airport owners and operators, and local fire departments that released PFAS from the use of AFFF. Owners and operators of landfills could be PRPs if PFAS-containing products and wastes migrated into the environment. Chemical manufacturers and processors that release PFAS at sites they own or operate could also be PRPs. CERCLA does not more broadly establish product liability for companies that manufacture or process PFAS. Although CERCLA authorizes some exemptions from liability, these exemptions focus primarily on situations in which the site owner did not cause or contribute to the contamination or the party contributed very small quantities of waste or only household wastes to a site. Fertilizer applications of biosolids (i.e., treated sewage sludge) that may contain PFAS would generally not be subject to CERCLA because of the statutory exclusion of the \"normal application of fertilizer.\"\nAlthough PFAS are presently not subject to liability under CERCLA, states may establish liability for releases of these chemicals under their own laws. Section 120(a)(4) of CERCLA waives federal sovereign immunity to allow the application of state remediation laws to federal facilities that are not on the NPL. State laws establishing liability for PFAS may be applied to such facilities. Although federal sovereign immunity is not waived at federal facilities on the NPL, Section 121 of CERCLA requires the state in which a site is located to be provided the opportunity for involvement in the selection of remedial actions regardless of whether the site is on the NPL. This provision allows states to oversee remedial actions at federal facilities on the NPL, but not to enforce state law at such facilities.\n\n\t\t\tSuperfund Program\n\nAbsent a hazardous substance designation, EPA has responded to releases of PFAS under the Superfund program using CERCLA response authorities for pollutants and contaminants at certain sites on non-federal lands, in coordination with the states in which the sites are located. Sites where EPA has been involved under the Superfund program have typically been contaminated not only from PFAS but also releases of designated hazardous substances. For example, EPA added the Saint-Gobain Performance Plastics site in Hoosick Falls, NY to the NPL in August 2017 based on potential risks associated with multiple hazardous substances detected at that site in addition to PFOA.\nWithout a hazardous substance designation, EPA's PFAS Action Plan indicated that the agency would continue to consider its use of CERCLA response authorities for pollutants and contaminants to respond to PFAS contamination, or the use of SDWA Section 1431 emergency powers or RCRA Section 7003 enforcement authorities applicable to solid or hazardous wastes. PFAS could be considered a solid waste under RCRA if released in a manner that constituted discarding, pursuant to the definition of \"solid waste\" in RCRA Section 1004(27). Hazardous waste is a subset of solid waste as defined in Section 1004(5) of RCRA. All solid wastes are therefore not necessarily hazardous wastes. EPA has not listed any PFAS as hazardous waste to date. The constituents for characterizing the toxicity of hazardous waste under RCRA also do not include any PFAS.\nOn April 25, 2019, EPA proposed interim groundwater cleanup recommendations for PFOA and PFOS at Superfund sites, U.S. military installations, and other federal facilities. The public comment period closed on June 10, 2019. These recommendations would establish screening levels to identify sites for evaluation, and a preliminary remediation goal (PRG) as a starting point to inform site-specific remediation decisions under CERCLA. EPA proposed a concentration of 40 ppt in groundwater as a screening level, and a concentration of 70 ppt as a PRG for groundwater that is a current or potential source of drinking water at sites where no state, tribal, or other applicable, relevant, and appropriate requirement exists. The proposed 70 ppt PRG is the same concentration as the EPA Lifetime Health Advisory for PFOA or PFOS in drinking water. If EPA were to promulgate an MCL under SDWA, the concentration may be applied as a standard for remedial actions under Section 121 of CERCLA to protect current or potential sources of drinking water.\nEPA indicated that its proposed groundwater cleanup recommendations may also be used to evaluate risks at RCRA corrective action sites. However, as noted above, EPA has not listed any PFAS as hazardous waste under RCRA to date.\n\n\t\t\tDefense Environmental Restoration Program\n\nDOD has responded to releases of various PFAS from the use of AFFF at current and former U.S. military installations under the Defense Environmental Restoration Program in conjunction with its delegated CERCLA response authorities. DOD response actions taken under this program are subject to the requirements of CERCLA. These program authorities apply to releases at facilities or sites that are or were owned by, leased to, or otherwise possessed by the federal government, and under the jurisdiction of DOD at the time of the release. DOD is required to respond to releases of hazardous substances at such facilities or sites. DOD may also respond to releases of other pollutant or contaminants, but is not required to do so consistent with CERCLA liability applying only to hazardous substances. Section 319(b) of Senate-passed S. 1790 would amend these program authorities to require DOD to respond to releases of either hazardous substances, pollutants, or contaminants at DOD facilities or sites, but without enforceable liability under CERCLA. Regardless of such statutory obligation, funding for DOD response actions would remain subject to annual appropriations.\nReleases caused by a state National Guard unit operating at a facility or site that DOD owns, leases, or possesses may be eligible for DOD response actions, but the contractual agreement with the state may relieve federal responsibility for actions of a state National Guard unit. National Guard facilities that are state-owned and state-operated have generally been ineligible for funding under the Defense Environmental Restoration Program, consistent with the statutory criteria of eligibility restricted to DOD facilities or sites. House-passed H.R. 2500 and Senate-passed S. 1790 both include provisions that would address the eligibility of DOD funding to respond to releases of PFAS at National Guard facilities.\nDOD actions to respond to PFAS contamination at eligible sites have ranged from providing bottled water or other alternative water supplies to treating contaminated water sources. The availability of funding for response actions under the Defense Environmental Restoration Program is subject to annual appropriations to multiple accounts. Each account funds a different inventory of sites, including Defense Environmental Restoration accounts of the U.S. Air Force, U.S. Army, U.S. Navy, and Defense-wide sites. A fifth Defense Environmental Restoration account funds Formerly Used Defense Sites (FUDS) decommissioned prior to 1986. The Defense Base Closure account funds sites closed under consolidated Base Realignment and Closure (BRAC) rounds in 1988, 1991, 1993, 1995, and 2005. \nThe Explanatory Statement accompanying the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) \"encouraged\" DOD to establish procedures for prompt and cost-effective remediation of contamination from perfluorinated chemicals (PFCs, i.e., PFAS) released as a result of the use of AFFF at current and former U.S. military installations. The Explanatory Statement also directed DOD to submit a report to Congress assessing the number of current and former installations where AFFF was or is used, and the impact of contamination in drinking water on surrounding communities. The Explanatory Statement further directed DOD to develop plans for \"prompt\" community notification of such contamination and procedures for \"timely\" remediation. DOD issued this report in October 2017 identifying an initial inventory of release sites and stating \nAddressing elevated levels of PFOS and PFOA from DoD activities is a priority for DoD. The DoD Components have taken action to ensure safe drinking water for people living and working on their military installations and in the surrounding communities. Following the CERCLA process, DoD is addressing its cleanup responsibility and promptly notifying affected communities. DoD is also taking steps to remove and replace AFFF containing PFOS in the supply chain, and is committed to finding a fluorine-free alternative that safeguards its troops and military assets, meets critical mission requirements, and protects human health and the environment.\nIn March 2018, DOD issued a presentation on the status of its efforts to respond to releases of PFOA and PFOS. The House Committee on Armed Services directed DOD to provide a status update, in its report accompanying the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ). DOD identified 401 U.S. military installations with known or suspected releases of PFOA or PFOS from the use of AFFF. DOD detected PFOA or PFOS in groundwater wells above the EPA Lifetime Health Advisory of 70 ppt at 90 of these installations. DOD identified planned actions at these installations under the CERCLA site response process, subject to annual appropriations and prioritization of funding among eligible sites. DOD has been remediating contamination from hazardous substances and unexploded ordnance under the Defense Environmental Restoration Program for years at many of these same installations. Detections of PFOA or PFOS in groundwater are a more recent development that adds to existing challenges.\n\n\t\tDisposal\n\nSome stakeholders have expressed concern about the potential for environmental contamination from the disposal of PFAS. As with many other types of wastes, incineration and landfilling have been the two principal methods of disposal available for wastes containing PFAS. Incineration offers the potential to reduce the toxicity and volume of wastes, but generates air emissions and combustion residuals that necessitate disposal. Determining what temperatures are necessary to break down PFAS and ensuring that potential combustion byproducts are acceptable also have been issues for incineration. Wastewater discharges or sludge from industrial facilities and sewage treatment plants may contain PFAS depending on the constituency of the waste source. As industry transitions to shorter chain PFAS, some policymakers and stakeholders have also expressed concern about the disposal of existing stocks of longer chain PFAS and products containing these chemicals. For example, DOD, other federal agencies, civilian airport operators, and local fire departments face disposal needs for existing stocks of AFFF as they transition to alternatives. Waste streams generated from the treatment of PFAS in drinking water, or the remediation of PFAS contamination, also necessitate disposal.\nThe disposal of PFAS wastes is regulated under multiple federal and state laws. EPA has not promulgated contaminant-specific standards for the disposal of PFAS to date. The disposal of PFAS wastes has been regulated similarly to other types of wastes for which contaminant-specific standards are not established. Although not presently listed as hazardous wastes, the disposal of PFAS wastes in landfills would generally be subject to RCRA Subtitle D solid waste criteria considering the breadth of the definition of \"solid waste\" in applying to garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility, and other discarded material. Incineration facilities are also subject to RCRA for the disposal of combustion residuals, and to hazardous air pollutants standards under the Clean Air Act (CAA). Whereas these CAA standards are not specific to PFAS, some of them apply to related chemicals that may be created during combustion, such as hydrogen fluoride. Although EPA has not established effluent limitations or pretreatment standards for PFAS in wastewater, the Clean Water Act generally requires permits for the discharge of any pollutant into U.S. waters.\nSection 330D of House-passed H.R. 2500 would require DOD to ensure that PFAS is eliminated and not emitted into the air when using incineration to dispose of AFFF or other materials containing these chemicals. This House provision would also require DOD to ensure that applicable CAA requirements are met, the selected incineration facility has not violated the CAA within the past 12 months, and AFFF or other PFAS materials designated for disposal are stored in accordance with RCRA Subtitle C hazardous waste requirements. As a practical matter, DOD would be required to select incinerators designed for hazardous wastes that operate at temperatures sufficient to destroy carbon and fluorine bonds in PFAS. However, Section 330D would not designate PFAS as hazardous waste.\nThe PFAS Waste Incineration Ban Act of 2019 ( H.R. 2591 ) would require EPA to promulgate regulations no later than six months after enactment that would prohibit the use of incineration to dispose of AFFF containing PFAS. H.R. 2591 would also require EPA to promulgate regulations no later than one year after enactment to identify other categories of PFAS wastes for which incineration would be prohibited if necessary to protect human health and the environment, and to review and revise these waste categories at least every four years. If incineration were prohibited, landfilling could increase if other disposal methods do not become more widely available.\nFor wastewater discharges, Section 330A of House-passed H.R. 2500 would require EPA to list PFAS as toxic pollutants under the Clean Water Act within 30 days of enactment, and to establish effluent limitations and pretreatment standards for PFAS no later than January 1, 2022.\n\n\t\tTransition to Fluorine-Free Class B Firefighting Foams\n\nDOD has revised its Military Specification for AFFF as a step in its transition away from the use of Class B firefighting foams containing PFOA and PFOS. Military Specifications provide instructions to U.S. military departments and agencies that establish standards and parameters for specific products that DOD has determined are suitable for procurement to meet U.S. military needs for DOD to carry out its mission. DOD Military Specifications are internal guidelines developed for U.S. military procurement, and are not binding and enforceable regulations. \nDOD initially issued its Military Specification on AFFF (MIL-F-24385) in 1969, specifying the use of \"fluorocarbon surfactants\" based on their effectiveness in extinguishing petroleum-based liquid fuel fires. DOD subsequently revised MIL-F-24385 for various purposes in the 1970s, 1980s, and 1990s, and on September 7, 2017, under MIL-PRF-24385F to address the amount of PFOA and PFOS and other criteria. DOD guidelines generally require reviews of Military Specifications at least once every five years. The next scheduled review of MIL-PRF-24385F is September 6, 2022. DOD issued a similar version of this Military Specification for the Naval Sea Systems Command on May 7, 2019. Both versions specify AFFF containing fluorocarbon surfactants for use as Class B fire extinguishing agents, but restrict the content of PFOA or PFOS to 800 parts per billion (ppb) or micrograms per liter. Neither version limits the content of other PFAS. Previous versions stated that AFFF must contain \"fluorocarbon surfactants\" but did not restrict the concentration of any PFAS.\nSection 6.6 of both the September 2017 version and the May 2019 version include the following DOD policy statement on the long-term objective to transition to the use of fluorine-free AFFF:\nThe DoD's goal is to acquire and use a non-fluorinated AFFF formulation or equivalent firefighting agent to meet the performance requirements for DoD critical firefighting needs. The DoD is funding research to this end, but a viable solution may not be found for several years. In the short term, the DoD intends to acquire and use AFFF with the lowest demonstrable concentrations of two particular PFAS; specifically PFOS and PFOA. The DoD intends to be open and transparent with Congress, the Environmental Protection Agency (EPA), state regulators, and the public at large regarding DoD efforts to address these matters. AFFF manufacturers and vendors are encouraged to determine the levels of PFOS, PFOA, and other PFAS in their products and work to drive these levels toward zero while still meeting all other military specification requirements.\nDOD has funded the research and development of fluorine-free AFFF under its Strategic Environmental Research and Development Program (SERDP) and Environmental Security Technology Certification Program (ESTCP). In June 2018, DOD issued a report examining the status of alternatives to AFFF that contain PFOA and PFOS, and the plans of DOD for the phase-out and disposal of its existing stocks of AFFF that contain these chemicals. The report also discussed projects funded under SERDP and ESTCP. Section 1059 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ) required DOD to issue this report to the House and Senate Committees on Armed Services. House-passed H.R. 2500 includes multiple provisions related to phasing out the use of AFFF for land-based application at U.S. military installations and replacement with fluorine-free foams. Senate-passed S. 1790 also includes a phase-out provision for land-based application at U.S. military installations.\nThe Federal Aviation Administration (FAA) has been using the DOD Military Specification for AFFF as criteria for civilian airport operators to demonstrate compliance with certification requirements for Class B fire extinguishing agents. Section 332 of the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) directed FAA to stop recommending the use of fluorinated AFFF for civilian airport certification, no later than three years from the date of enactment (October 5, 2018). On January 17, 2019, FAA updated its guidelines to reference the September 2017 version of the DOD Military Specification for AFFF that restricted the maximum content of PFOA or PFOS. The FAA noted that it is researching potential alternatives for fluorine-free AFFF to comply with P.L. 115-254 , but observed \nCurrently, fluorine-free foams on the market do not match the performance of their fluorinated counterparts, and they require more agent to extinguish fires quickly. Fluorine-free foams are not able to provide the same level of fire suppression, flexibility, and scope of usage as MIL-PRF-24385 AFFF firefighting foam.\nThe statutory deadline under P.L. 115-254 for FAA to allow the use of fluorine-free firefighting foams for civilian airport certification is October 5, 2021.\n\n\t\tPFAS in Dairy Milk, Foods, and Food Contact Applications\n\nFederal efforts to address potential health risks of PFAS have also focused on the potential for these chemicals to be present in foods, which may occur through interactions with environmental contamination or food contact applications. The U.S. Food and Drug Administration (FDA) has been evaluating potential exposures to PFAS in dairy milk, dairy products, other foods, and food contact applications, using its authorities under the Federal Food, Drug, and Cosmetic Act (FFDCA). The FDA has not established regulatory standards for specific concentrations of PFAS in milk or other foods to date. Federal safety standards for milk have generally been established in the Pasteurized Milk Ordinance.\nThe FDA has examined multiple ways in which PFAS may become present in foods:\nPFAS may be present in dairy milk and dairy products from livestock that consume contaminated water. PFAS similarly may be present in meat from livestock that consume contaminated water. PFAS may be present in food crops if grown in contaminated soils or irrigated with contaminated water sources. PFAS may be present in fish and shellfish from contaminated water bodies. Food contact applications (e.g., cookware, food packaging, and processing) that contain PFAS are another potential source of contamination in foods.\nThese situations are not unique to PFAS. They may present potential pathways of human exposure to any contaminant present in the environment that may interact with foods or that may be present in food contact applications. The uptake of PFAS or other chemicals in food would depend on the properties of the specific chemical, the conditions in which interaction with food occurs, and potentially other factors. As with drinking water, potential risks from PFAS or other contaminants in food would depend on the toxicity of the specific chemical, the conditions of exposure, and the characteristics of the exposed individual.\nThe FDA has been assessing PFAS in foods from specific sites where PFAS contamination has been detected, certain foods with an increased likelihood of PFAS contamination not associated with specific sites, and foods more generally. The FDA has also regulated the uses of PFAS in food contact applications, and has been reviewing these regulations as more information becomes available. The FDA has generally found no or relatively low concentrations of PFAS in the foods that it has sampled. The FDA concluded that the sampled foods with detectable concentrations of PFAS were low enough not to present a human health concern. Of dairy milk sampled, FDA found elevated levels of certain PFAS in milk produced from livestock that consumed water from a contaminated well at a dairy farm in New Mexico. The FDA reports that the contaminated milk was discarded and did not enter the food supply.\nThe U.S. Department of Agriculture (USDA) provided financial assistance to this affected New Mexico dairy farm through the Dairy Indemnity Payment Program (DIPP) for removing the contaminated milk from the commercial market. The USDA Agricultural Research Service (ARS) has also been examining blood and tissue samples from the contaminated livestock. ARS reports that the USDA Food Safety and Inspection Service notified state animal health officials that cattle from the New Mexico dairy farm should not be shipped to a federally inspected establishment and are not eligible to be processed for human food.\nThe FDA reports that it conducts a safety assessment when discovering PFAS in foods \"using the best available current science to evaluate whether the levels present a possible human health concern\" considering the quantity of food consumed and the toxicity of the contaminants. The FDA has used EPA's reference dose (RfD) of 0.00002 mg\/kg\/day for ingestion of PFOA and PFOS as a toxicity value for its food safety assessments. The EPA lifetime health advisories of 70 ppt for PFOA and PFOS in drinking water are derived from this RfD, but are not intended for addressing other exposure scenarios. EPA did not recommend 70 ppt as an acceptable concentration of PFOA or PFOS individually or combined in milk or other foods.\nEPA stated in November 2016 that these health advisories \"only apply to exposure scenarios involving drinking water\" and \"are not appropriate for use in identifying risk levels for ingestion of food sources, including: fish, meat produced from livestock that consumes contaminated water, or crops irrigated with contaminated water.\" In a November 2016 agency memorandum, EPA also clarified these health advisories in relation to food:\nIn the development of the health advisories, EPA took into consideration sources of exposure to PFOA and PFOS other than drinking water, including: air, food, dust, and consumer products. Thus, to be protective of exposure, the calculation of the health advisory accounts for the relative exposure to PFOA and PFOS from a variety of sources, including food. Calculation of specific risk levels for foods would require development of entirely different exposure assumptions and is not a part of the HA [health advisory] derivation methodology.\nMultiple bills in the 116 th Congress would address agricultural uses of water contaminated with PFAS, including provisions in the FY2020 NDAA bills. Section 323 of House-passed H.R. 2500 and Section 1073 of Senate-passed S. 1790 would authorize the use of DOD Operation and Maintenance accounts to fund alternative water sources or treat water contaminated with PFOA or PFOS at sites where U.S. military activities caused contamination of a water source used to produce agricultural products for human consumption. These provisions in both bills would authorize such DOD actions in these situations where PFOA or PFOS\nis detected in a water source at a concentration that exceeds EPA's May 2016 lifetime health advisories for PFOA or PFOS, or is equal to or exceeds any future FDA regulatory standard for PFOA or PFOS in raw agricultural commodities and milk associated with a contaminated water source.\nSection 323 of House-passed H.R. 2500 also would authorize alternative water sources or treatment of contaminated water in situations where PFOA of PFOS in raw agricultural commodities and milk exceeds a promulgated enforceable state standard, whereas Section 1073 of Senate-passed S. 1790 does not include such state standards. Section 4 of H.R. 1567 and Section 4 of S. 675 similarly would authorize DOD to provide alternative water sources or treat agricultural water sources contaminated with PFOA or PFOS, but do not include exceedances of state standards for raw agricultural commodities or milk as a threshold for DOD action. Use of the EPA lifetime health advisories for PFOA or PFOS in drinking water as a threshold for taking actions to address contamination of agricultural water sources may also be an issue from a scientific standpoint, as discussed above.\nOther legislation would address PFAS in food contact applications. H.R. 2566 would require EPA to revise the \"Safer Choice Standard\" to provide for a Safer Choice label for pots, pans, and cooking utensils that do not contain PFAS. H.R. 2827 would amend Section 409(h) of FFDCA to deem any PFAS used as a food contact substance as unsafe, beginning on January 1, 2022. Section 330B of House-passed H.R. 2500 would prohibit the DOD Defense Logistics Agency, beginning October 1, 2020, from procuring meals ready-to-eat (MREs) for U.S. military use that are assembled or packaged with any food contact substances that contain PFAS.\n\n\tRelevant Legislation Enacted in the 115th Congress\n\nIn the 115 th Congress, multiple bills of broader purposes containing provisions related to PFAS were enacted. Some of these provisions were included in annual defense authorization legislation to authorize the CDC, ATSDR, and DOD to conduct additional health effects studies, and require DOD to submit reports to Congress related to the use of AFFF containing PFAS. Other provisions related to PFAS were included in Federal Aviation Administration (FAA) reauthorization legislation to allow the use of fluorine-free firefighting foams for civilian airport certification, and in a \"farm bill\" to authorize technical assistance for rural water systems.\n Table 1 on the following page identifies each of these laws, the specific provisions related to PFAS, the date of enactment, and a summary of the purpose of each relevant provision. Various appropriations acts have also allocated funding for DOD response actions at current and former U.S. military installations, joint CDC\/ATSDR health effects studies, and certain other federal actions not identified in the table below. Multiple bills introduced in the 116 th Congress would also require EPA to take actions related to PFAS under various existing laws or would create new authorities, but none of these bills have been enacted to date.\n\n\tRelevant Legislation in the 116th Congress\n\nMore than 40 bills have been introduced in the 116 th Congress to address PFAS through a broad range of actions and federal agencies, but none of these bills have been enacted to date. Among these bills, the House- and Senate-passed NDAA bills ( S. 1790 and H.R. 2500 ) contain numerous PFAS provisions specific to DOD. For example, some provisions involve the use, phase out, and disposal of AFFF, while others address DOD remediation of PFAS-contaminated drinking water, groundwater, and surface water. Multiple bills would require EPA to take actions related to PFAS under various existing laws or would create new authorities. The apparent intent of many of these bills is to reduce exposures to PFAS in drinking water and prevent or remediate the contamination of environmental media from releases of these substances. Table 2 identifies each of these bills and their status, the specific provisions related to PFAS, and a summary of the purpose of each relevant provision.","output":null}
{"id":"gao_GAO-19-603","pid":"gao_GAO-19-603_0","input":"\tBackground\n\nCMS and states jointly administer the Medicaid program and generally  share in the financing of Medicaid payments according to a formula  established in law. States may deliver health care services to Medicaid  beneficiaries through fee-for-service payments to participating providers  or through Medicaid managed care plans, through which states pay plans  a fixed amount per beneficiary\u2014typically per member per month\u2014to  provide a specific set of Medicaid-covered services. States finance their  share (nonfederal share) of Medicaid program spending in a variety of  ways, including state funds, such as state general funds appropriated to  the state Medicaid program and funds collected through taxes levied on  health care providers. Within limits, however, states may also use other  sources of funds\u2014including funding from local government providers,  such as county-owned or county-operated hospitals, or from local  governments on behalf of government providers. Federal law allows  states to finance up to 60 percent of the nonfederal share of Medicaid  payments from local government funds.\n\n\t\tMedicaid Payments to Hospitals\n\nState Medicaid agencies have two primary mechanisms for making  payments to hospitals\u2014base payments and supplemental payments\u2014 and both can qualify for federal matching funds.\nBase payments are payments to hospitals for specific services  provided to Medicaid beneficiaries through both fee-for-service and  managed care. These payments are set by state Medicaid programs  or managed care plans, and can vary considerably across states for  the same services. Payment amounts for the same service may also  vary within a state. States\u2019 Medicaid base payments are typically  lower than other payers\u2019, and often are below the costs of providing  services.\nSupplemental payments are typically lump sum payments made to  hospitals that are not specifically tied to an individual\u2019s care. Like all  Medicaid payments, supplemental payments are required to be  economical and efficient. Supplemental payments can be grouped  into two broad categories: (1) DSH payments, which states are  required to make to certain hospitals; and (2) non-DSH payments,  which states are allowed to make, but are not required by law.\n\n\t\t\tDSH Payments\n\nDSH payments are designed to help offset uncompensated care costs for  hospitals serving a high proportion of Medicaid beneficiaries and  uninsured low-income patients. In fiscal year 2017, total DSH payments  to hospitals nationally were about $18.1 billion. States may distribute  DSH payments to any eligible hospital in the state; however, under  federal law, the total amount of DSH payments to a hospital must not be  more than the total amount of uncompensated care provided by the  hospital (both the Medicaid shortfall and uncompensated costs for care  for the uninsured). To be eligible for a DSH payment, hospitals must meet  minimum requirements such as having a Medicaid inpatient utilization  rate of at least 1 percent. States are required to make DSH payments to  certain hospitals\u2014termed deemed-DSH hospitals\u2014with a Medicaid inpatient utilization rate of at least one standard deviation above the mean  for hospitals in the state that receive Medicaid payments, or a low-income  utilization rate that exceeds 25 percent.\nThe amount of federal funding each state may claim for DSH payments is  limited by federal law. Since fiscal year 1993, each state is subject to a  federal DSH allotment that establishes the maximum federal funding  available for the payments. A state\u2019s DSH allotment is largely based on its  fiscal year 1992 DSH spending, although Congress has since made  several incremental adjustments to these allotments. Ultimately, however,  the states that spent the most in fiscal year 1992 continue to have the  largest allotments; conversely, the states that spent the least in fiscal year  1992 have the smallest allotments.\nStates may choose to make DSH payments to institutions for mental  disease (IMD), which can include state-operated psychiatric hospitals.  Prior to 1997, a large share of DSH payments went to state-operated  IMDs, where they were used to pay for services not covered by Medicaid  and any remaining funds were returned to the state treasuries. In general,  Medicaid excludes fee-for-service base payments for beneficiaries aged  21-64 who are residents of IMDs\u2014called the IMD exclusion\u2014and using  DSH payments allowed states to support the costs of IMDs. In 1997,  Congress restricted the total amount of DSH payments a state could  make to IMDs as a group by establishing an annual limit on payments to  IMDs for each state. Any unspent funds within the IMD-designated limit  can be used for other hospital types.\n\n\t\t\tNon-DSH Payments\n\nNon-DSH payments include four types of supplemental payments that  states may make, but are not required to do so, to hospitals and other  providers.\nMedicaid upper payment limit (UPL) payments are lump-sum  payments that are made in addition to fee-for-service base payments.  The UPL is a limit or ceiling on the amount of a state\u2019s Medicaid  payments for which the federal government will match spending. The  UPL is based on the difference between Medicaid fee-for-service  base payments and an estimate of what Medicare would pay for  comparable services. The UPL is not a hospital-specific limit, but is  applied in the aggregate across certain categories of providers. States  have some flexibility in deciding which hospitals will receive a UPL  payment, and how to allocate UPL payments among hospitals. In  fiscal year 2017, UPL payments totaled nearly $13 billion.\nUncompensated care pool payments are payments that some states  make to hospitals specifically for uncompensated care costs in  conjunction with section 1115 demonstration waivers and pilot  projects for which they have received approval from the Secretary of  HHS. Specifically, section 1115 of the Social Security Act authorizes  the Secretary of HHS to waive certain federal Medicaid requirements  and allow costs that would not otherwise be eligible for federal  matching funds for experimental, pilot, or demonstration programs  that, in the Secretary\u2019s judgment, are likely to assist in promoting  Medicaid objectives. States have received approval to make  supplemental payments for hospital uncompensated care in their  Medicaid programs. In fiscal year 2017, states reported total spending  of about $8 billion through uncompensated care pools.\nDelivery system reform incentive payment (DSRIP) programs, which  have also been authorized under section 1115 demonstrations, allow  states to make supplemental payments to providers engaging in  various improvement projects that align with state delivery system  reform objectives. Examples of reform objectives include improving  care for patients with specific conditions or increasing capacity. In  fiscal year 2017, DSRIP program payments totaled about $7.3  billion.\nGraduate medical education payments help support teaching  hospitals, and can include teaching costs, such as physician resident  salaries, though states are not required to make such payments to  teaching hospitals. States have significant flexibility in designing and  administering these payments; however, the payments are subject to  the UPL. In fiscal year 2017, Medicaid graduate medical education  payments totaled about $2 billion.\n\n\t\tThe Patient Protection and Affordable Care Act (PPACA) and DSH Allotments\n\nEffective January 1, 2014, PPACA allowed states to expand Medicaid  eligibility to certain non-pregnant, non-elderly individuals. PPACA also  required a phased reduction in DSH allotments to states, reflecting the  expectation that the number of uninsured individuals would decline\u2014and  so would hospital spending on uncompensated care. As of May 2019,  there were 37 \u201cexpansion states\u201d\u2014those states that chose to expand  Medicaid eligibility\u2014and 14 \u201cnon-expansion states\u201d\u2014those that did not  choose to expand Medicaid. Congress has delayed the reduction in DSH  allotments several times. The reductions are scheduled to begin in fiscal  year 2020.\nBetween 2013 and 2014, both expansion and non-expansion states  reported different degrees of change in care for the uninsured and  Medicaid shortfall. In particular, MACPAC reported that between 2013  and 2014, the year in which most state Medicaid expansions took effect,  expansion states\u2019 uncompensated care costs for the uninsured declined  by $2.2 billion (19 percent), while non-expansion states\u2019 uncompensated  care costs for the uninsured increased by $0.6 billion (5 percent). During  the same period, expansion states\u2019 Medicaid shortfall increased by $2.2  billion (36 percent), and non-expansion states\u2019 Medicaid shortfall  increased by $1.8 billion (546 percent).\n\n\tStates Increasingly Made Supplemental Payments to Hospitals\n\nStates\u2019 use of supplemental payments has grown in recent decades,  partly due to the flexibility supplemental payments provide. This flexibility  is twofold: supplemental payments provide states with flexibility in  financing the nonfederal share of supplemental payments, and flexibility  to target the payments to specific hospitals or types of hospitals.\n\n\t\tStates Increasingly Made Supplemental Payments to Hospitals, while Reducing or Freezing Hospitals\u2019 Base Payments\n\nTotal supplemental payments to hospitals have grown over time, while  states\u2019 base payments have often been frozen or reduced. Congress  imposed limits on DSH spending in the 1990s, and since then states\u2019 use  of non-DSH payments has grown. Between fiscal year 2000 and fiscal  year 2017, DSH payments increased about 16 percent, from $15.6 billion  to $18.1 billion. In prior work, we reported that in fiscal year 2006 state  Medicaid agencies made at least $6.3 billion in non-DSH payments,  though the exact amounts are unknown, because states did not report all  their payments to CMS. By fiscal year 2017, the amount of non-DSH  payments had increased to $30.4 billion. Both uncompensated care  pool payments and DSRIP programs are relatively new types of non-DSH  payments, and thus contributed to the overall increase in supplemental  payments. In prior work, we reported that, as of February 2017, CMS  authorized nearly $38.7 billion in DSRIP spending nonconsecutively over  2011 to 2022 in four states with the largest DSRIP programs.\nOur prior work found that new or increased supplemental payments  helped mitigate the increasing gap between Medicaid base payments and  hospital costs. While supplemental payments increased, the number of  states reducing or freezing base payments to hospitals has increased, in  part, because states reported challenges paying the nonfederal share  with state general funds. Our work found that from 2008 to 2011, across  all providers, the number of states making at least one base payment  reduction grew from 13 to 34, while the number of states increasing at  least one base payment fell over the same period. Across all 4 years,  states most frequently reported reducing base payments for hospitals.\nThe Kaiser Family Foundation\u2019s annual survey data shows the trend  continued in more recent years. Specifically, over half of states froze or  reduced inpatient hospital base payments each fiscal year from 2011 to  2018, ranging from a low of 28 states in 2011 and 2018, to a high of 39  states in 2012. (See table 1.)\nIn a September 2018 study of five states, MACPAC found that hospitals  and state Medicaid officials often prefer increases to supplemental  payments rather than increases to base payments, because supplemental payments come with more predictability. MACPAC found  that all five states reported reducing hospital base payments from 2007 to  2011. After 2011, all five states kept base payments frozen with no  adjustment for inflation. As a result, base payments to hospitals in these  states were lower in 2018 relative to other payers and hospital costs. To  address the growing gap between base payments and hospital costs,  states collaborated with hospitals to establish or increase supplemental  payments. In the five states, supplemental payments ranged from 18  percent to 61 percent of total hospital payments.\n\n\t\tStates Have Relied on Multiple Sources of Funds to Finance Their Nonfederal Share\n\nMore often than with base payments, states have relied on sources other  than state general funds to finance the nonfederal share of supplemental  payments. For example, states may receive funds for the nonfederal  share of supplemental payments through taxes levied on health care  providers. (See fig. 1.) In previous work, we found that funds from local  governments and health care providers constituted about 50 percent of  the nonfederal share for DSH and non-DSH payments in fiscal years  2008 through 2012. In contrast, funds from local governments and  health care providers constituted approximately 30 percent of base  payments during the same time period. The MACPAC study of five states  also found that states and hospitals preferred supplemental payments,  because hospitals can track the extent to which their tax assessments are  recouped through supplemental payments.\nIn a July 2014 report, we found that the number of states relying on  provider taxes increased, and that provider tax revenues were then used  for the nonfederal share of supplemental payments. In particular, the  total number of provider taxes increased from 119 taxes in 42 states in  2008 to 159 taxes in 47 states in 2012\u2014a 34 percent increase. Kaiser  Family Foundation data show this trend has continued. According to  state survey data, the number of states using inpatient hospital provider  taxes has steadily increased from fiscal year 2011 to 2018, ranging from  a low of 34 states in 2011, to a high of 42 states in 2017 and 2018. (See  table 2.)\n\n\t\tSupplemental Payments Allow States to Target Payments to Certain Hospitals or Types of Hospitals\n\nSupplemental payments provide states with flexibility that allows them to  address states\u2019 goals by targeting payments to particular hospitals or  hospital types, such as public hospitals or teaching hospitals. States may  choose to target supplemental payments to hospitals that may not have  the highest uncompensated care costs. Our prior work found some states\u2019  DSH payments were not proportionally targeted to hospitals with the  highest uncompensated care costs, which DSH payments are designed  to address. Based on our prior analysis of annual hospital-specific 2010 DSH data, we reported that in 30 of 42 states, hospitals receiving the  largest share of state DSH payments did not provide the largest share of  total uncompensated care. Moreover, our prior review of the independent  DSH audits found that\n41 states made DSH payments to 717 hospitals that exceeded the  individual hospitals\u2019 uncompensated care costs as calculated by the  auditors,\n9 states did not accurately calculate the uncompensated care costs of  206 hospitals in those states for purposes of making DSH payments,  and\n15 states made DSH payments to a total of 58 hospitals that either did  not retain their DSH payments or were not qualified to receive them.\nStates\u2019 criteria for identifying eligible DSH hospitals and how much  funding they receive vary, but were often related to hospital ownership,  hospital type, and geographic factors. Our prior work found that 2006  DSH payments to individual hospitals varied widely, ranging from 1 cent  to about $395 million. For example, California reported both the lowest  and highest 2006 DSH payment amounts; the state made a total of only  $160 in DSH payments to 96 private hospitals and paid $2 billion in DSH  payments to 51 government hospitals.\nBased on our analysis of 2014 DSH audits, several states targeted DSH  payments to certain hospitals and hospital types, including the following:\nPublic hospitals: States targeting nearly all (93 percent or higher) of  their DSH funding to public hospitals included Arkansas (99 percent),  California (100 percent), Illinois (99 percent), Iowa (93 percent), Maine  (100 percent), and Washington (97 percent).\nNonprofit hospitals: Nebraska targeted 98 percent of its DSH funding  to nonprofit hospitals.\nHigh-teaching hospitals: Arkansas targeted 98 percent of DSH  funding to high-teaching hospitals, defined as teaching hospitals with  an intern-and-resident-to-bed ratio of 0.25 or greater.\nIMDs: Maine makes DSH payments to the two state-run IMDs. In  2014, 18 states directed their entire IMD-designated DSH limit to  IMDs. (For additional information on DSH payments to IMDs, see  table 9 in app. II).\nSimilarly, states can target UPL payments to certain hospitals. We and  the HHS Office of the Inspector General have reported that some states  concentrated these payments to a small number of providers.\n\n\t\tGAO and Others Have Noted Concerns With States\u2019 Use of Supplemental Payments\n\nOur work has highlighted a number of concerns about the use of non- DSH payments from various perspectives, highlighting the need for  transparent reporting, ensuring expenditures meet Medicaid purposes,  and concerns regarding arrangements that shift costs from the states to  the federal government. For example, in November 2012, we  recommended that Congress consider requiring CMS to improve the  transparency of and accountability for non-DSH payments by requiring  facility-specific payment reporting and annual audits. The report noted  that the annual DSH reports and audits that states began submitting in  2010 were important steps toward improving transparency and  accountability for Medicaid DSH payments; however, similar information  is lacking for non-DSH payments. Moreover, the report stated that the  limited information available on non-DSH payments shows that a large  share of these payments are paid to a small number of hospitals; when  these payments are combined with Medicaid base payments, hundreds of  hospitals may be receiving Medicaid payments well in excess of their  actual costs of providing Medicaid services. As of March 2019, Congress  has not taken any action, but CMS announced in fall 2018 that it was  planning a proposed rule on supplemental payments that, if finalized,  would improve transparency by requiring states to provide CMS with  certain information on Medicaid supplemental payments. The agency  plans to release the proposed rule for comment by fall 2019.\nIn 2014, we recommended that CMS develop a data collection strategy  ensuring states report accurate and complete data on all sources of funds  used to finance the nonfederal share of Medicaid payments. Such data  are needed to (1) track trends in financing the nonfederal share, and (2)  oversee compliance with current limits on sources of financing the  nonfederal share. CMS did not concur with our recommendation, but did  acknowledge the agency does not have sufficient data to oversee  compliance with the 60 percent limit on local government contributions to  a state\u2019s nonfederal share.\n\n\tHospital Uncompensated Care Costs and DSH Payments Varied by State; Some Types of Hospitals Received a Greater Proportion of DSH Payments\n\n\t\tUncompensated Care Costs Varied by State and Were Mainly for Costs Related to Treating Uninsured Patients\n\nAmong hospitals receiving DSH payments in 2014, total uncompensated  care costs varied by state, ranging from $5.9 million in North Dakota to  $6.2 billion in New York. In the hospitals, most uncompensated care costs  were related to costs to care for uninsured patients, rather than the  Medicaid shortfall. For example, among hospitals receiving DSH  payments in the 48 states studied:\nCosts related to care for the uninsured comprised about two-thirds  (67.9 percent) of total uncompensated care costs for DSH hospitals.  The remaining share of DSH hospital uncompensated care costs  consisted of the Medicaid shortfall.\nIn 34 states, costs for care for the uninsured exceeded the Medicaid  shortfall. In the remaining 14 states, the Medicaid shortfall exceeded  costs related to care for the uninsured.\nIn 15 states, Medicaid paid hospitals more than the total cost of  services provided to Medicaid beneficiaries, resulting in a surplus of  Medicaid payments\u2014even prior to receiving DSH payments. Termed  a negative Medicaid shortfall, these surplus funds can be the result of  non-DSH Medicaid supplemental payments. The remaining 33 states  had some Medicaid shortfall. (See table 3.) No states had a surplus of  total uncompensated care costs.  (For additional information on state uncompensated care costs and DSH  payments in 2014, see table 10 in app. II.)\n\n\t\tAcross States, DSH Payments Varied Significantly in Amounts, Percentage of Uncompensated Care Costs Covered, and Percentage of States\u2019 Medicaid Spending on Hospitals\n\nDSH payments\u2014both the federal and nonfederal share\u2014varied  significantly in the amount that each state paid to hospitals in 2014. (See  table 4 and fig. 2.) Wyoming made the smallest amount of DSH payments  at about $500,000, while New York made the largest amount in DSH  payments at $3.5 billion. Differences in DSH payments are largely the  result of differences in the state allocations established in law.\nThe proportion of total DSH hospital uncompensated care costs covered  by total DSH payments in 2014 also varied considerably by state.  Nationally, DSH payments ($18.3 billion) covered about half of DSH  hospital uncompensated care costs ($36.2 billion). Nineteen states made  DSH payments totaling at least 50 percent of uncompensated care costs  for the states\u2019 DSH hospitals, while 29 states made DSH payments of  less than 50 percent of uncompensated care costs for the states\u2019 DSH  hospitals. (See table 5.) Four states (California, Illinois, Maryland, and  Missouri) made DSH payments that exceeded aggregate hospital  uncompensated care costs. (For additional information on state  uncompensated care costs and DSH payments in 2014, see table 10 in  app. II.)\nAmong hospitals receiving them, DSH payments accounted for 13.6  percent of total Medicaid payments, nationally, but there was  considerable variation across states. For example, DSH payments  comprised 96.6 percent of Medicaid payments to DSH hospitals in Maine  and 0.7 percent of Medicaid payments to DSH hospitals in Tennessee.  In 40 states, DSH payments accounted for less than 20 percent of total  Medicaid payments to hospitals, but in 8 states, it exceeded 20 percent.  (See table 6.) (For additional information on state Medicaid payments to  hospitals, see table 11 in app. II.)\n\n\t\tDeemed-DSH, Public, and Teaching Hospitals Received a Greater Share of DSH Payments Relative to their Proportion of Uncompensated Care Costs\n\nAmong deemed and non-deemed DSH hospitals, overall deemed-DSH  hospitals received larger relative DSH payments compared to non- deemed DSH hospitals. Deemed-DSH hospitals received 69.9 percent  of DSH payments in 2014, but carried 51.2 percent of uncompensated  care costs, relative to all hospitals receiving DSH payments that year.  Each of the 48 states that distributed DSH payments in 2014 had at least  one deemed-DSH hospital. (See table 7 for hospital type definitions.)  Most of these states (36) provided deemed-DSH hospitals with a greater  share of DSH payments relative to their share of total uncompensated  care costs. (See table 8 for a summary of how states\u2019 DSH payments to  deemed-DSH hospitals compared to the hospitals\u2019 share of  uncompensated care costs, and table 12 in app. II for additional  information by state.)\nIn terms of ownership and teaching hospital status, hospitals that were  publicly owned or teaching hospitals also generally received a greater  proportion of DSH payments relative to their share of total  uncompensated care costs.\nAmong the three different ownership groups (public, non-profit, and  private), public hospitals generally received a larger share of DSH  payments relative to their share of uncompensated care. Among  hospitals receiving DSH payments in 2014, public (36.7 percent) and  nonprofit (53.7 percent) hospitals accounted for more uncompensated  care costs than that of privately owned hospitals (9.6 percent). States  generally provided more DSH payments to public hospitals (62.8  percent) relative to their share of total uncompensated care costs  (36.7 percent). (For additional information on DSH payments and  hospitals\u2019 uncompensated care costs by ownership, see table 13 in  app. II.)\nStates distribute DSH payments to teaching hospitals at different  rates, but generally provided a greater proportion of DSH payments to  high-teaching hospitals (56.5 percent) relative to their share of total  DSH hospital uncompensated care costs (44.0 percent). (For  additional information on DSH payments and hospitals\u2019  uncompensated care costs by hospital teaching status, see table 14 in  app. II.)\nNationally, urban hospitals received a greater share of DSH payments  relative to rural hospitals, with 89.6 percent of DSH funds distributed  to urban hospitals and the remaining 10.4 percent distributed to rural  hospitals. This proportion corresponds to a similar distribution of  uncompensated care costs, with 88.2 percent of uncompensated care  costs among DSH hospitals carried by urban hospitals and the  remaining 11.8 percent carried by rural hospitals. (For additional  information on DSH payments and hospitals\u2019 uncompensated care  costs by urban\/rural status, see table 15 in app. II.)\nFor additional information on variation in uncompensated care and DSH  payments by hospital category and sole community provider status, and  state characteristics, see tables 16 through 19 in appendix II.\n\n\tAgency Comments\n\nWe provided a draft of this report to HHS for review. HHS provided  technical comments, which we incorporated as appropriate.\nAs 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, 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.\nIf 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 III.\n\nAppendix I: Selected Bibliography\n\nThis bibliography contains citations for the eight Kaiser Family Foundation  reports referenced in the report.\nKaiser Family Foundation and Health Management Associates. States  Focus on Quality and Outcomes Amid Waiver Changes: Results from a  50-State Medicaid Budget Survey for State Fiscal Years 2018 and 2019.  Washington, D.C.: Kaiser Family Foundation, and National Association of  Medicaid Directors, October 2018.\nKaiser Family Foundation and Health Management Associates. Medicaid  Moving Ahead in Uncertain Times: Results from a 50-State Medicaid  Budget Survey for State Fiscal Years 2017 and 2018. Washington, D.C.:  Kaiser Family Foundation, October 2017.\nKaiser Family Foundation and Health Management Associates.  Implementing Coverage and Payment Initiatives: Results from a 50-State  Medicaid Budget Survey for State Fiscal Years 2016 and 2017.  Washington, D.C.: Kaiser Family Foundation and National Association of  Medicaid Directors, October 2016.\nKaiser Family Foundation and Health Management Associates. Medicaid  Reforms to Expand Coverage, Control Costs and Improve Care: Results  from a 50-State Medicaid Budget Survey for State Fiscal Years 2015 and  2016. Washington, D.C.: Kaiser Family Foundation and National  Association of Medicaid Directors, October 2015.\nKaiser Family Foundation and Health Management Associates. Medicaid  in an Era of Health & Delivery System Reform: Results from a 50-State  Medicaid Budget Survey for State Fiscal Years 2014 and 2015.  Washington, D.C.: Kaiser Family Foundation, and National Association of  Medicaid Directors, October 2014.\nKaiser Family Foundation and Health Management Associates. Medicaid  in a Historic Time of Transformation: Results from a 50-State Medicaid  Budget Survey for State Fiscal Years 2013 and 2014. Washington, D.C.:  Kaiser Commission on Medicaid and the Uninsured, Kaiser Family  Foundation, October 2013.\nKaiser Family Foundation and Health Management Associates. Medicaid  Today; Preparing for Tomorrow: A Look at State Medicaid Program  Spending, Enrollment and Policy Trends Results from a 50-State  Medicaid Budget Survey for State Fiscal Years 2012 and 2013.  Washington, D.C.: Kaiser Commission on Medicaid and the Uninsured,  Kaiser Family Foundation, October 2012.\nKaiser Family Foundation and Health Management Associates. Moving  Ahead Amid Fiscal Challenges: A Look at Medicaid Spending, Coverage  and Policy Trends Results from a 50-State Medicaid Budget Survey for  State Fiscal Years 2011 and 2012. Washington, D.C.: Kaiser Commission  on Medicaid and the Uninsured, Kaiser Family Foundation, October 2011.\n\nAppendix II: Data on Disproportionate Share Hospital Payments and Hospital Uncompensated Care Costs by State\n\nTo conduct this analysis, we used data compiled by Acumen for the  Medicaid and CHIP Payment and Access Commission. These data  consist of measures from several sources. The measures used within this  report were collected from state disproportionate share hospital (DSH)  audits and Medicare cost reports. The 2014 DSH audits, which report  data on hospital uncompensated care costs and DSH payments to  hospitals, were submitted by 48 states and the District of Columbia.  These data do not include a census of all hospitals, but only those  hospitals that were reported in the 2014 DSH audits. As a result, these  data do not capture all uncompensated care costs in each state, only  uncompensated care costs for those hospitals reported in the 2014 DSH  audits. Two states, Massachusetts and Hawaii, did not submit a 2014  DSH audit, because they did not make DSH payments. Additionally, while  South Dakota submitted a 2014 DSH audit, we excluded the state from  our analysis because of concerns about the reliability of the reported cost  measures.\nIn addition, not all hospitals reported every data element we analyzed. As  a result, total uncompensated care costs and total DSH payments vary  between tables, as hospitals were excluded from a given table if they did  not report the characteristic described by the table. The numbers of  hospitals excluded because they did not report a given data element are  noted in each table for which this is the case. Likewise, as  uncompensated care costs are an important focus of the report, we also  excluded from all analyses 13 hospitals that did not report a value for  uncompensated care costs.\n\nAppendix III: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Lori Achman (Assistant Director),  Dawn Nelson (Analyst-in-Charge), Sean Miskell, and Jeffrey Tamburello  made key contributions to this report. Also contributing were Tim  Bushfield, Drew Long, Vikki Porter, and Emily Wilson.","output":null}
{"id":"crs_R46241","pid":"crs_R46241_0","input":"I n October 2018, the Office of the U.S. Trade Representative (USTR) officially notified the Congress, under Trade Promotion Authority (TPA), of the Trump Administration's plans to enter into formal trade negotiations with the European Union (EU). This action followed a July 2018 U.S.-EU Joint Statement by President Trump and then-European Commission (EC) President Juncker announcing that they would work toward a trade agreement to reduce tariffs and other trade barriers, address unfair trading practices, and increase U.S. exports of soybeans and certain other products. Previously, in 2016, U.S.-EU negotiations as part of the Transatlantic Trade and Investment Partnership (T-TIP) stalled after 15 rounds under the Obama Administration. \nThe outlook for new U.S.-EU talks remains uncertain. There continues to be disagreement about the scope of the negotiations, particularly the EU's intent to exclude agriculture from the talks on the basis that it \"is a sensitivity for the EU side.\" EU sensitivities stem in part from commercial and cultural practices that are often embodied in EU laws and regulations and vary from those of the United States. For food and agricultural products, such differences include regulatory and administrative differences between the United States and the EU on issues related to food safety and public health\u00e2\u0080\u0094or Sanitary and Phytosanitary (SPS) measures, and Technical Barriers to Trade (TBTs). Other differences include product naming schemes for some types of food and agricultural products subject to protections involving Geographical Indications (GIs). Addressing food and agricultural issues in the negotiations remains important to U.S. exporters given the sizable and growing U.S. trade deficit with the EU in agricultural products.\nRenewed trade talks also come amid heightened U.S.-EU trade frictions. In March 2018, President Trump announced 25% steel and 10% aluminum tariffs on most U.S. trading partners, including the EU, after a Section 232 investigation determined that these imports threaten U.S. national security. In response, the EU began applying retaliatory tariffs of 25% on certain U.S. exports to the EU. Additionally, as part of the Boeing-Airbus subsidy dispute, in October 2019 the United States began imposing additional, World Trade Organization (WTO)-sanctioned tariffs on $7.5 billion worth of certain U.S. imports from the EU. \nThis report provides an overview of U.S.-EU trade in agriculture and background information on selected U.S.-EU agricultural trade issues concerning a potential trade liberalization agreement between the United States and the EU. Following a review of U.S.-EU agricultural trade trends, this report describes recent agricultural trade trends and tariff actions affecting certain U.S.-EU traded food and agricultural goods. It then describes potential issues in U.S.-EU trade agreement negotiations involving food and agricultural trade. Figure 1 shows a timeline of selected events.\nFigure 1. Selected Timeline of Events Related to U.S.-EU Agricultural TradeSource: CRS. Actions related to the U.S.-EU Trade Agreement negotiations are shown in red.Note: USTR = U.S. Trade Representative (USTR). WTO = World Trade Organization. EU27 includes the current 27 EU member states, excluding the United Kingdom (UK). EU28 includes the UK.\n\n\tTrade Data and Statistics\n\nFollowing are trade data and statistics for the current 27 EU member states (EU27). Unless otherwise noted, these figures exclude the United Kingdom (UK), which formally exited the EU in January 2020. Moving forward, U.S. trade negotiations with the EU are expected to exclude the UK, which may enter into trade discussions with the United States separately. \nTrade data presented here are compiled from U.S. Department of Agriculture (USDA) trade statistics for \"Agricultural and Related Products.\" As defined by USDA, this product grouping includes agricultural products (including bulk and intermediate products and also consumer-oriented products) and agricultural-related products (including fish and shellfish products, distilled spirits, forest products, and ethanol and biodiesel blends). Additional information on the various data sources is discussed in the t ext box .\nThe United States and the EU are the world's largest trade and investment partners. While food and agricultural trade between the United States and the EU27 accounts for less than 1% of the value of overall trade in total goods and services ( Figure 2 ), the EU27 remains a leading market for U.S. agricultural exports. It accounted for about 8% of the value of all U.S. exports and ranked as the fifth-largest market for U.S. food and farm exports in 2019\u00e2\u0080\u0094after Canada, Mexico, China, and Japan. Data depicted in Figure 2 do not reflect trade in fish and seafood, distilled spirits, and bioenergy products.\nDuring the past two decades, growth in U.S. agricultural exports to the EU has not kept pace with growth in trade to other U.S. markets. U.S. agricultural imports from the EU27 currently exceed U.S. exports to the EU27. In 2019, U.S. exports of agricultural and related products to the EU27 totaled $12.4 billion, while U.S. imports of agricultural and related products from the EU27 totaled $29.7 billion, resulting in a U.S. trade deficit of approximately $17.3 billion. This reverses the U.S. agricultural trade surpluses with the EU27 during the early 1990s ( Figure 3 ). Leading U.S. agricultural exports to the EU27 were corn and soybeans, tree nuts, distilled spirits, fish products, wine and beer, planting seeds, and processed foods. Leading U.S. imports from the EU27 were wine and spirits, beer, drinking waters, olive oil, cheese, and processed foods. \nWhile data shown in the graphic reflect total trade in \"Agricultural and Related Products,\" including agricultural products, fish and shellfish products, distilled spirits, and other agricultural related products, the trade picture may vary by product category (as shown in Table 1 ). Trade data presented here do not include the UK, which is a major importer of U.S. agricultural products. In 2019, U.S. agricultural and related product exports to the UK totaled $2.8 billion, which roughly equaled the value of imports from the UK ( Figure 4 ).\n\n\tU.S.-EU Tariff Retaliation\n\nThe U.S.-EU trade negotiations come amid heightened U.S.-EU trade frictions. In March 2018, President Trump announced 25% steel and 10% aluminum tariffs on most U.S. trading partners after a Section 232 investigation determined that these imports threaten to impair U.S. national security. The EU was not among the trading partners with whom the Trump Administration negotiated permanent exemptions from tariffs or alternative quota arrangements, and U.S. tariffs on U.S. imports from the EU went into effect in June 2018. The EU views the U.S. national security justification as groundless and the U.S. tariffs to be inconsistent with WTO rules. The EU has challenged the U.S. actions at the WTO.\nEffective June 2018, the EU began applying retaliatory tariffs of 25% on imports of U.S. whiskies, corn, rice, kidney beans, preserved and mixed vegetables, orange juice, cranberry juice, peanut butter, and tobacco products, along with selected non-agricultural products ( Figure 5 ). This action includes the EU27 countries and the UK (EU28), as U.S. exports to the UK remain subject to the additional tariffs. The value of U.S. agricultural exports to the EU28 targeted by these additional tariffs is estimated to have been approximately $1.2 billion in 2018, or nearly 9% of total U.S. agricultural exports to the EU28 (excluding nonagricultural products) ( Table 2 ). Some analysts estimate that U.S. agricultural exports subject to tariff retaliation in 2018-2019 experienced a 33% decline in the EU28 market. \nIn October 2019, U.S.-EU trade tensions escalated further when the United States imposed additional tariffs on $7.5 billion worth of certain U.S. imports from the EU, or about 1.5% of all U.S. imports from the EU28 in 2018 (including the UK and nonagricultural products). This action, authorized by WTO dispute settlement procedures, followed a USTR investigation initiated in April 2019 under Section 301 of the Trade Act of 1974. The USTR determined that the EU had denied U.S. rights under WTO agreements. Specifically, USTR concluded that the EU and certain member states (including the UK) had not complied with a WTO Dispute Settlement Body ruling recommending the withdrawal of WTO-inconsistent EU subsidies to Airbus for the manufacture of large civil aircraft.\nThe list of products subject to additional tariffs stemming from the Airbus subsidy dispute targets mainly the EU member states responsible for the illegal subsidies. It includes agricultural products such as spirits and wine, cheese and dairy products, meat products, fish and seafood, fresh and prepared fruit products, coffee, and bakery goods. Agricultural imports account for about 56% of the total value of EU28 products subject to these additional tariffs. As of February 2020, tariff increases are limited to 25% on agricultural products, and they target primarily France, Germany, UK, and Spain ( Figure 6 ). By agricultural product category, whiskies, liqueurs, and wine (mainly from UK and France) account for approximately 38%, and other food and agricultural products (mainly from Spain and France) account for 19% ( Table 3 ). In December 2019, USTR began a review to determine if the list of imports subject to additional tariffs should be revised or tariff rates increased. In February 2020, USTR made some changes to the list of products affected by Section 301 tariffs. In terms of U.S. agricultural imports from the EU, the only change will be the removal of prune juice from the list, which will not be subject to additional 25% tariffs effective March 5, 2020.\nU.S.-EU trade negotiations could be affected further if the EU retaliates and imposes tariffs on U.S. exports, in response to either these U.S. actions or an upcoming WTO decision in the parallel EU dispute case against the United States. Later this year a WTO arbitrator is expected to authorize the EU to seek remedies in the form of tariffs on U.S. exports to the EU, after the WTO determined in early 2019 that the United States had also failed to abide by WTO subsidies rules in supporting Boeing.\n\n\tSelected U.S.-EU Agricultural Trade Issues\n\nIn January 2019, USTR announced its negotiating objectives for a U.S.-EU trade agreement, following a public comment period and a hearing involving several leading U.S. agricultural trade associations. These objectives include agricultural policies\u00e2\u0080\u0094both market access and non-tariff measures such as tariff rate quotas (TRQ) administration and other regulatory issues. Among regulatory issues, key U.S. objectives include harmonizing regulatory processes and standards to facilitate trade, including SPS standards, and establishing specific commitments for trade in products developed through agricultural biotechnologies. The U.S. objectives also include addressing GIs by protecting generic terms for common use. U.S. agricultural interests generally support including agriculture in a U.S.-EU trade agreement. The stated overarching goal for the U.S. side is addressing the U.S. trade deficit in agricultural products with the European Union.\nEarly on, the EU indicated that it was planning for a more limited negotiation that does not include agricultural products and policies. The EU negotiating mandate, dated April 2019, states that a key EU goal is \"a trade agreement limited to the elimination of tariffs for industrial goods only, excluding agricultural products.\" Several Members of Congress opposed the EU's decision to exclude agricultural policies in its negotiating mandate. A letter to USTR from a bipartisan group of 114 House members states that \"an agreement with the EU that does not address trade in agriculture would be, in our eyes, unacceptable.\" Senate Finance Committee Chairman Chuck Grassley reiterated, \"Bipartisan members of the Senate and House \u00e2\u0080\u00a6 have voiced their objections to a deal without agriculture, making it unlikely that such a deal would pass Congress.\" \nThen, in January 2020, public statements by U.S. and EU officials signaled the possibility that the U.S.-EU trade talks might include negotiation on SPS and regulatory barriers to agricultural trade. It is not clear, however, that both sides agree on which specific types of non-tariff trade barriers might actually be part of the U.S.-EU trade talks. As reported in the press, statements by some USDA officials have suggested that selected SPS barriers as well as GIs would need to be addressed by the trade talks. Meanwhile, other press reports indicate that some EU officials have downplayed the extent that certain non-tariff barriers\u00e2\u0080\u0094such as biotechnology product permits, approval of certain pathogen rinses for poultry, regulations on pesticides, or food standards\u00e2\u0080\u0094would be part of the talks; instead, regulatory barriers might be lowered for certain \"non-controversial\" foods. The United States continues to push for additional concessions from the EU. More formal discussions are expected in the spring of 2020\u00e2\u0080\u0094in an effort to ease trade tensions regarding the imposition of retaliatory tariffs.\nThe EU has taken certain measures to avoid escalating agricultural trade tensions with the United States. For example, it has expanded the U.S.-specific quota for EU imports of hormone-free beef, increased imports of U.S. soybeans as a source of biofuels, approved a number of long-pending genetically engineered products for food and feed uses, and proposed to lift a ban on certain pest-resistant American grapes in EU wine production, and other trade-related measures.\nIn a separate but indirectly related action, in August 2019, USTR asked the U.S. International Trade Commission (USITC) to conduct an investigation examining SPS barriers related to pesticide maximum residue levels (MRLs) across all U.S. markets, including Europe.\nPreviously, during T-TIP negotiations, both market access and non-tariff barriers were part of the U.S. negotiating objectives. At that time, non-tariff barriers to agricultural trade\u00e2\u0080\u0094including SPS and TBT measures, and GIs\u00e2\u0080\u0094were among the agricultural issues actively debated. In addition, regulatory coherence and cooperation was part of USTR's stated objectives. Some of the same issues that proved to be challenging during the T-TIP talks may continue to challenge negotiators. Various studies at the time reported that removing tariff and non-tariff barriers in U.S.-EU trade would result in economic benefits to the U.S. and EU agricultural sectors. Another study by the European Parliament acknowledged that gains from tariff cuts would be limited unless regulatory and administrative barriers were also addressed. \n\n\t\tMarket Access\n\nMarket access issues are not slated to be discussed in the U.S.-EU trade talks. However, these issues remain important for U.S. agricultural exporters. This is especially true regarding the EU's use of restrictive tariff rate quotas (TRQs) on certain agricultural products. TRQs allow imports of fixed quantities of a product at a lower tariff. Once the quota is filled, a higher tariff is applied on additional imports. The EU allocates TRQs to importers using licenses issued by the member states' national authorities. Only companies established in the EU may apply for import licenses. For exports under a U.S.-specific TRQ, a certificate of origin must be supplied. The EU applies TRQs on many types of beef and poultry products, sheep and goat meat, dairy products, cereals, rice, sugar, and fruit and vegetables. Some products are heavily protected by both TRQs and non-tariff SPS measures. \nImport tariffs for agricultural products into Europe tends to be relatively high compared to tariffs for similar products into the United Sates. The WTO reports that the simple average most-favored-nation (MFN) tariff applied to agricultural products entering the United States is about 5%, compared to an average tariff of about 13% for products entering the EU. Including all products imported under an applied tariff or a TRQ, USDA reports that the calculated average rate across all U.S. agricultural imports is roughly 12%, well below the EU's average of 30%. By commodity group, EU tariffs average more than 40% for imported meat products, grains, and grain products and average at or above 20% for most fruit and vegetable products. For some products, EU tariffs are even greater, averaging more than 80% for imported dairy products, more that 50% for sugar cane and sweeteners, and nearly 350% for sugar beets. The EU has concluded preferential trade agreements with more than 35 non-EU countries and continues to negotiate agreements with several others. This preferential access provides U.S. export competitors an advantage over U.S. agricultural exporters, particularly in countries where the United States does not have a preferential agreement in place.\nPreviously, during the T-TIP negotiations, Senate leadership sent a letter to USTR reiterating that a final agreement would need to include \"a strong framework for agriculture,\" including \"tariff elimination on all products\u00e2\u0080\u0094including beef, pork, poultry, rice, and fruits and vegetables\" and that \"liberalization in all sectors of agriculture\" was a priority, if the agreement were to obtain the support of Congress. The letter also addressed the importance of \"longstanding regulatory barriers,\" including the EU's import approval process of U.S. biotechnology products and GI protections promoted by the EU.\n\n\t\tNon-Tariff Barriers to Trade\n\nHigh tariff barriers are further exacerbated by additional non-tariff barriers that may limit U.S. agricultural exports, including SPS measures, and other types of non-tariff barriers. Non -t ariff m easures (NTMs) generally refer to policy measures other than tariffs that may have a negative economic effect on international trade. NTMs include both technical and nontechnical measures. Technical measures include both SPS and TBTs and pre-shipment formalities and related requirements that are intended to govern public health and food safety. Nontechnical measures include quotas, price control measures, rules of origin requirements, and government procurement restrictions. \nNon-tariff barriers affect agricultural trade in various ways, including delays in reviews of biotech products (creating barriers to U.S. exports of grain and oilseed products), prohibitions on growth hormones in beef production and certain antimicrobial and pathogen reduction treatments (creating barriers to U.S. meat and poultry exports), and burdensome and complex certification requirements (creating barriers to U.S. processed foods, animal products, and dairy products). Extensive EU regulations and difficulty finding up-to-date information are among the primary concerns of U.S. businesses, particularly for makers of processed foods. U.S. businesses report a lack of a science-based focus in establishing SPS measures, difficulty meeting food safety standards and obtaining product certification, differences across countries in food labeling requirements, and stringent testing requirements that are often applied inconsistently across EU member nations.\nNon-tariff barriers to agricultural trade\u00e2\u0080\u0094including SPS and TBT measures, and GIs\u00e2\u0080\u0094were among the agricultural issues actively debated in the T-TIP negotiation. Previous negotiations were complicated by longstanding trade disputes between the United States and EU involving food safety and product standards that are often embodied in laws and regulations in the United States and EU, as well as separate requirements that may be in force within individual EU member states. For example, the EU restricts some types of genetically engineered (GE) seed varieties and also prohibits the use of hormones in meat production and certain pathogen reduction treatments in poultry production. As these types of practices are commonplace in the United States, this tends to restrict U.S. agricultural exports to the EU. Other EU regulations and standards involve pesticide residues on foods, drug residues in animal production, and certain animal welfare requirements that may vary from those in the United States. The United States has also opposed the EU's GI protections that govern product labeling on products within the EU and within some countries that have a formal trade agreement with the EU. Such GI protections also tend to restrict U.S. agricultural exports to the EU and to some other countries where such protections have been put in place. \nAs part of a trade negotiation, non-tariff barriers tend to be broadly grouped along with other issues related to regulatory coherence. The U.S. Chamber of Commerce defines regulatory coherence as \"good regulatory practices, transparency, and stakeholder engagement in a domestic regulatory process\" and regulatory cooperation as \"the process of interaction between U.S. and EU regulators, founded on the benefits regulators can achieve through closer partnership and greater regulatory interoperability.\" Related terminology may refer interchangeably to regulatory convergence, cooperation, and\/or harmonization. Trade negotiations involving regulatory and intellectual property rights issues have focused, in part, on the goals of ensuring greater transparency, harmonization, and coherence to improve cooperation and streamline the regulatory approval process among the trading partners. \nPrevious USDA estimates calculated the ad valorem equivalent effects of EU non-tariff barriers to U.S. agricultural exports, which were estimated to range from 23% to 102% for some more heavily protected products, including meat products, fruits and vegetables, and some crops. \nIn general, SPS and related regulatory issues tend to be addressed in free trade agreements (FTAs) within an agreement's agriculture chapter or chapter on regulatory coherence, while GIs tend to be addressed along with other types of intellectual property rights (IPR) issues, in an FTA's IPR chapter. The following section provides additional background on SPS and TBT measures, as well as GI protections. \n\n\t\t\tSPS\/TBT Issues\n\nSPS measures are laws, regulations, standards, and procedures that governments employ as \"necessary to protect human, animal or plant life or health\" from the risks associated with the spread of pests, diseases, or disease-carrying and causing organisms, or from additives, toxins, or contaminants in food, beverages, or feedstuffs. Examples include product standards, requirements for products to be produced in disease-free areas, quarantine and inspection procedures, sampling and testing requirements, residue limits for pesticides and drugs in foods, and limits on food additives. TBT measures cover both food and non-food traded products. TBTs in agriculture include SPS measures, but also include other types of measures related to health and quality standards, testing, registration, and certification requirements, as well as packaging and labeling regulations. Both SPS and TBT measures regarding food safety and related public health protection are addressed in various multilateral trade agreements and are regularly notified to and debated within both the SPS Agreement and TBT Agreement within the WTO. \nIn general, under the SPS and TBT agreements, WTO members agree to apply such measures, based on scientific evidence and information, only to the extent necessary to protect human, animal, or plant life and health and to not arbitrarily or unjustifiably discriminate between WTO members where identical standards prevail. Member countries are also encouraged to observe established and recognized international standards. Improper use of SPS and TBT measures can create substantial barriers to trade when they are disguised protectionist barriers, are not supported by scientific evidence, or are otherwise unwarranted. Bilateral and regional FTAs between the United States and other countries regularly address SPS and TBT matters. Provisions in most U.S. FTAs have generally reaffirmed rights and obligations of both parties under the WTO SPS and TBT agreements. Some FTAs have established standing bilateral committees to enhance understanding of each other's measures and to consult regularly on related matters. Other FTAs have included side letters or agreements for the parties to continue to cooperate on scientific and technical issues, which in some cases may be related to certain specific market access concerns. Most FTAs have not addressed specific non-tariff trade concerns directly.\n\n\t\t\t\tDifferences in U.S. and EU Laws and Regulations\n\nRegulatory differences between the United States and EU have contributed to trade disputes regarding SPS and TBT rules between the two trading blocs. The United States has several formal WTO trade disputes regarding SPS and TBT measures with the EU. These include concerns regarding the EU's prohibitions on the use of growth-promoting hormones (and ractopamine ) in meat production, the EU's restrictions on chemical treatments (\"pathogen reduction treatments\" or \"PRTs\") on U.S. poultry, and the EU's approval process of biotechnology products. Other SPS concerns have involved regulations related to bovine spongiform encephalopathy (BSE, commonly known as mad cow disease) and regulations involving plant processing, chemical residues, endocrine-disrupting chemicals, antibiotics, and animal welfare.\nThere are major differences in how the United States and the EU regulate food safety and related public health protection, including various administrative and technical review differences, which in turn influences how each applies various SPS and TBT measures. Such differences have often been central to SPS and TBT disputes, including those involving the use of hormones in meat production and pathogen reduction treatments in poultry processing. Other disputes invoking the SPS and TBT agreements between the U.S. and EU have included beef and poultry products, eggs, frozen bovine semen, milk products, animal byproducts, seafood, pesticide and animal drug residues, seeds, wheat, wine and spirits, and food packaging requirements.\nDifferences are also evident in how the United States and EU regard biotechnology in agricultural production. In general, EU officials have been cautious in allowing genetically engineered crops\u00e2\u0080\u0094commonly referred to in Europe as genetically modified organisms (or GMOs)\u00e2\u0080\u0094to enter the EU market. As such, any GE-derived food and feed must be labeled accordingly. The EU's regulatory framework regarding biotechnology is generally regarded as one of the most stringent systems worldwide. During the T-TIP negotiations, U.S. agricultural and food groups actively called for changes to the EU's approach for approving and labeling biotechnology products.\nThe EU has reported concerns about perceived U.S. SPS barriers to EU exports of sheep and goat meat, egg products, beef, certain dairy products, live bivalve mollusks, apples, and pears, along with difficulties protecting its own GIs on certain food and drinks. Other EU concerns have involved the use of \"Buy American\" restrictions in the United States governing public procurement. During the T-TIP negotiations, some expressed concern that including \"Buy American\" provisions could affect local food procurement, including restricting bidding contract preferences contained in U.S. and EU farm-to-school programs.\nThe EU's application of the so-called precautionary principle remains central to the EU's risk management policy regarding food safety and animal and plant health and is often cited as the rationale behind the EU's more risk-averse approach. The precautionary principle was reportedly referenced as part of the 1992 Treaty on European Union that further integrated the EU, and its use was further outlined in a 2000 communication and then formally established in EU food legislation in 2002 (Regulation EC No 178\/2002). The EU's 2000 communication further outlines guidelines for implementation, the basis for invoking the principle, and the general standards of application. Regarding international trade, under EU law, the precautionary principle provides for \"rapid response\" to address \"possible danger to human, animal, or plant health, or to protect the environment\" and can be used to \"stop distribution or order withdrawal from the market of products likely to be hazardous.\" Although the principle may not be used as a pretext for protectionist measures, many countries have challenged some EU actions that invoke the precautionary principle as \"protectionist.\" The EU, however, continues to invoke the precautionary principle to justify its policies regarding various regulatory issues and generally rejects arguments, on the grounds of risk management, that the lack of clear evidence of harm is not evidence of the absence of harm.\nNo universally agreed-upon definition of the precautionary principle exists, and many differently worded or conflicting definitions can be found in international law. However, within the context of the WTO and the SPS agreement, the precautionary principle (or precautionary approach) allows a country to set higher standards and methods of inspecting products. It also allows countries to take \"protective action\"\u00e2\u0080\u0094including restricting trade of products or processes\u00e2\u0080\u0094if they believe that scientific evidence is inconclusive regarding their potential impacts on human health and the environment (provided the action is consistent and not arbitrary). The WTO has generally acknowledged that the need to take precautionary actions in the face of scientific uncertainty has long been widely accepted, particularly in the fields of food safety and plant and animal health protection. Examples might include a sudden outbreak of an animal disease that is suspected of being linked to imports, which may require a country to impose certain trade restrictions while the outbreak is assessed.\nApplication of the precautionary principle by some countries remains an ongoing source of contention in international trade, particularly for the United States, and is often cited as a reason why some countries may restrict imports of some food products and processes. \n\n\t\t\t\tAddressing SPS and TBT Measures in FTA Negotiations\n\nIn the lead up to the previous T-TIP and Trans-Pacific Partnership (TPP) negotiations, there were active efforts to \"go beyond\" the rules, rights, and obligations in the WTO SPS Agreement and TBT Agreement, as well as commitments in existing U.S. FTAs. These efforts were referred to as \"WTO-Plus\" rules or, alternatively, as \"SPS-Plus\" and \"TBT-Plus\" rules. Related efforts called for improvements in regulatory cooperation and coherence, along with enhanced partnerships and interactions among regulators in each country.\nModernizing the rules governing the application of SPS and TBT measures in U.S.-EU trade by incorporating \"SPS-Plus\" and \"TBT-Plus\" rules as part of a trade agreement could represent a positive step for U.S. food and agricultural exporters. Changes regarding SPS and TBT measures agreed to in the U.S.-Mexico-Canada Agreement (USMCA) and the U.S.-China Phase One Trade Agreement incorporated policy changes regarding SPS and TBT measures consistent with previous \"SPS-Plus\" and \"TBT-Plus\" efforts. According to USITC, USMCA \"goes further in requiring transparency and encouraging harmonization or equivalence of SPS measures\" and incorporates all of the proposed enhanced TPP disciplines \"in the areas of equivalence, science and risk analysis, transparency, and cooperative technical consultations.\" Some industry representatives claim that USMCA \"goes beyond TPP in establishing deadlines for 'import checks,' by requiring importing parties to inform exporters or importers within five days of shipments being denied entry.\" Both agreements contain language that directly relates to the use of biotechnology.\nAlternative efforts to modify the EU's application of the precautionary principle could present more of a challenge for U.S. agricultural producers and exporters. Previously, during the T-TIP negotiations, some in the U.S. agriculture and food industry urged U.S. negotiators to address the EU's use and application of the precautionary principle. Many U.S. agricultural and food organizations contended that the EU's application of the precautionary principle undermines sound science and innovation and results in \"unjustifiable restrictions\" on U.S. exports, allowing the EU \"to put in place restrictions on products or processes when they believe that scientific evidence on their potential impact on human health or the environment is inconclusive.\" Some asserted that application of the principle results in a bias against new technologies, such as biotechnology and nanotechnology. As a result, these groups said that \"science-based decision making and not the precautionary principle must be the defining principle in setting up mechanisms and systems\" to address SPS concerns. The U.S. Chamber of Commerce supported a \"science-based approach to risk management, where risk is assessed based on scientifically sound and technically rigorous standards\" and opposed \"the domestic and international adoption of the precautionary principle as a basis for regulatory decision making.\" Many in Congress also called for \"effective rules and enforceable rules to strengthen the role of science\" to resolve international trade differences. \nMore recently, the EU's SPS were among the issues that raised the most concerns during a WTO review of the EU's trade policies. Among the cited concerns were certain SPS measures that were viewed to be not based on science or on international standards, and that were also deemed to not allow for adequate opportunity to take into account for the views of third countries. \n\n\t\t\t\tEfforts to Resolve SPS and TBT Measures Outside FTA Negotiations\n\nOutside of the FTA negotiation process, various U.S. federal agencies regularly address trade concerns involving SPS and TBT measures as part of their day-to-day oversight and regulatory responsibilities. For example, USDA's Animal and Plant Health Inspection Service (APHIS) administers various regulatory and control programs pertaining to animal and plant health and quarantine, humane treatment of animals, and the control and eradication of pests and diseases. APHIS also oversees SPS certification requirements for imported and exported agricultural goods. This work is ongoing. \nThe United States also maintains ongoing interagency processes and mechanisms to identify, review, analyze, and address foreign government standards-related measures that may be barriers to trade. These activities are coordinated through the USTR-led Trade Policy Staff Committee, which is composed of representatives from several federal agencies, including USDA, the Department of Commerce, and the State Department. USTR also chairs an interagency group (i.e., both USDA and non-USDA agencies with SPS and TBT responsibilities) that reviews SPS and TBT measures that are notified to the WTO, as required under the SPS and TBT agreements. These agency officials also work with their international counterparts on concerns involving SPS and TBT measures. USTR tracks issues related to such measures as part of its annual reports. \n\n\t\t\tGeographical Indications\n\nGIs are geographical names that act to protect the quality and reputation of a distinctive product originating in a certain region. The term GI is most often applied to wines, spirits, and agricultural products. GIs allow some food producers to differentiate their products in the marketplace. GIs may also be eligible for relief from acts of infringement or unfair competition. While GIs may protect consumers from deceptive or misleading labels, they can also impair trade when names that are considered common or generic in one market are protected in another. Examples of registered or established GIs include Parmigiano Reggiano cheese and Prosciutto di Parma ham from the Parma region of Italy, Toscano olive oil from the Tuscany region of Italy, Roquefort cheese from France, Champagne from the region of the same name in France, Irish whiskey, Darjeeling tea, Florida oranges, Idaho potatoes, Vidalia onions, Washington State apples, and Napa Valley wines. \nGIs are an example of IPR, along with patents, copyrights, trademarks, and trade secrets. The use of GIs has become a contentious international trade issue, particularly for U.S. wine, cheese, and sausage makers. In general, some consider GIs to be protected intellectual property, while others consider them to be generic or semi-generic terms. GIs are included among other IPR issues in the current U.S. trade agenda. GIs were an active area of debate during the T-TIP negotiations. Laws and regulations governing GIs differ markedly between the United States and EU, which further complicates this issue. \nGIs are protected by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which sets binding minimum standards for intellectual property protection that are enforceable by the WTO's dispute settlement procedure. Under TRIPS, WTO members must recognize and protect GIs as intellectual property. Both the United States and the EU are signatories of TRIPS and therefore subject to its rights and obligations. Accordingly, under TRIPS, the United States and EU have committed to providing a minimum standard of protection for GIs (i.e., protecting GI products to avoid misleading the public and prevent unfair competition) and an \"enhanced level of protection\" to wines and spirits that carry a GI, subject to certain exceptions. TRIPS builds on treaties administered by the World Intellectual Property Organization, a specialized agency in the United Nations with the mission to \"lead the development of a balanced and effective international intellectual property (IP) system.\" It also oversees the \"International Register of Appellations of Origin\" established in the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. The agreement's multilateral register covers food products and beverages and related products, as well as non-food products. \nThe EU's GI program remains a contentious issue for some U.S. producer groups, particularly among wine, cheese, and sausage makers. Some have long expressed their concerns about EU protections for GIs, which they claim are being misused to create market and trade barriers. Much of this debate involves certain terms used by cheesemakers, such as parmesan, asiago, and feta cheese, which the U.S. cheese sectors consider to be generic terms. For example, feta cheese produced in the United States may not be exported for sale in the EU, since only feta produced in countries or regions currently holding GI registrations may be sold commercially. A 2019 study commissioned by the U.S. dairy industry forecasts declining U.S. cheese exports due to expanding restrictions on parmesan, asiago, and feta cheese. Another study concluded that up to $15 million in cheese trade might need to be relabeled due to the restriction on certain GI terms, while other traded foods, such as oilseeds and vinegars, would experience little impact. \nSome U.S. industry groups, however, are trying to institute protections for U.S. products\u00e2\u0080\u0094similar to those in the EU GI system\u00e2\u0080\u0094to promote certain distinctive American agricultural products. The American Origin Products Association represents certain U.S. potato, maple syrup, ginseng, coffee, and chile pepper producers and certain U.S. winemakers, among other regional producer groups. It seeks to work with federal authorities to create \"a list of qualified U.S. distinctive product names, which correspond to the GI definition.\" \n\n\t\t\t\tDifferences in U.S. and EU Laws and Regulations\n\nLaws and regulations governing GIs differ markedly between the United States and EU. In the United States, GIs generally fall under the common law right of possession or \"first in time, first in right\" as trademarks or collective or certification marks under the purview of the existing trademark regime, administered by the U.S. Patent and Trademark Office (PTO) and protected under the U.S. Trademark Act. Trademarks are distinctive signs that companies use to identify themselves and their products or services to consumers and can take the form of a name, word, phrase, logo, symbol, design, image, or a combination of these elements. Trademarks do not refer to generic terms, nor do they refer exclusively to geographical terms. Trademarks may refer to geographical names to indicate the specific qualities of goods either as certification marks or as collective marks. PTO does not have a special database register for GIs in the United States. PTO's trademark register, the U.S. Trademark Electronic Search System, contains GIs registered as trademarks, certification marks, and collective marks. USTR says that EU farm products hold nearly 12,000 trademarks. These register entries are not designated with any special field (such as \"geographical indications\") and cannot be readily compiled into a complete list of registered GIs. In the United States, the Alcohol and Tobacco Tax and Trade Bureau (TTB) also plays a role overseeing the labeling of wine, malt beverages, beer, and distilled spirits. \nIn the EU, a series of regulations governing GIs was initiated in the early 1990s covering agricultural and food products, wine, and spirits. Legislation adopted in 1992 covering agricultural products (not including wines and spirits) was replaced by changes enacted in 2006 following a WTO panel ruling that found some aspects of the EU's scheme inconsistent with WTO rules. The new rules came into force in January 2013. The EU laws and regulations provide product registration markers for the different quality schemes. The EU regulations establish provisions regarding products from a defined geographical area given linkages between the characteristics of products and their geographical origin. The EU defines a GI as \"a distinctive sign used to identify a product as originating in the territory of a particular country, region or locality where its quality, reputation or other characteristic is linked to its geographical origin.\" \nEU registered products often fall under GI protections in certain third-country markets, and some EU GIs have been trademarked in some non-EU countries. This has become a concern for U.S. agricultural exporters following a series of trade agreements the EU has concluded with Canada, Japan, South Korea, South Africa, and other countries that in many cases are also trading partners of the United States. For example, Canada has agreed to recognize a list of 143 EU GIs in Canada, and Japan has agreed to recognize more than 200 EU GIs in Japan. These GI protections could limit U.S. sales of certain products to these countries. The EU is in the process of negotiating FTAs with several other U.S. trading partners, including Mexico, Australia, New Zealand, and the Mercosur states (Argentina, Brazil, Paraguay, and Uruguay). Each of these efforts includes a selected list of GIs that would become protected under an FTA between these countries and the European Union. In December 2019, the EU also entered into an agreement with China regarding GIs that would protect a reported 100 EU GIs in China. As of January 2020, 3,316 product names are registered and protected in the EU for foods, wine, and spirits originating in both EU member states and other countries. \n\n\t\t\t\tAddressing GI Barriers in FTA Negotiations\n\nGIs continue to be actively debated as part of the official U.S. trade agenda, involving concerns about their possible improper use as well as the lack of transparency and due process under some country GI systems. USTR is working \"to advance U.S. market access interests in foreign markets and to ensure that GI-related trade initiatives of the EU, its Member States, like-minded countries, and international organizations, do not undercut such market access,\" and states that the EU's GI agenda \"significantly undermines the scope of trademarks and other [IPR] held by U.S. producers and imposes barriers on market access for American-made goods that rely on the use of common names.\" Statements by USDA officials in early 2020 have signaled that this issue could resurface as part of the U.S.-EU trade talks. \nPreviously, during T-TIP negotiations, U.S. officials indicated that the United States would likely not agree to EU demands to reserve certain food names for EU producers and have expressed concerns about the EU's system of protections for GIs. At the time, U.S. trade policy objectives regarding the EU's GI protections was to ensure that they \"do not undercut U.S. industries' market access\" and to defend the use of certain \"common food names.\" In general, the United States is seeking protection for current U.S. owners of trademarks that overlap with EU-protected GIs, the ability to use U.S. trademarked names in third countries, and the ability to use U.S. trademarked names in the EU.\nIn recent developments, according to USITC, USMCA \"increases the transparency of applications, approvals, and cancellations\" regarding GIs and \"provides guidelines for determining whether a term is customary in common use.\" In addition, a side letter between the United States and Mexico commits Mexico to not restrict market access for a list of more than 30 cheeses. USITC says this could \"help prevent future losses of U.S. market access for cheeses with common names\" such as \"blue\" or \"Swiss\" cheese. The final U.S.-China Phase One Trade Agreement also addresses longstanding concerns regarding IPR, including GIs, building on previous commitments regarding IPR and GIs. The agreement is expected to require that China ensure that it will \"not undermine market access for U.S. exports to China of goods\" and will apply relevant factors when providing certain GI protections, as well as provide the United States with \"necessary opportunities to raise disagreement\" regarding GIs. GI provisions in these two recent U.S. FTAs, however, could prove to be incompatible with other EU agreements regarding GIs with these countries. For Mexico and Canada, these include GI protections that are likely to be part of the EU-Mexico Global Agreement, as well as existing GI protections in the EU-Canada Comprehensive Economic and Trade Agreement. For China, these include GI protections agreed to in the 2019 EU-China agreement protecting certain EU GIs in China. \n\n\tNext Steps\n\nThe U.S.-EU Trade Agreement negotiations present Congress with the challenge of determining to what extent food and agriculture issues will be addressed in the trade talks, if at all. Although market access and tariff reductions may be off the table, addressing regulatory restrictions and other non-tariff barriers to U.S. agricultural trade are considered important for many U.S. producers. Some press reports indicate that certain non-tariff barriers and regulatory cooperation could become part of the new trade talks, while other press reports raise questions about the EU's willingness to address specific types of non-tariff barriers as part of the negotiation. Even if regulatory coherence and cooperation become part of the U.S.-EU trade talks, their resolution in a manner that benefits U.S. agricultural exporters is far from assured. Instead, some of the same non-tariff and regulatory barriers to U.S. trade that proved to be challenging during the T-TIP negotiation could prove to be equally intractable today.\nThe UK's exit from the EU could also complicate future trade negotiations. The UK is a close ally of the United States and has been one of its strongest advocates among the EU bloc. In general, the regulatory framework and actions taken by the UK's Food Standards Agency are more aligned with those in the United States. Now that the UK is no longer part of the EU, the EU trade gains for U.S. agriculture could be reduced while its agricultural trade deficit may become more pronounced, given a more favorable trade situation with the UK.","output":null}
{"id":"gao_GAO-19-368T","pid":"gao_GAO-19-368T_0","input":"\tBackground\n\n\t\tFamily Separations at the Southwest Border\n\nAccording to DHS and HHS officials, DHS has historically separated a  number of children from accompanying adults at the border and  transferred them to HHS custody, but these separations occurred only in  certain circumstances. For example, DHS might separate families if the  parental relationship could not be confirmed, if there was reason to  believe the adult was participating in human trafficking or otherwise a  threat to the safety of the child, or if the child crossed the border with  other family members such as grandparents without proof of legal  guardianship. HHS has traditionally treated these children as  unaccompanied alien children (UAC)\u2014children who (1) have no lawful  immigration status in the United States, (2) have not attained 18 years of  age, and (3) have no parent or legal guardian in the United States or no  parent or legal guardian in the United States available to provide care and  physical custody.\nThe Attorney General\u2019s April 2018 memorandum, also referred to as the  \u201czero tolerance\u201d policy, directed Department of Justice (DOJ) prosecutors  to accept all referrals of all improper entry offenses from DHS for criminal  prosecution, to the extent practicable. According to DHS officials, in  implementing the April 2018 memo, DHS\u2019s U.S. Customs and Border  Protection (CBP) began referring a greater number of individuals  apprehended at the border to DOJ for criminal prosecution, including  parents who were apprehended with children. In these cases, referred  parents were placed into U.S. Marshals Service custody and separated  from their children because minors cannot remain with a parent who is  arrested on criminal charges and detained by U.S. Marshals Service. In  cases where parents were referred to DOJ for criminal proceedings and  separated from their children, DHS and HHS officials stated they treated  those children as UAC. In such cases, DHS transferred these children to  the custody of HHS\u2019s Office of Refugee Resettlement (ORR) and ORR  placed them in one of their shelter facilities, as is the standard procedure  for UAC.\nThe President\u2019s executive order issued on June 20, 2018, directed,  among other things, that the Secretary of Homeland Security maintain  custody of alien families during any criminal improper entry or immigration  proceedings involving their family members, to the extent possible. This  order stated that the policy of the administration is to maintain family  unity, including by detaining alien families together where appropriate. In  addition, on June 26, 2018, a federal judge ruled in the Ms. L. v. ICE case  that certain separated parents must be reunited with their minor children  (referred to in this testimony statement as the \u201cJune 2018 court order\u201d).  In this case, the American Civil Liberties Union filed a federal lawsuit on  behalf of certain parents (referred to as class members) who had been  separated from their children. As of September, 10, 2018, the  government had identified 2,654 children of potential class members in  the Ms. L. v. ICE case, which we discuss in greater detail later in this  statement. As of January 31, 2019, this litigation was ongoing.\n\n\t\tCare and Custody of Unaccompanied Alien Children (UAC)\n\nUnder the Homeland Security Act of 2002, responsibility for the  apprehension, temporary detention, transfer, and repatriation of UAC is  delegated to DHS, and responsibility for coordinating and implementing  the placement and care of UAC is delegated to HHS\u2019s ORR. CBP\u2019s U.S.  Border Patrol (Border Patrol) and Office of Field Operations (OFO), as  well as DHS\u2019s ICE, apprehend, process, temporarily detain, and care for  UAC who enter the United States with no lawful immigration status.  ICE\u2019s Office of Enforcement and Removal Operations (ERO) is generally  responsible for transferring UAC, 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 (TVPRA), UAC in the custody of any federal department or agency,  including DHS, must be transferred to ORR within 72 hours after  determining that they are UAC, except in exceptional circumstances. In  addition, the 1997 Flores v. Reno Settlement Agreement (Flores  Agreement) sets standards of care for UAC while in DHS or ORR  custody, including, among other things, providing drinking water, food,  and proper physical care and shelter for children.\nIn 2015 and 2016, we reported on DHS\u2019s and HHS\u2019s care and custody of  UAC, including the standard procedures that DHS follows to transfer UAC  to ORR. ORR\u2019s UAC policy guide states that the agency requests  certain information from DHS when DHS refers children to ORR,  including, for example, how DHS determined the child was  unaccompanied. Depending on which DHS component or office is  referring the child to ORR, DHS may provide information on the child in  an automated manner directly into ORR\u2019s UAC Portal\u2014the official system  of record for children in ORR\u2019s care\u2014or via email.\nORR has cooperative agreements with residential care providers to  house and care for UAC 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 care providers are 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 the child  leaves ORR custody. Release to a sponsor does not grant UAC 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.\nOnce at the shelter, shelter staff typically conduct an intake assessment  of the child within 24 hours, and then are to provide services such as  health care and education. According to ORR\u2019s UAC policy guide, shelter  staff are responsible for meeting with the child to begin identifying  potential sponsors, which can include parents. To assess the suitability of  potential sponsors, including parents, ORR care providers collect  information from potential sponsors to establish and identify their  relationship to the child. For example, the screening conducted of  potential sponsors includes various background checks and in June 2018,  ORR implemented increased background check requirements that were  outlined in an April 2018 memorandum of agreement with DHS. These  changes required ORR staff to collect fingerprints from all potential  sponsors, including parents, and all adults in the potential sponsor\u2019s  household and transmit the fingerprints to ICE to perform criminal and  immigration status checks on ORR\u2019s behalf. ICE was to submit the results  to ORR, and ORR used this information, along with information provided  by, and interviews with, the potential sponsors, to assess their  suitability. However, in December 2018, ORR revised its background  check policy to limit criminal and immigration status checks conducted by  ICE to the potential sponsor, unless concerns about other adult  household members are raised via a public records check, there is a  documented risk to the safety of the child, the child is particularly  vulnerable, or the case is referred for a home study.\n\n\tHHS and DHS Planning for Family Separations\n\nAccording to HHS and DHS officials we interviewed, the departments did  not take specific steps in advance of the April 2018 memo to plan for  family separations or a potential increase in the number of children who  would be referred to ORR because they did not have advance notice of  the memo. Specifically, ORR, CBP, and ICE officials we interviewed  stated that they became aware of the April 2018 memo when it was  announced publicly.\nThough they did not receive advance notice of the April 2018 memo,  ORR officials stated that they were aware that increased separations of  parents and children were occurring prior to the April memo. According to  ORR officials, the percentage of children referred to ORR who were  known to have been separated from their parents rose by more than  tenfold from November 2016 to August 2017 (0.3 to 3.6 percent). In  addition, the ORR shelter and field staff we interviewed at four ORR  facilities in Arizona and Texas told us they started noticing an increase in  the number of children separated from their parents in late 2017 and early  2018, prior to the April 2018 memo. The DHS officials we interviewed  stated that, in some locations across the southwest border, there was an  increase in the number of aliens CBP referred to DOJ for prosecution of  immigration-related offenses after an Attorney General memo issued in  April 2017. This memo prioritized enforcement of a number of criminal  immigration-related offenses, including misdemeanor improper entry. In  addition, CBP officials stated that there may have been an increase in  children separated from non-parent relatives or other adults fraudulently  posing as the child\u2019s parents.\nAccording to ORR officials, in November 2017, ORR officials asked DHS  officials to provide information about the increase in separated children. In  response, DHS officials stated that DHS did not have an official policy to  separate families, according to ORR officials. A few months prior to the  April 2018 memo, ORR officials said they saw a continued increase in  separated children in their care. ORR officials noted that they considered  planning for continued increases in separated children, but HHS  leadership advised ORR not to engage in such planning since DHS  officials told them that DHS did not have an official policy of separating  families.\nFrom July to November 2017, the Border Patrol sector in El Paso, Texas  conducted an initiative to address an increase in apprehensions of  families that sector officials had noted in early fiscal year 2017.   Specifically, Border Patrol officials in the sector reached an agreement  with the District of New Mexico U.S. Attorney\u2019s Office to refer more  individuals who had been apprehended, including parents who arrived  with minor children, for criminal prosecution. Prior to this initiative, the  U.S. Attorney\u2019s Office in this district had placed limits on the number of  referrals it would accept from Border Patrol for prosecution of immigration  offenses. According to Border Patrol officials, under this initiative, the  U.S. Attorney\u2019s Office agreed to accept all referrals from Border Patrol in  the El Paso sector for individuals with violations of 8 U.S.C. \u00a7 1325  (improper entry by alien) and \u00a7 1326 (reentry of removed aliens),  consistent with the Attorney General\u2019s 2017 memo directing federal  prosecutors to prioritize such prosecutions. For those parents placed  into criminal custody, Border Patrol referred their children to ORR\u2019s care  as UAC. According to a Border Patrol report on the initiative, the El Paso  sector processed approximately 1,800 individuals in families and 281  individuals in families were separated under this initiative. Border Patrol  headquarters directed the sector to end this initiative in November 2017,  and Border Patrol officials stated that there were no other similar local  initiatives that occurred prior to the Attorney General\u2019s 2018 memo.\n\n\tDHS and HHS Systems for Indicating When Children Were Separated from Parents\n\nWhen the April 2018 memo was released, there was no single database  with easily extractable, reliable information on family separations. DHS  and HHS subsequently updated their data systems in the spring and  summer of 2018, but it is too soon to know the extent to which these  changes, if fully implemented, will consistently indicate when children  have been separated from the parents or will help reunify families, if  appropriate. Specifically, prior to April 2018, CBP\u2019s and ORR\u2019s data  systems did not include a designated field to indicate that a child was  unaccompanied as a result of being separated from his or her parent, and  ORR officials stated that such information was not always provided when  children were transferred from DHS to HHS custody. According to agency  officials, between April and August 2018, the agencies made changes to  their data systems to help notate in their records when children are  separated from parents.\nRegarding DHS, CBP\u2019s Border Patrol and OFO made changes to their  data systems to allow them to better indicate cases in which children  were separated from their parents; however, ORR officials told us in  September 2018, that they had been unaware that DHS had made these  systems changes.\nAccording to Border Patrol officials, Border Patrol modified its system  on April 19, 2018, to include yes\/no check boxes to allow agents to  indicate that a child was separated from their parent(s). However,  Border Patrol officials told us that information on whether a child had  been separated is not automatically included in the referral form sent  to ORR. Rather, agents may indicate a separation in the referral notes  sent electronically to ORR, but they are not required to do so,  according to Border Patrol officials. While the changes to the system  may make it easier for Border Patrol to identify children separated  from their parents, ORR officials stated ORR may not receive  information through this mechanism to help it identify or track  separated children. Prior to this system modification, Border Patrol  agents typically categorized a separated child as an unaccompanied  child in its system and did not include information to indicate the child  had been separated from a parent.\nCBP\u2019s OFO, which encounters families presenting themselves at  ports of entry, also modified its data system and issued guidance to  its officers on June 29, 2018, to track children separated from their  parents. OFO officials have access to the UAC Portal but typically  email this information to ORR as part of the referral request.  According to OFO officials, prior to that time, OFO designated children  separated from their parents as unaccompanied.\nORR updated the UAC Portal to include a check box for indicating that a  child was separated from his or her parents. According to ORR officials,  ORR made these changes on July 6, 2018, after the June 20 executive  order and June 2018 court order to reunify families. According to ORR  officials, prior to July 6, 2018, the UAC Portal did not have a systematic  way to indicate whether a child was designated as unaccompanied as a  result of being separated from a parent at the border. The updates allow  those Border Patrol agents with direct access to the UAC Portal to check  this box, and Border Patrol issued guidance on July 5, 2018, directing its  agents to use the new indicator for separated children in the UAC Portal  and provide the parent\u2019s alien number in the UAC Portal when making  referrals to ORR as of July 6, 2018. However, ORR officials also said  that DHS components with access to the UAC Portal are not yet utilizing  the new check box consistently.\nStaff at three of the four shelters we visited in Arizona and Texas in July  and August of 2018 said that in most, but not all cases during the spring  of 2018, DHS indicated in the custody transfer information that a child had  been separated. Staff at one shelter estimated that for approximately 5  percent of the separated children in its care there was no information from  DHS indicating parental separation. In these cases, shelter staff said they  learned about the separation from the child during the shelter\u2019s intake  assessment. Staff at the same shelter, which cares for children ages 0 to  4, noted that intake assessments for younger children are different from  intake for older children, as younger children are unable to provide  detailed information on such issues as parental separation.\nWhile the updates that OFO and ORR have made to their data systems  are a positive step, they do not fully address the broader coordination  issues we identified in our previous work. Specifically, we identified  weaknesses in DHS and HHS\u2019s process for the referral of UAC. In 2015,  we reported that the interagency process to refer and transfer UAC from  DHS to HHS was inefficient and vulnerable to errors because it relied on  emails and manual data entry, and documented standard procedures,  including defined roles and responsibilities, did not exist. To increase  the efficiency and improve the accuracy of the interagency UAC referral  and placement process, we recommended that the Secretaries of 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 the referral and placement of UAC in HHS shelters. In response, DHS  officials told us DHS delivered a Joint Concept of Operations between  DHS and HHS to Congress on July 31, 2018, which provides field  guidance on interagency policies, procedures, and guidelines related to  the processing of UAC transferred from DHS to HHS. DHS submitted the  Joint Concept of Operations to us on September 26, 2018, in response to  our recommendation. We are reviewing the extent to which the Joint  Concept of Operations includes a documented interagency process with  clearly defined roles and responsibilities, as well as procedures to  disseminate placement decisions, for all agencies involved in the referral  and placement of unaccompanied children, including those separated  from parents at the border, in HHS shelters. Moreover, to fully address  our recommendation, DHS and HHS should implement such interagency  processes.\n\n\tDHS and HHS Actions to Reunify Families in Response to the June 2018 Court Order\n\nDHS and HHS took various actions in response to the June 26, 2018,  court order to identify and reunify children separated from their parents.  The June 2018 court order required the government to reunite class  member parents with their children under 5 years of age within 14 days of  the order, and for children age 5 and over, within 30 days of the order.  HHS officials told us that there were no specific procedures to reunite  children with parents from whom they were separated at the border prior  to the June 2018 court order. Rather, the agency used its standard  procedures, developed to comply with the William Wilberforce Trafficking  Victims Protection Reauthorization Act of 2008 (TVPRA), to consider  potential sponsors for unaccompanied children in their custody; if a parent  was available to become a sponsor, reunification with that parent was a  possible outcome.\nDHS and HHS Efforts to Identify Potential Class Members. To create  the list of potential class members (that is, those parents of a separated  child covered under the lawsuit) eligible for reunification per the June  2018 court order, DHS and HHS officials told us that they generated the  list based on children who were in DHS or HHS custody on that date. As  a result, DHS and HHS officials told us that a parent of a separated child  would only be a class member if his or her child was detained in DHS or  HHS custody on June 26, 2018. After developing the class list, DHS and  HHS officials told us that they next determined whether class members  were eligible for reunification, as a class member could be determined  ineligible for reunification if it was determined that the parent was unfit or  presented a danger to the child.\nParents of children who were separated at the border but whose children  were released by ORR to sponsors prior to the June 2018 court order  were not considered class members, and according to HHS officials, the  department was not obligated to reunite them with the parent or parents  from whom they were separated. Further, HHS officials told us that they  do not know how many such children separated from parents at the  border were released to sponsors prior to the order and that the court  order does not require the department to know this information.\nBecause there was no single database with information on family  separations, HHS officials reported using three methods to determine  which children in ORR\u2019s custody as of June 26, 2018, had been  separated from parents at the border:  1.  Data Reviewed by an Interagency Data Team. An interagency team  of data scientists and analysts\u2014led by HHS\u2019s Office of the Assistant  Secretary for Preparedness and Response with participation from  CBP, ICE, and ORR\u2014used data and information provided by DHS  and HHS to identify the locations of separated children and parents,  according to HHS officials.  2.  Case File Review. HHS reported that more than 100 HHS staff  reviewed about 12,000 electronic case files of all children in its care  as of June 26, 2018 for indications of separation in specific sections of  each child\u2019s case file, such as the phrases \u201czero tolerance,\u201d  \u201cseparated from ,\u201d and \u201cfamily  separation.\u201d  3.  Review of Information Provided by Shelters. According to HHS  officials, shelter staff were asked to provide lists of children in their  care who were known to be separated from parents based on the  shelter\u2019s records.\nOn the basis of its reviews, as of September 10, 2018, the government  had identified 2,654 children of potential class members in the Ms. L. v.  ICE case. Of the 2,654 children, 103 were age 0 to 4 and 2,551 were  age 5 to 17. As previously discussed, the number of children of potential  class members does not include those who were separated from parents  but released to sponsors prior to the June 2018 court order or the more than 500 children who were reunified with parents by CBP in late June  2018, because these children were never transferred to ORR custody.\nAs of September 10, 2018, 2,217 of the 2,654 identified children had  been released from ORR custody, according to a joint status report filed  in the Ms. L. v. ICE case. About 90 percent of the released children  were reunited with the parent from whom they were separated and the  remaining children were released under other circumstances. Children  released under other circumstances could include those released to  another sponsor such as a parent already in the United States, another  relative, or an unrelated adult, or children who turned 18. Staff at one  ORR facility we visited told us they planned to release some children  under these circumstances. As of December 11, 2018, the government  had identified additional possible separated children of potential class  members for a total of 2,816. It had released 2,657 and 159 remained in  ORR custody. However, the government has also reported that 79 of  the children it initially identified as separated had not been separated from  a parent. Excluding those 79 children from the 2,816 total would bring  the total number of children separated to 2,737.\nPlan for Reunifying Children with Class Member Parents Within and  Outside ICE\u2019s Custody. The process used to reunify separated children  with their class member parents in the Ms. L. v. ICE case evolved over  time based on multiple court hearings and orders, according to HHS  officials. After the June 2018 court order, HHS officials said the agency  planned to reunify children using a process similar to their standard  procedures for placing unaccompanied children with sponsors. However,  according to agency officials, the agency realized that it would be difficult  to meet the court\u2019s reunification deadlines using its standard procedures  and began developing a process for court approval that would expedite  reunification for class members. As a result, from June 26, 2018 to July  10, 2018, the reunification process was refined and evolved iteratively  based on court status conferences, according to HHS officials. ORR field  and shelter staff we interviewed noted the impact of the continually  changing reunification process; for example, staff at one shelter told us  there were times when they would be following one process in the  morning but a different one in the afternoon.\nOn July 10, 2018, the court approved reunification procedures for the  class members covered by the June 2018 court order. In the July 10,  2018 order that outlined these procedures, the court noted that the  standard procedures developed by ORR pursuant to the TVPRA were  meant to address \u201ca different situation, namely, what to do with alien  children who were apprehended without their parents at the border or  otherwise\u201d and that the agency\u2019s standard procedures were not meant to  apply to the situation presented in the Ms. L. v. ICE case, which involves  parents and children who were apprehended together and then separated  by government officials. The reunification procedures approved in the  Ms. L. v. ICE case apply only to reunification of class members with their  children and included determining (1) parentage and (2) whether the  parent is fit to take care of the child or presents any danger to the child.  Specifically:  1.  Determining Parentage. Before July 10, 2018, to determine  parentage for children ages 0 to 4, HHS officials said they initially  used DNA swab testing instead of requiring documentation, such as  birth certificates, stating that DNA swab testing was a prompt and  efficient method for determining biological parentage in a significant  number of cases. On July 10, 2018, the court approved the use of  DNA testing \u201conly when necessary to verify a legitimate, good-faith  concern about parentage or to meet a reunification deadline.\u201d HHS  officials told us that at that point, to determine parentage, ORR relied  on the determinations made by DHS when the family was separated  and information ORR shelter staff had already collected through  assessments of the children in their care. Unless there were specific  doubts about the relationship, ORR did not collect additional  information to confirm parentage, according to HHS officials.  2.  Determining Fitness and Danger. To reunify class members, HHS  also followed the procedures approved by the court on July 10, 2018  for determining whether a parent is fit and whether a parent presents  a danger to the child. HHS used the fingerprints and criminal  background check of the parent conducted by DHS when the  individual was first taken into DHS custody rather than requiring the  parent and other adults living in the household to submit fingerprints  to ORR, as potential sponsors were typically required to do for  unaccompanied children. According to HHS officials, ORR  personnel also reviewed each child\u2019s case file for any indication of a  safety concern, such as allegations of abuse by the child. HHS did not  require fingerprints of other adults living in the household where the  parent and child will live. HHS also did not require parents to complete  an ORR family reunification application as potential sponsors are  typically required to do for unaccompanied children.\nThe specific procedures for physical reunification varied depending on  whether the parents were inside or outside of ICE custody. DHS and HHS  took steps to coordinate their efforts to reunify children with parents who  were in ICE custody, but experienced challenges. Generally, for parents  in ICE custody, DHS transported parents to a detention facility close to  their child and HHS transported the child to the same facility. At the  facility HHS transferred custody of the child to ICE for final reunification.  HHS officials said that in some instances children had to wait for parents  for unreasonably long amounts of time and parents were transported to  the wrong facilities. In one case, staff at one shelter told us that they had  to stay two nights in a hotel with the child before reunification could occur.\nAccording to HHS officials, for families in which the parent was released  into the interior of the United States, the reunification process involves  ORR officials and shelter staff attempting to establish contact with the  parent and determining whether the parent has \u201cred flags\u201d for parentage  or child safety. These determinations are based on DHS-provided  criminal background check summary information and case review of the  child\u2019s UAC Portal records. In cases where no red flags are found, HHS  transports the child to the parent or the parent picks the child up at the  ORR shelter. For more information on DHS and HHS reunification  procedures for class member parents inside and outside ICE custody,  see GAO-19-163.\nChair DeGette, Ranking Member Guthrie, and Members of the  Subcommittee, this concludes our prepared remarks. We would be happy  to answer any questions that you may have.\n\n\tGAO Contacts and Staff Acknowledgments\n\nFor further information regarding this testimony, please contact Kathryn  A. Larin at (202) 512-7215 or larink@gao.gov or 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.\nIndividuals who made key contributions to this testimony include Kathryn  Bernet (Assistant Director), Elizabeth Morrison (Assistant Director), David  Barish (Analyst-in-Charge), Andrea Dawson, Jason Palmer, and Leslie  Sarapu. In addition, key support was provided by Susan Aschoff, James  Bennett, Sarah Cornetto, Michael Kniss, Sheila R. McCoy, Jean  McSween, Jan Montgomery, Heidi Nielson, and Almeta Spencer.\nThis 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.","output":null}
{"id":"gao_GAO-20-357","pid":"gao_GAO-20-357_0","input":"\tBackground\n\n\t\tMicroelectronics Production at Sandia\n\nThe MESA Complex at Sandia comprises multiple production facilities  and buildings, which total approximately 400,000 square feet (see fig.  1). In particular, the SiFab Facility, completed in 1988, is the primary  production facility for microelectronics integrated into nuclear weapons.  The SiFab Facility produces application-specific integrated circuits (ASIC)  that are custom-designed to control certain nuclear weapon arming,  fuzing, and firing functions. The MESA Complex also includes other  buildings, such as the Micro Fabrication Facility, which was completed in  2006 and produces strategic radiation-hardened devices for manipulating  electronic signals and electrical power. The physical layouts of these  two production facilities center around a series of clean rooms that are  designed to maintain an extremely low level of dust and other  particulates, which can harm microelectronic functionality. The two  facilities contain about 375 pieces of specialized production equipment,  some of which cost millions of dollars, and have acid exhaust and liquid  waste management systems for handling the byproducts of the  production processes.\nThe SiFab Facility produces all of the strategic radiation-hardened ASICs  currently used in nuclear weapons. ASICs are produced on wafers\u2014a  thin slice of semiconductor material such as silicon\u2014using what is  referred to as a complementary metal-oxide semiconductor (CMOS)  process technology. The production of ASICs requires hundreds of  processing steps, which are completed over multiple weeks. For example,  according to Sandia documentation, the production of a specific type of  ASIC requires over 600 processing steps over an approximately 26-week  period.\nMicroelectronics are produced with characteristic dimensions (or \u201cfeature  sizes\u201d) measured in nanometers (nm), or one-billionth of one meter. The  process technology together with an associated feature size is known as  a technology \u201cnode.\u201d In general, smaller nodes represent more advanced  technologies. The SiFab Facility produces microelectronics at the 350 nm  node, and NNSA and Sandia refer to the CMOS production process technology at the 350 nm node as \u201cCMOS7.\u201d Currently, state-of-the-art  microelectronics are produced at the 32 nm or below node. For example,  the Intel Corporation produces commercial microelectronics at the 14 nm  node for use in personal computers and servers. However, such smaller  nodes are more challenging to produce and have not been proven to  perform at the strategic radiation-hardened level, according to Sandia  contractor representatives. Figure 2 shows commercially produced  microelectronics on a wafer (left photo) and diced into individual  microelectronics parts next to a U.S. dime (right photo).\n\n\t\tOngoing and Planned Weapon Modernization Programs and Other Modernization Plans Requiring Microelectronics\n\nAs shown in table 1, NNSA is undertaking multiple LEPs and weapon  modernization efforts, in which Sandia is participating. In addition, the  2018 Nuclear Posture Review calls for NNSA to consider additional  weapon programs\u2014specifically, a program to develop a modern nuclear- armed sea-launched cruise missile, and another to develop a new  submarine-launched ballistic missile warhead (now referred to as the  W93). To develop and produce microelectronics for these efforts, Sandia  must (1) conduct research and development activities, (2) finalize the  design of microelectronics to meet military requirements specific to the  weapon program into which the microelectronics will be integrated, and  (3) produce the microelectronics. Sandia must conduct all of these  activities years before NNSA delivers a weapon program\u2019s first production  unit to DOD. According to Sandia documents and contractor representatives, microelectronics research and development efforts  generally begin 10 to 15 years before a weapon program\u2019s first production  unit date, while microelectronics production generally begins 3 to 5 years  before a first production unit date.\nDOD is also undertaking modernization efforts related to nuclear weapon  delivery platforms, and Sandia is producing microelectronics to support  those efforts. Specifically, DOD is responsible for designing and  producing the arming and fuzing components on delivery platforms for  certain types of nuclear weapons, and Sandia produces some of these  components for DOD at the MESA Complex. For example, according to  Air Force and Sandia documentation, the Air Force contracted with  Sandia to design and produce microelectronics for its Intercontinental  Ballistic Missile Fuze Modernization, which will provide a new fuze for use  on both the current Minuteman III missile and its replacement, the Ground  Based Strategic Deterrent missile.\n\n\t\tDOE and NNSA Management Approaches for Projects and Programs\n\nDOE and NNSA distinguish between projects and programs, and the  agencies use different management approaches for each:\nProjects. DOE\u2019s project management order governs NNSA\u2019s  management of capital asset acquisition projects with a total cost  greater than $50 million. The order states that capital assets  projects have a defined start and end point. Capital assets include  land, structures, equipment and intellectual property that are used by  the federal government and have an estimated useful life of 2 years or  more. The order\u2019s goal includes delivering projects within their original  performance baselines (on time and within budget) and fully capable  of meeting mission performance and other requirements, such as  environmental, safety, and health standards.\nPrograms. As we reported in 2018, DOE has not established a  program management policy. However, NNSA issued its own  program management policy in February 2019. The policy applies to  all NNSA elements and requires them to establish additional program  management requirements for respective NNSA programs based on  needs, risk, complexity, and stakeholder involvement, among other  things. The NNSA policy defines a program in part as an organized  set of activities directed toward a common purpose or goal,  undertaken or proposed in support of an assigned mission area. In  addition, some NNSA offices have issued their own program  management directives that are more specific than the NNSA policy.  For example, NNSA\u2019s Office of Defense Programs\u2014which is  responsible for, among other things, weapon modernization programs,  including LEPs, and associated materials and components, such as  microelectronics\u2014issued a program management directive in June  2019 that establishes requirements and processes for managing the  office\u2019s programs. This directive establishes four program  management categories and execution requirements for these  categories. These management categories are risk-based and apply  different execution requirements commensurate with program risk.\n\n\t\tFiscal Year 2020 Funding for Microelectronics Activities at Sandia\n\nThe MESA Complex\u2019s estimated fiscal year 2020 budget is $283 million,  according to Sandia documentation. As shown in figure 3, this funding  comes from a variety of sources, because Sandia uses the MESA  Complex to meet both NNSA\u2019s and DOD\u2019s nuclear weapon production  missions as well as for research and development for those and other  federal entities through strategic partnership programs. Sandia  documentation states that a portion of the MESA Complex\u2019s budget is  obtained from other, non-NNSA federal entities that pay Sandia directly to  produce microelectronics for, among other thing, research and  development purposes, and this amount of funding fluctuates annually.  According to Sandia contractor representatives, the laboratory presents  MESA\u2019s budget as an estimate for this reason.\nSpecific funding sources are discussed in greater detail below:\nNNSA provides about 60 percent (or $168 million) of the MESA  Complex\u2019s total estimated budget for fiscal year 2020. Two NNSA  offices account for most of the agency\u2019s funding:\nThe Office of Defense Programs accounts for 42 percent (or about  $71 million) and is responsible for ensuring the United States  maintains a safe, secure, and reliable nuclear stockpile through  the application of science, technology, engineering, and  manufacturing activities. This funding comes from multiple sub- offices. For example, the Office of Research, Development, Test,  and Evaluation provides funding for microelectronics research and  development; the Office of Production Modernization provides  funding for, among other things, refurbishing microelectronics  processing capabilities; and the Office of Stockpile Management  provides funding for microelectronics production, according to an  NNSA official and NNSA documentation.\nThe Office of Safety, Infrastructure and Operations accounts for  46 percent (or about $78 million), and this office is responsible for  ensuring existing facilities are safely operated, effectively  managed, and maintained to meet mission needs.\nDOE\u2019s Strategic Partnership Programs account for about 13 percent  (or $36 million) of the MESA Complex\u2019s fiscal year 2020 budget.  These programs include research and development projects  sponsored by the Air Force and the Defense Advanced Research  Projects Agency.\nDOE\u2019s Laboratory Directed Research and Development work  accounts for about 10 percent (or $28 million) of the MESA Complex\u2019s  fiscal year 2020 budget. Each of DOE\u2019s 16 contractor-operated  laboratories\u2014including Sandia\u2014may direct a portion of the funding  they receive from DOE to scientists who conduct independent  research. The statutory limit on this laboratory-directed research and  development work is between five to seven percent of funds provided  by DOE to the laboratories for national security activities.\nDOD provides about 6 percent (or $17 million) of the MESA  Complex\u2019s fiscal year 2020 budget through Strategic Partnership  Programs. According to Sandia documentation, this funding comes  directly from the Air Force and Navy to support the production of  microelectronics that are integrated into nuclear weapon delivery  platforms.\nOther sources account for about 12 percent (or $34 million) of the  MESA Complex\u2019s fiscal year 2020 budget. Among other things, this  funding comes from indirect rates applied to all Sandia programs to  support the MESA Complex\u2019s management and operations.\n\n\tNNSA Completed Actions over the Past Decade to Sustain Its Microelectronics Capability at Sandia and Identified but Did Not Pursue Alternatives for a New Future Capability\n\nOver the past decade, NNSA completed several actions to sustain its  existing strategic radiation-hardened microelectronics facilities at Sandia  through 2025 while simultaneously identifying future alternatives for its  microelectronics capability beyond 2025. In particular, during fiscal years  2012 through 2019, NNSA engaged in a $150 million effort at Sandia to  sustain operations at the SiFab Facility through 2025. NNSA pursued  this effort in response to a 2010 study conducted by Sandia that identified  the need for millions of dollars in funding to sustain the SiFab Facility  through 2025. NNSA\u2019s sustainment efforts focused on the following two  areas:  Infrastructure. NNSA spent about $27 million to complete  approximately 25 infrastructure projects that support microelectronics  production. For example, NNSA installed two new 20,000-gallon tanks  for water storage to improve the facility\u2019s deionized water system,  which provides ultra-high purity water for use in certain processing  steps. NNSA also replaced a portion of the facility\u2019s acid exhaust  system.\nEquipment. NNSA spent about $123 million on production equipment  for two main purposes: (1) to replace aging equipment that Sandia  classified as being at high risk of failure; and (2) to refurbish existing  equipment and procure equipment that will be used to produce  microelectronics once Sandia completes its ongoing effort to convert  the production process from using 6-inch silicon wafers to 8-inch  wafers.\nPrior to these equipment investments, the SiFab Facility relied on aging  equipment to perform certain processing steps using a manual process.  In fiscal year 2018, Sandia refurbished existing equipment and purchased  new equipment that is more automated and is intended to increase  process reliability. In addition, according to Sandia documentation,  Sandia needed to convert its production process to use 8-inch silicon  wafers because the commercial sector had increasingly limited  maintenance support and service for equipment that processed 6-inch  wafers.\nWhile NNSA was working with Sandia to sustain the SiFab Facility  through 2025, the agency also began identifying and evaluating options  for producing microelectronics after 2025, such as constructing a new  multibillion-dollar production facility at Sandia. However, because of  changes to key assumptions, NNSA decided in November 2018 not to  pursue any of the identified alternatives and instead stated that the  agency was going to assess options to sustain its current capability at  Sandia beyond 2025. See figure 4 for a summary of NNSA\u2019s actions to  sustain the SiFab facility and consider alternatives.\nMore specifically, NNSA took the following actions during the past decade  to identify alternatives for producing microelectronics beyond 2025:  In 2011, NNSA\u2019s Deputy Administrator for Defense Programs  requested proposals from the agency\u2019s three nuclear weapons  laboratories for flagship experimental science, technology, and  engineering facilities to help ensure that NNSA will have the  capabilities to address future national security needs. In response,  Sandia submitted a proposal to NNSA in 2012 to construct a new,  multibillion-dollar microelectronics production facility, called the Center  for Heterogeneous Integration, Packaging, and Processes (CHIP2).  The Sandia proposal estimated that CHIP2 would take 14 years to  design and build at an estimated cost of $2.5 billion. The proposal  indicated that the facility would increase microelectronics functionality  and trustworthiness by creating a trusted supply chain into the future  for design, fabrication, testing, and packaging activities. As a result of  the time needed to design and construct CHIP2, investment would still  be needed to sustain the MESA SiFab Facility through 2025.\nNNSA commissioned two studies by The Aerospace Corporation, a  federally funded research and development center sponsored by the  Air Force, to help the agency evaluate Sandia\u2019s CHIP2 proposal  against other potential alternatives, such as contracting with  commercial entities to produce microelectronics. These studies,  completed in August and September 2014, generally ranked the  CHIP2 proposal at or near the top of the alternatives but also stated  that CHIP2 did not stand out as a decidedly better option.  Nonetheless, in early 2015, NNSA\u2019s Deputy Administrator for Defense  Programs issued a memorandum recommending that NNSA pursue  the CHIP2 proposal as a formal capital asset project, subject to DOE\u2019s  project management order on acquisition of capital assets.\nIn 2016, in accordance with DOE\u2019s project management order, NNSA  developed two key documents during the initiation phase of its capital  asset project supporting the CHIP2 proposal, which NNSA referred to  as the Trusted Microelectronics Capability (TMC) project.\nNNSA first developed a mission need statement, which is a formal  document that identifies a credible performance gap between  current capabilities and those needed to achieve the goals stated  in the agency\u2019s strategic plan. The mission need should be  stated in a way that is solution-neutral. The project\u2019s mission need  statement stated that, among other things, after 2025 the SiFab  Facility faced a severe risk of equipment and facility failures that  could have detrimental impacts on future microelectronics  production schedules. The statement noted that continued  refurbishment of the SiFab Facility beyond 2025 could result in  significant downtime during critical weapon development and  production cycles, as the facility was constructed in the 1980s and  was not sized for modern microelectronics production equipment  and supporting infrastructure.\nNNSA next developed a requirements document, which describes  the ultimate goals the project must satisfy while also identifying  key assumptions and constraints. The requirements document  identified several key requirements, including that the TMC project  must be able to provide NNSA with trusted access to produce  microelectronics in support of the agency\u2019s nuclear weapons  mission.\nBetween 2016 and 2017, in accordance with DOE\u2019s project  management order, NNSA conducted an analysis of alternatives for  the TMC project based on achieving NNSA\u2019s mission need statement.  Such an analysis identifies, analyzes, and selects a preferred  alternative to best meet the mission need by comparing the  operational effectiveness, costs, and risks of potential alternatives,  according to DOE documentation. During this process, NNSA  considered 21 alternatives for meeting the mission need statement,  among them the CHIP2 proposal as well as several alternatives that  included partnerships with commercial industry and other government  production facilities. The final TMC analysis of alternatives report,  dated January 2018, did not identify the CHIP2 proposal as a  preferred alternative because of the proposal\u2019s high life-cycle costs,  high total project cost, and long project schedule. Instead, the report  identified two preferred alternatives as best meeting NNSA\u2019s needs:  (1) partnering with an existing, government-owned, contractor- operated production facility other than Sandia; and (2) entering into  an interagency agreement with DOD and at least one member of the  intelligence community, as well as a commercial entity, to design,  build, and operate a state-of-the-art production facility.\nUltimately, NNSA decided not to pursue either preferred alternative  because of changing assumptions. For example, one of NNSA\u2019s key  assumptions for the TMC analysis of alternatives was that the SiFab  Facility could not remain operational beyond 2025. However, NNSA  tasked The Aerospace Corporation to validate this assumption, and in  January 2018, The Aerospace Corporation completed a study concluding  that the SiFab Facility could remain viable until 2040 with prioritized and  well-planned infrastructure repairs and equipment replacements.  Another example of changing assumptions concerned the preferred  alternative under which NNSA would enter into an interagency agreement  with DOD and at least one member of the intelligence community to  design, build, and operate a state-of-the-art production facility. This  preferred alternative assumed that DOD, the intelligence community, or  both, would pay to develop and build the production facility (estimated to  cost from $350 million up to $1.2 billion), while NNSA would pay to equip  its portion of the production process. The TMC analysis of alternatives  report stated that commitment from DOD and the intelligence community  would be vital, and that this alternative carried significant execution risks.  In January 2018, NNSA documentation stated that this interagency  alternative was no longer viable because other agencies stated they were  no longer interested in a potential partnership.\nPartly as a result of these changes in key assumptions, in November  2018, NNSA wrote in a letter to Congress that it was no longer requesting  funding for the TMC and was assessing what investments were needed  to extend the operational life of the SiFab Facility to 2040.\n\n\tNNSA Has Decided to Upgrade and Sustain Its Microelectronics Capability at Sandia through 2040, but Its Management Approach Does Not Fully Incorporate Key Controls\n\nAs part of NNSA\u2019s ongoing approach to managing its strategic radiation- hardened microelectronics activities, the agency plans to upgrade and  sustain its microelectronics capability at Sandia through 2040, which it  estimates will cost about $1 billion over the next 20 years. NNSA is also  in the preliminary stages of identifying and evaluating options for a  microelectronics capability beyond 2040. In addition, NNSA is starting to  implement a revised management approach, including appointing a  coordinator to guide certain aspects of its microelectronics activities.  However, NNSA\u2019s approach does not fully incorporate key management  controls, such as developing an overarching management plan, which the  agency has applied to other important activities.\n\n\t\tNNSA Plans to Upgrade and Sustain Its Microelectronics Capability at Sandia through 2040 and Is Beginning to Identify Options for a Capability Beyond 2040\n\nIn 2019, NNSA made three key decisions related to upgrading and  sustaining its microelectronics capability at Sandia through 2040. First,  NNSA approved plans to further upgrade its process for producing  microelectronics. This upgraded process, called CMOS8, contains some  features of the currently employed CMOS7 process, but is a more  advanced technology node that also includes many new features,  according to Sandia documentation. Second, NNSA approved plans to  produce and integrate into future nuclear weapons a more advanced type  of microelectronics component called a field programmable gate array  (FPGA). According to Sandia documentation, strategic radiation- hardened FPGAs can be produced using the CMOS8 process but not the  CMOS7 process. Third, Sandia developed and NNSA approved a plan to  identify, prioritize, and provide budget estimates to sustain Sandia\u2019s  microelectronics infrastructure and equipment at the MESA Complex over  the next 20 years. This plan incorporates NNSA\u2019s decisions to develop  the CMOS8 process and produce FPGAs.\nAccording to NNSA and Sandia documents, the rationale behind and  expected benefits of these three key decisions are as follows:\nThe CMOS8 process will allow Sandia to produce microelectronics at  a smaller, more advanced technology node (180nm) compared with  the current CMOS7 technology node (350nm). NNSA documentation  states that, among other things, the CMOS8 process is expected to  produce microelectronics that have twice the processing speed  compared with those produced using the CMOS7 process. Such  advances are needed to help ensure that future nuclear weapons  remain safe, secure, and reliable while operating in increasingly  hostile threat environments and that the weapons meet increased  performance requirements, according to Sandia documentation.  According to NNSA officials, the agency agreed with Sandia\u2019s  assessment on implementing the CMOS8 production process based,  in part, on findings and recommendations contained in an  independent study commissioned by NNSA and completed by  multiple entities including The Aerospace Corporation.\nAccording to Sandia documentation, while FPGAs have never been  used before in a nuclear weapon, they may significantly reduce the  cycle time for microelectronics research, development, and production  compared with cycle times for ASICs used in nuclear weapons. This  reduction may be possible because the ASICs currently used in  nuclear weapons are uniquely designed and produced to carry out  specific functions, whereas FPGAs can be produced using a common  design and then programmed after production (but before insertion  into a nuclear weapon) to carry out different functions, according to  NNSA officials. Reduced cycle time from FPGAs could alleviate  schedule pressure on future weapon modernization programs  because cycle times for designing and producing ASICs for LEPs  have historically been about 10 years before production of the first  weapon, according to Sandia documentation.\nSandia\u2019s plan will provide NNSA with the basis for the investment  profile needed to sustain the MESA Complex\u2019s infrastructure and  equipment through 2040. Because the sustainment effort will last at  least 20 years, NNSA officials said that having a long-term planning  document that provides a current baseline for the condition of  Sandia\u2019s microelectronics infrastructure and equipment, identifies  challenges, and recommends specific sustainment activities will be a  useful management tool.\nThe plan for extending the life of the MESA Complex at Sandia provides  cost and schedule estimates related to sustainment of existing facilities  and equipment, as well as installation of new equipment for CMOS8 and  development and maturation of the FPGA technology. Overall, the plan  calls for spending about $1 billion over the next 20 years. Specifically, the  plan identifies spending for the following activities:\nSustainment of existing facilities and equipment. The plan  identifies about $900 million in spending from fiscal years 2020  through 2040\u2014or about $45 million a year for the next 20 years\u2014to  complete identified infrastructure and equipment projects. The plan  calls for spending roughly half of the $900 million on projects to  upgrade existing infrastructure within the MESA Complex. In  particular, Sandia plans to spend about $120 million from fiscal years  2020 through 2024 on projects to improve or upgrade infrastructure  within the SiFab Facility that is considered to be in \u201cpoor condition\u201d  based on information contained in NNSA\u2019s infrastructure condition  database. The SiFab Facility is to be the physical location for the  majority of production tools for CMOS8. Two of these projects would  replace electrical power and distribution equipment at an estimated  cost of about $50 million, while another project would replace the  facility\u2019s chemical distribution system at an estimated cost of about $5  million. Sandia plans to spend the other half of the $900 million on  equipment-related projects. For example, Sandia plans to spend  about $85 million from fiscal years 2021 through 2026 on projects to  support existing, non-CMOS8 production processes\u2014such as  producing transistors in the Micro Fabrication Facility\u2014as well as  activities that support microelectronics production, such as laboratory  analysis, testing, and packaging. For example, Sandia plans to spend  $1.5 million on a computerized tomography machine to support  microelectronics testing.\nDevelopment of CMOS8 and production of FPGAs. The MESA  Complex extended life plan identifies about $170 million in spending  from fiscal years 2020 through 2027 related to developing, maturing,  installing, and implementing the CMOS8 process and the FPGA  technology. Sandia contractor representatives told us that the CMOS8  process relies on newer and more advanced equipment to complete  critical individual processing steps compared with the current CMOS7  process. As a result, the plan identifies about $70 million (out of the  $170 million total) to acquire approximately 30 pieces of equipment,  which Sandia will need to install and then qualify their performance. In  addition, the plan identifies almost $90 million (out of the $170 million  total) for developing and maturing the CMOS8 production process and  the FPGA technology. According to Sandia documentation, Sandia  plans to begin using the CMOS8 process to produce FPGAs for  integration into a future nuclear weapon program at the end of fiscal  year 2027.\nIn addition to upgrading and sustaining Sandia\u2019s microelectronics  capabilities through 2040, NNSA is in the preliminary stages of identifying  and evaluating options to ensure a continued microelectronics capability  beyond 2040, according to NNSA officials and documentation. In  particular, NNSA has identified the following two key options:\nNNSA is in the initial stages of identifying and evaluating options to  construct a new facility for producing microelectronics by 2040 and  beyond. In December 2019, NNSA officials provided us with  documentation stating that the agency plans to begin evaluating  options for a new microelectronics facility in 2021 with the goal of  completing construction in 2030, installing needed equipment in the  completed facility by 2033, and qualifying the production process and  begin producing microelectronics for integration into nuclear weapons  no later than 2035. In NNSA\u2019s fiscal year 2021 budget request, which  was released in February 2020, the agency requested funds to begin  evaluation and early planning activities for this new microelectronics  facility.\nNNSA is also evaluating whether the agency might be able to  leverage a recent investment by DOD in a U.S. commercial  microelectronics production facility to help meet NNSA\u2019s  microelectronics production needs after 2040. Specifically, DOD  announced in October 2019 that it had awarded a contract to a U.S.- owned-and-operated microelectronics commercial production facility  to, among other things, enhance its radiation-hardened  microelectronics production process to meet DOD\u2019s microelectronic  needs for systems (such as satellites) that operate in environments  with increased radiation levels. Over the next two years, the U.S.  commercial microelectronics production facility plans to adapt its  current production process and develop a new process that will  produce microelectronics at a smaller node, according to DOD  documentation. According to NNSA officials we interviewed in  February 2020, NNSA and DOD are in preliminary discussions to  determine if NNSA could make additional investments in this same  facility to potentially produce strategic radiation-hardened  microelectronics for integration into nuclear weapons. NNSA officials  said that there was no firm timeframe for making an investment  decision because such a decision would need to be made after the  microelectronics facility begins producing microelectronics at the  smaller node.\n\n\t\tNNSA Is Starting to Implementing a Revised Microelectronics Management Approach, but This Approach Does Not Fully Incorporate Key Management Controls\n\nNNSA is starting to implement a revised approach to managing its  microelectronics activities. During our initial interviews with NNSA officials  in early 2019, they stated that NNSA had not established a formal  management structure to oversee the agency\u2019s microelectronics  activities. Instead, they said that NNSA had delegated primary  responsible for overseeing such activities to two officials within NNSA\u2019s  Office of Defense Programs, who both served in multiple positions and  had other duties within the office. According to these officials, once NNSA  formally canceled the TMC project in November 2018, management  efforts were focused on making initial determinations on the actions and  budget estimates needed to sustain NNSA\u2019s existing microelectronics  capability at Sandia until 2040. These efforts included coordinating with  multiple NNSA offices\u2014such as the Office of Safety, Infrastructure and  Operations\u2014to understand their future microelectronics needs and  requirements and to review draft MESA Complex sustainment  documentation prepared by Sandia.\nHowever, officials from NNSA\u2019s Office of Defense Programs told us that  in late 2019 they determined that a more coordinated management  approach would better position NNSA to oversee microelectronics  activities and make informed budgetary and programmatic decisions.  Specifically, NNSA officials stated that in November 2019 the Office of  Defense Programs created and filled a new full-time microelectronics  coordinator position within a sub-office, the Office of Research,  Development, Test, and Evaluation. The microelectronics coordinator told  us that NNSA has not yet finalized an official position description for the coordinator role. However, the coordinator said that the position will  primarily be responsible for developing the CMOS8 process and the  FPGA technology and integrating the research and development activities  of the Office of Research, Development, Test, and Evaluation with  another sub-office, the Office of Production Modernization.\nIn addition, officials from NNSA\u2019s Office of Defense Programs and Office  of Safety, Infrastructure and Operations told us that they continue to use  other existing processes to manage microelectronics activities at Sandia.  For example, these officials said that they use the annual planning,  programming, budgeting, and evaluation process, along with the annual  work authorization process, to coordinate across NNSA offices on  budgetary matters and work activities associated with microelectronics  activities at Sandia. As part of these processes, agency officials told us  that they issue annual implementation plans to direct the work of Sandia  contractors related to microelectronics activities. NNSA officials then  monitor the contractors\u2019 progress toward completing the identified scope  of work and work activities. For example, NNSA officials said that they  conduct monthly meetings with contractor representatives to review  status and financial reports. They also said that they hold mid-year and  end-of-year program reviews with contractor representatives.\nTo help management achieve desired results\u2014such as ensuring a  continued microelectronics capability\u2014federal agencies design,  implement, and operate internal controls, which comprise the plans,  methods, policies, and procedures used to fulfill an entity\u2019s mission,  goals, and objectives. Federal standards for internal control state that  management should, among other things: design control activities, such as by developing policies, procedures,  techniques, and mechanisms that enforce management\u2019s directives,  to achieve objectives and respond to risk; and establish an organizational structure, assign responsibility, and  delegate authority to achieve the entity\u2019s objectives.\nNNSA has implemented internal controls at the agency level, in part, by  developing and implementing directives that provide an organizational  structure for the agency to plan, execute, control, and assess its  programs and projects while also assigning responsibility and delegating  authority for key management roles. For example, one purpose of  NNSA\u2019s 2019 program management directives is to increase  management efficiency and effectiveness by, among other things, clearly  defining management responsibilities and authorities. In addition, DOE\u2019s  project management order for the acquisition of capital assets lists  principles for successful project execution such as disciplined, up-front  planning; line management accountability; and effective implementation  of all management systems (such as risk and performance management)  supporting the project.\nIn particular and as applicable to front-end planning, NNSA\u2019s and DOE\u2019s  directives related to program and project management both include the  following controls:\nAppointment of a federal manager, who is vested with the authority to  carry out assigned responsibilities to meet program or project  milestones on schedule and on budget, who manages the  coordination of deliverables between the multiple entities (such as  different program offices) involved, and who is responsible and  accountable for planning, implementing, and executing a program or  project, which includes responsibility for developing an overarching  management plan;\nAn overarching management plan, which establishes the procedures  to define, execute, and monitor a program or project, as well as  establishing specific requirements in a variety of areas\u2014such as cost  estimating, an integrated schedule, performance management, and  risk management\u2014to use to develop a baseline and against which to  measure and monitor;\nA mission need statement, which identifies a credible gap between  current capabilities and those needed to achieve the goals stated in  the strategic plan; and\nA requirements document that describes the ultimate goals the  program or project must satisfy while also identifying key assumptions  and constraints.\nHowever, while some in NNSA and at Sandia have recognized the need  to coordinate microelectronics activities to effectively carry them out and  meet specific goals by specific dates, as evidenced by the hiring of a  coordinator, Office of Defense Programs leadership have not fully  developed controls to better manage and coordinate its microelectronics  activities. Specifically, NNSA does not have or has not fully developed the  following:\nFederal manager with coordination or oversight authority. NNSA  has not established a federal management position with the authority  and accountability to better coordinate or oversee NNSA\u2019s  microelectronics activities. Instead, as described above, agency  officials told us that NNSA\u2019s Office of Defense Programs established a  coordinator position\u2014within a sub-office, the Office of Research,  Testing, Development and Evaluation\u2014in November 2019 to help  guide the agency\u2019s efforts to develop the CMOS8 process and the  FPGA technology, among other things. Moreover, in May 2020, NNSA  stated that senior leadership within the Office of Defense Programs  have not endorsed the formal role of a microelectronics coordinator  and that the coordinator\u2019s role and responsibilities are currently under  review. NNSA also stated that the coordinator has not been given  authority to manage an annual budget for microelectronics activities  and that it was unlikely that such authority would be granted.  This  statement stands in contrast to earlier statements made to us that the  coordinator would have responsibility for an annual budget of about  $50 million, subject to future appropriations.\nManagement plan. NNSA has not developed an overarching  management plan to guide and coordinate the agency\u2019s  microelectronics activities. Instead, NNSA officials from the Office of  Defense Programs and the Office of Safety, Infrastructure and  Operations told us that the agency is in the very early stages of  developing a NNSA plan that will incorporate key decisions and  approaches outlined in the Sandia\u2019s 20-year MESA sustainment plan,  among other things. While NNSA officials are still evaluating the  specific contents of this plan, they said that the plan may outline  specific roles and responsibilities for each NNSA office involved in  microelectronics, describe how these offices will interact with the  microelectronics coordinator, and provide options for future  microelectronics technology development efforts. However, it is  unclear whether the document will define the planning approach,  procedures, and processes that NNSA will use to ensure coordinated  management in multiple areas and across multiple offices, such as  developing cost estimates, an integrated schedule, and performance  metrics. Agency officials said that this plan, when finalized, will  provide a useful tool for coordinating various aspects of NNSA\u2019s  microelectronics activities, but they did not provide an estimated date  for when the plan will be completed.\nMission need statement and requirements document. NNSA has  not developed a current mission need statement or a current program  requirement document. In 2016, as required by DOE\u2019s project  management order on the acquisition of capital assets, NNSA issued  a formal mission need statement and a requirements document to  guide its assessment of the cancelled TMC project (as described  earlier in this report). However, agency officials told us that these  2016 documents are no longer applicable to NNSA\u2019s current approach  to sustaining its microelectronics capability and evaluating options to  ensure a continued capability after 2040. NNSA officials said that they  intend to establish an updated set of requirements to guide the  agency\u2019s future microelectronics capability, and that they will consider  these requirements in establishing a future mission need statement.  However, NNSA officials did not provide a timeframe for finalizing  these documents.\nNNSA officials acknowledged the importance of using management  controls and that the controls described above would be useful, but they  could not identify any specific DOE or NNSA directives, government-wide  guidance, or best practices that they follow to manage their  microelectronics activities. Instead, they offered three reasons why the  agency has not implemented a more coordinated and robust set of  management controls to oversee the agency\u2019s microelectronics activities:\nMicroelectronics production has historically been managed as a  component production effort by an LEP, which is led by an NNSA  program manager within the Office of Defense Programs who  coordinates directly with other NNSA offices and Sandia contractors.\nBecause NNSA has not designed microelectronics as a formal  program, the requirements contained in the agency\u2019s program  management directives are not binding on microelectronics activities.\nNNSA officials said that the multiple projects (identified in the MESA  Complex extended life plan) to upgrade and sustain the  microelectronics capabilities at Sandia through 2040\u2014at an estimated  cost of over $1 billion over 20 years\u2014will not be subject to DOE\u2019s  project management order, as these projects are for sustainment and  not for new facility construction. According to officials from NNSA\u2019s  Office of Safety, Infrastructure, and Operations, infrastructure  investments are being planned and managed as maintenance and  repair efforts.\nNNSA officials told us that the agency\u2019s current efforts provide the  necessary structure for NNSA to oversee and manage its  microelectronics capability. However, NNSA has recognized the  importance of implementing a more coordinated and robust set of  management controls for other important activities within its nuclear  security mission that similarly have not been treated in the past as  specific programs. For example, as we reported in June 2019, while  NNSA historically managed its high-explosive capability without a formal  mechanism to coordinate activities across multiple programs, it recently  implemented a more robust set of management controls to oversee its  high-explosive activities. Specifically, in 2018 NNSA appointed an  enterprise manager to help coordinate these activities. NNSA also  encouraged the enterprise manager to adopt, where appropriate, the  program management controls contained in an NNSA directive on  managing nuclear weapon life extension and strategic materials  programs. Subsequently, the enterprise manager issued a strategic plan  that provided an organizational structure for the agency\u2019s high explosives  capability. By taking a similar approach to its management of  microelectronics activities and incorporating a more coordinated and  robust set of management controls, the agency would have increased  assurance that its planned microelectronics activities are clearly defined,  efficiently executed, and effectively monitored.\n\n\tConclusions\n\nNNSA\u2019s ability to produce unique microelectronics for nuclear weapons is  essential to ensuring a credible U.S. nuclear deterrent. Producing such  microelectronics is a complex task, and NNSA is limited in its ability to  partner with the commercial sector for such production. Over the next two  decades, NNSA will undertake an expensive and ambitious approach to  upgrade and sustain its existing microelectronics production facilities and  capabilities. Specifically, NNSA plans to spend about $1 billion over the  next 20 years to, among other things, upgrade its process to produce a  new type of microelectronic component that has never been integrated  into a nuclear weapon. In addition, NNSA officials said that the agency  will need to identify and analyze options for a continued capability after  2040, and that effort could begin as early as 2021.\nTo increase its management and oversight of the agency\u2019s  microelectronics activities, NNSA has taken some positive steps such as  appointing a microelectronics coordinator within the Office of Defense  Programs and approving certain long-term planning documents.  However, in contrast to other NNSA activities, including programs and  projects, NNSA has not fully developed a coordinated and robust set of  management controls to oversee its microelectronics activities. For  example, NNSA has not established an overarching management plan to  manage and coordinate the cost, schedule, and risks associated with its  microelectronics activities. By incorporating a more coordinated and  robust set of management controls, NNSA would have increased  assurance that its planned microelectronics activities are clearly defined,  efficiently executed, and effectively monitored.\n\n\tRecommendation for Executive Action\n\nThe NNSA Administrator should incorporate additional management  controls to better oversee and coordinate NNSA\u2019s microelectronics  activities. Such management controls could include investing the  microelectronics coordinator with increased responsibility and authority,  developing an overarching management plan, and developing a mission  need statement and a microelectronics requirements document.  (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to DOD and NNSA for review and  comment. DOD did not provide any comments. In its written comments,  reproduced in appendix I, NNSA neither agreed nor disagreed with our  recommendation but provided three main comments. First, NNSA stated  that by December 2020 the agency plans to complete a strategic  management plan that will more clearly articulate the integration of  management controls for the various components of its microelectronics  activities. NNSA stated that it believes this action is consistent with our  recommendation. We are encouraged by this planned action and will  evaluate the completed strategic management plan to determine if it  meets the intent of our recommendation.\nSecond, NNSA stated that our report did not clearly convey the  differences between the management of microelectronics and other  weapons or materials programs and did not include all aspects of its  microelectronics activities (such as the procurement of commercial off the  shelf components) in our audit\u2019s scope. In response, we added  references to the various aspects of NNSA\u2019s microelectronics activities  and clarified that our report focuses on NNSA\u2019s strategic radiation- hardened microelectronics activities at Sandia\u2019s MESA Complex. As  stated in the report, we focused on this specific aspect of NNSA\u2019s  microelectronics mission because of the language in the Senate  committee report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2019, which included a provision for us  to review NNSA\u2019s efforts to recapitalize its strategic radiation-hardened  microelectronics design and production capacity. We also focused on this  specific aspect of NNSA\u2019s mission because the fiscal year 2020 Stockpile  Stewardship and Management Plan lists the continued production of  strategic radiation-hardened microelectronics as one of four key  challenges to the agency\u2019s nuclear stockpile mission.\nThird, NNSA stated that our audit did not include an assessment of  management controls for the range of activities that work together to  ensure the effectiveness of microelectronics planning and execution.  However, our report identifies and describes these management controls,  and as part of our work we considered how these controls work together.  In addition and as stated above, NNSA intends to complete a strategic  management plan to more clearly articulate the integration of its various  microelectronics management controls, which is especially important as  the agency invests about $1 billion dollars over the next 20 years while  simultaneously needing to meet microelectronics production deliverables  for multiple nuclear weapon modernization programs.\nNNSA also provided technical comments, which we incorporated in our  report as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Secretary of Defense, and other  interested parties. In addition, this report is available at no charge on the  GAO website at http:\/\/www.gao.gov.\nIf 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 II.\n\nAppendix I: Comments from the National Nuclear Security Administration\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nAllison B. Bawden at (202) 512-3841 or bawdena@gao.gov  In addition to the contact named above, Jason Holliday (Assistant  Director), Patrick Bernard (Analyst in Charge), and Alisa Carrigan made  key contributions to this report. Also contributing to this report were  Jonathan Felbinger, Juan Garay, Lisa Gardner, Cindy Gilbert, Cynthia  Norris, and Dan C. Royer.","output":null}
{"id":"crs_R45995","pid":"crs_R45995_0","input":"\tIntroduction\n\nOn June 4, 2019, the House passed the American Dream and Promise Act of 2019 ( H.R. 6 ) on a vote of 237 to 187. Title I of the bill, the Dream Act of 2019, would establish a process for certain unauthorized immigrants who entered the United States as children (known as unauthorized childhood arrivals) to obtain lawful permanent immigration status. This vote on H.R. 6 was one of several House and Senate floor votes since 2018\u00e2\u0080\u0094and the only successful one\u00e2\u0080\u0094on legislation to grant some type of immigration relief to unauthorized childhood arrivals. \nAs commonly used, the term \"unauthorized childhood arrivals\" encompasses both individuals who entered the United States unlawfully and individuals who entered legally but then lost legal status, by, for example, overstaying an authorized temporary period of stay. There is no single set of requirements that defines an unauthorized childhood arrival. Individual bills include their own criteria. \nThis report considers House and Senate measures on unauthorized childhood arrivals that have seen legislative action since 2001, focusing in particular on legislation considered in the 115 th and 116 th Congresses. It also discusses the related Deferred Action for Childhood Arrivals (DACA) initiative and DACA-related data. The material is presented chronologically to trace the development of legislative proposals on unauthorized childhood arrivals and highlight the interplay between legislative action on these measures and developments related to the DACA initiative.\n\n\tOriginal Dream Acts in the 107th and 108th Congresses\n\nLegislation on unauthorized childhood arrivals dates to 2001. That year, the Development, Relief, and Education for Alien Minors (DREAM) Act ( S. 1291 ) was introduced in the 107 th Congress to provide a pathway to lawful permanent resident (LPR) status for eligible individuals. LPRs can live and work in the United States permanently and can become U.S. citizens through the naturalization provisions in the Immigration and Nationality Act (INA). In most cases, LPRs must reside in the United States for five years before they can naturalize.\nS. 1291 sought to provide immigration relief to unauthorized childhood arrivals who, like the larger unauthorized population, were typically unable to work legally and were subject to removal from the United States. Many policymakers viewed this subset of the unauthorized population more sympathetically than unauthorized immigrants on the whole because unauthorized childhood arrivals had arrived in the United States as children and were thus not generally seen as being responsible for their unlawful status.\nAlthough not all subsequent bills to grant LPR status to unauthorized childhood arrivals were entitled the \"DREAM Act\" and no subsequent bill included exactly the same provisions as S. 1291 , such legislation came to be known generally as the \"Dream Act\" and its intended beneficiaries as \"Dreamers.\"\nIn general, the potential beneficiaries of such bills did not have an avenue under the INA to become LPRs. The most common way for a foreign national to adjust status (become an LPR while in the United States) is through INA provisions that require the individual to be eligible for an immigrant visa and to have such a visa immediately available to him or her through the permanent immigration system. Individuals are most often eligible for immigrant visas based on a qualifying family relationship (to a U.S. citizen or LPR) or an employment tie. Among the other criteria to adjust status under these provisions, the individual must have been \"inspected and admitted or paroled into the United States\"; thus, individuals who entered the United States unlawfully are not eligible. In addition, with limited exceptions, an individual is not eligible for adjustment of status if he or she falls in a disqualified category, such as someone who engaged in unauthorized employment or \"who has failed (other than through no fault of his own or for technical reasons) to maintain continuously a lawful status since entry into the United States.\"\nS. 1291 in the 107 th Congress and a subsequent DREAM Act bill ( S. 1545 ) introduced in the 108 th Congress were reported by the Senate Judiciary Committee. Neither bill saw further action.\n\n\t\tFramework for Subsequent Proposals\n\nS. 1545 , as reported in the 108 th Congress, contained the basic features of many later proposals to provide LPR status to unauthorized childhood arrivals. It applied to foreign nationals who were \"inadmissible or deportable from the United States\"\u00e2\u0080\u0094this is how the bill described its target unauthorized population. The grounds of inadmissibility in the INA are the grounds on which a foreign national can be denied admission to the United States. The grounds of deportability are the grounds on which a foreign national can be removed from the United States.\nS. 1545 , as reported, proposed a two-stage process for eligible individuals to become LPRs. Criteria to obtain conditional status (stage 1) included continuous presence in the United States for five years prior to the date of the bill's enactment, initial entry into the United States before age 16, and satisfaction of specified educational requirements. Criteria to become a full-fledged LPR (stage 2) included completion of at least two years in a bachelor's or higher degree program or in the Armed Forces, subject to a hardship exception. At either stage, an applicant could have been disqualified if he or she was inadmissible to or deportable from the United States under specified grounds in the INA.\nS. 1545 would have granted qualifying childhood arrivals conditional LPR status. Describing that status, Department of Homeland Security (DHS) regulations state, \"Unless otherwise specified, the rights, privileges, responsibilities and duties which apply to all other lawful permanent residents apply equally to conditional permanent residents, including but not limited to the right to apply for naturalization (if otherwise eligible).\" Regarding naturalization, S. 1545 provided that the time spent in conditional LPR status would have counted toward the LPR residence requirement for naturalization. At the same time, it stated that an individual could only apply to naturalize once the conditional basis of his or her status were removed (and he or she was a full-fledged LPR).\nOther provisions in S. 1545 addressed eligibility for higher education benefits. The bill provided that individuals obtaining LPR status under its terms would only be eligible for certain forms of federal student aid under Title IV of the Higher Education Act of 1965, namely federal student loans, federal Work-Study programs, and services. Unlike LPRs generally, they would seemingly not have been eligible for grant aid (e.g., federal Pell Grants). At the same time, S. 1545 proposed to eliminate a provision enacted in 1996 as part of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) that restricts the ability of states to provide higher education benefits to certain unauthorized immigrants. Section 505 of IIRIRA reads:\nan alien who is not lawfully present in the United States shall not be eligible on the basis of residence within a State (or a political subdivision) for any postsecondary education benefit unless a citizen or national of the United States is eligible for such a benefit (in no less an amount, duration, and scope) without regard to whether the citizen or national is such a resident.\n\n\tLegislative Activity in the 109th through the 111th\u00c2 Congresses\n\nBeginning in the 109 th Congress, proposals on unauthorized childhood arrivals\u00e2\u0080\u0094which had received action in earlier Congresses as stand-alone bills\u00e2\u0080\u0094were incorporated into larger measures. In the 109 th through the 111 th Congresses, several measures to grant LPR status to unauthorized childhood arrivals were considered on the Senate and the House floors.\n\n\t\t109th Congress\n\nIn the 109 th Congress, the Senate passed a major immigration reform bill, the Comprehensive Immigration Reform Act of 2006 ( S. 2611 ), with a DREAM Act subtitle. The Senate vote was 62 to 36. The House did not consider the bill.\nThe DREAM Act provisions in Senate-passed S. 2611 were similar to those in stand-alone S. 1545 , as reported in the 108 th Congress. Like the earlier bill, S. 2611 would have established a mechanism for an eligible unauthorized childhood arrival to become a conditional LPR and then, after meeting additional requirements, have the conditional basis of his or her status removed and become a full-fledged LPR. Applicants also would have had to clear inadmissibility and deportability criteria similar to those under S. 1545 . These DREAM Act provisions were separate from other legalization provisions in S. 2611 , and applicants under the DREAM Act provisions would not have been subject to the same requirements as applicants under the general legalization provisions. This more generous treatment of unauthorized childhood arrivals reflected a widely held belief that they were different and less responsible for their unlawful status than other unauthorized immigrants.\nAlthough the DREAM Act provisions in Senate-passed S. 2611 and S. 1545 , as reported, were similar, there were some differences. For example, under S. 1545 , as noted, the noneducational route through which a conditional LPR could become a full-fledged LPR required service in the Armed Forces. The comparable route under Senate-passed S. 2611 encompassed service in the broader uniformed services. \n\n\t\t110th Congress\n\nIn the 110 th Congress, there was an unsuccessful vote in the Senate to invoke cloture on a bill to provide for comprehensive immigration reform ( S. 1639 ) that included a DREAM Act subtitle among other legalization provisions. The vote was 46 to 53. \nS. 1639 differed from earlier bills on unauthorized childhood arrivals in notable ways. For example, unlike S. 2611 , the immigration reform bill passed by the Senate in the 109 th Congress, S. 1639 's DREAM Act provisions were tied to other legalization provisions in the bill. Under S. 1639 , the first step to LPR status for an unauthorized childhood arrival was the same as for any unauthorized immigrant: to obtain temporary legal status under a new \"Z\" nonimmigrant category. Among the eligibility requirements for Z status were continuous presence in the United States since a specified date and clearance of inadmissibility and ineligibility criteria that were stricter than under S. 2611 . Other requirements for obtaining Z status under S. 1639 included submission of biometric data for security and law enforcement background checks and satisfaction of any applicable federal tax liabilities. \nZ nonimmigrant status would have been granted for an initial period of four years and could have been extended in four-year increments. Applicants for extensions would have had to satisfy, among other criteria, escalating requirements concerning knowledge of the English language and U.S. civics, unless they qualified for an exception. These requirements were based on the English and civics requirements for naturalization.\nS. 1639 would have established different pathways to LPR status for Z nonimmigrants. A DREAM Act pathway to LPR status, which would have been quicker than the standard pathway provided in the bill, would have been available to Z nonimmigrants who met an additional set of requirements. These included being under age 30 on the date of enactment, being under age 16 at the time of initial U.S. entry, and having completed at least two years in either a bachelor's or higher degree program or the uniformed services. The \"under age 30\" requirement was new; earlier bills receiving action did not include maximum age provisions. S. 1639 would have deemed individuals obtaining LPR status under its DREAM Act pathway to meet the LPR residence requirement for naturalization eight years after the date of enactment. \nS. 1639 also addressed eligibility for higher education benefits. As under the earlier bills discussed above, individuals obtaining LPR status under S. 1639 's DREAM Act pathway would have been eligible for federal student loans, federal Work-Study programs, and services, but seemingly not grant aid. Unlike these other bills, S. 1639 would not have fully repealed the IIRIRA Section 505 restriction on state provision of post-secondary educational benefits, but would have rendered it ineffective for Z nonimmigrants.\nOther legislation on unauthorized childhood arrivals considered in the 110 th Congress included another major immigration reform bill ( S. 1348 ). The Senate voted against invoking cloture on both S. 1348 and a substitute amendment to the bill. These votes occurred prior to the introduction of S. 1639 . \nAfter the unsuccessful cloture vote on S. 1639 , the Senate considered a stand-alone DREAM Act bill ( S. 2205 ). It did not invoke cloture on the motion to proceed to the bill, by a vote of 52 to 44. This vote on S. 2205 brought to the fore competing views among supporters of providing LPR status to unauthorized childhood arrivals about the relationship between that issue and other components of immigration reform. Some supporters pressed for passage of the stand-alone bill arguing that the situation of unauthorized childhood arrivals was urgent. Another view held, however, that enacting a pathway to LPR status for unauthorized childhood arrivals in a narrow bill would hurt the prospects of achieving broader reform (including more controversial proposals for the legalization of other unauthorized immigrants).\n\n\t\t111th Congress\n\nIn the 111 th Congress, the House approved a DREAM Act amendment to an unrelated bill, the Removal Clarification Act of 2010 ( H.R. 5281 ) on a vote of 216 to 198. The Senate rejected a motion to invoke cloture on a motion to agree to the House-passed DREAM Act amendment to H.R. 5281 , by a vote of 55 to 41.\nThis House-passed version of the DREAM Act would have established a three-stage process for individuals who were inadmissible or deportable from the United States to obtain LPR status. In stage 1, as in many previous bills, a successful applicant would have been granted conditional status. This proposal, however, would have granted conditional status in the form of conditional nonimmigrant status, which is not an existing status under immigration law. An individual would have applied in stage 2 to have his or her conditional nonimmigrant status extended, and in stage 3 to be granted LPR status. Under this DREAM Act amendment, an individual who became an LPR could naturalize after three years in LPR status. \nThe DREAM Act amendment to H.R. 5281 included eligibility requirements concerning continuous presence, age at entry, and educational attainment, as well as inadmissibility and ineligibility criteria. It also included some of the same types of requirements as S. 1639 in the 110 th Congress\u00e2\u0080\u0094pertaining to maximum age, submission of biometric data, satisfaction of any applicable federal tax liability, and knowledge of English and U.S. civics\u00e2\u0080\u0094although the specific requirements were not necessarily the same, and did not necessarily apply at the same stage of the legalization process, in the two measures. Unlike earlier bills receiving action, the House-passed amendment would have established \"surcharges\" on applications for conditional status. While S. 1639 would have imposed penalty fees on applications for Z status, that bill would have made these fees inapplicable or refundable in the case of applicants who met its DREAM Act criteria.\nLike the DREAM Act provisions in S. 1639 and earlier bills receiving action, the House-passed DREAM Act amendment would have made individuals who obtained conditional nonimmigrant or LPR status under its terms eligible for federal student aid in the form of federal student loans, federal Work-Study programs, and services, but seemingly not grant aid. Unlike earlier bills receiving action, the House-passed measure contained no IIRIRA Section 505 repeal language. \n\n\tEstablishment of DACA\n\nOn June 15, 2012, DHS issued a memorandum announcing the DACA initiative. The memorandum stated that certain individuals who were brought to the United States as children and met other criteria would be considered for deferred action for two years, subject to renewal. DHS has described deferred action as \"a use of prosecutorial discretion to defer removal action against an individual for a certain period of time.\"\nIn remarks delivered that same day, President Barack Obama called on Congress to pass DREAM Act legislation, citing in particular the House-passed bill in the 111 th Congress. He indicated that \"in the absence of any immigration action from Congress to fix our broken immigration system,\" his Administration had tried \"to focus our immigration enforcement resources in the right places.\" He portrayed the DACA initiative as an extension of those efforts, stating that \"[e]ffective immediately, the Department of Homeland Security is taking steps to lift the shadow of deportation from these young people.\" President Obama made clear that DACA relief was not a permanent solution. Instead, he characterized it as \"a temporary stopgap measure.\"\nThe eligibility criteria for an initial two-year grant of DACA were broadly similar to those in earlie r DREAM Act bills. DHS's U.S. Citizenship a nd Immigration Services (USCIS), which administers DACA, published the eligibility criteria for an i ni tial DACA grant and a renewal on its website . The criteria for an initial DACA grant were (1) under age 31 on June 15, 2012; (2) under age 16 at time of entry into the United States; (3 ) continuous ly resident in the Unite d States since June 15, 20 07 ; (4 ) physically present in United S tates on June 15, 2012, and at the time of requesting DACA ; (5) no t in lawful status on June 15, 2012; (6) in school, graduated from high school or obtained general education development certificate, or honorably d ischarged from the Armed Forces; and (7 ) not convicted of a felony, a significant misdemeanor, or three or more misdemeanors, and not otherwise a threat to national se curity or public safety . In addition, with specified exceptions, an individual had to be a t least age 15 to request DACA.\nIndividuals granted deferred action could receive employment authorization. According to USCIS, \" Under existing regulations, an individual whose case has been deferred is eligible to receive employment authorization for the period of deferred action, prov ided he or she can demonstrate ' an ec onomic necessity for employment ' . \" To request DACA from USCIS, an applicant had to submit Form I-821D, \" Consideration of Deferre d Action for Childhood Arrivals \" ; an application for employment authorization (Form I-765) and a related worksheet (Form I-765WS) ; and required fees.\nCurrently, as discussed later in this report, individuals who have never been granted DACA cannot submit initial requests. Individuals who have been granted DACA in the past, however, continue to be able to submit requests. To be considered for a two-year renewal, a DACA recipient must satisfy the following criteria: (1) did not depart from the United States on or after August 15, 2012, without first obtaining permission to travel, (2) has continuously resided in the United States since submitting his or her latest approved DACA request, and (3) has not been convicted of a felony, a significant misdemeanor, or three or more misdemeanors, and is not a threat to national security or public safety. To request a renewal of DACA, an individual must submit the same forms and fees as for an initial request. As of the date of this report, these fees total $495.\n\n\tLegislative Activity in the 113th Congresses\n\nThe next significant legislative developments related to unauthorized childhood arrivals occurred in the 113 th Congress when the Senate approved a major immigration reform bill with DREAM Act provisions. The bill, the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), was passed on a 68-32 vote. The House did not consider S. 744 .\nS. 744 proposed to establish a general legalization program for individuals in the United States who were not in nonimmigrant status or other specified lawful status and a special DREAM Act pathway to LPR status for certain aliens who had entered the country as children. Under S. 744 , unauthorized childhood arrivals, like other unauthorized immigrants, would first have applied for a newly created status\u00e2\u0080\u0094registered provisional immigrant (RPI) status. The requirements for RPI status included continuous presence in the United States since a specified date, satisfaction of any applicable federal tax liability, and submission of biometric and biographic data for national security and law enforcement clearances. RPI status would have been granted for an initial period of six years and could have been extended in six-year increments. Applicants for RPI status would have been subject to specified inadmissibility and ineligibility criteria.\nUnder S. 744 , DHS could have adopted streamlined RPI procedures for DACA recipients. It could have granted RPI status to a DACA recipient upon completion of renewed national security and law enforcement clearances unless the agency determined that the individual had engaged in conduct making him or her ineligible for RPI status.\nS. 744 would have established a special DREAM Act pathway to LPR status for RPIs who had been in RPI status for at least five years, had initially entered the United States when they were under age 16, and, subject to a hardship exception, had completed either two years of higher education or four years of service in the uniformed services. Such individuals also would have had to submit biometric and biographic data for national security and law enforcement background checks and would have had to meet the English language and civics requirements for naturalization, unless exempted. S. 744 would have authorized DHS to adopt streamlined procedures for DACA recipients to obtain LPR status.\nWith respect to naturalization, an alien granted LPR status under the DREAM Act provisions in S. 744 would have been considered to be an LPR (and therefore accumulating time toward the residency requirement for naturalization) during the period in RPI status. In most cases, however, an alien could not have applied for naturalization while in RPI status.\nS. 744 would have placed restrictions on federal student aid under Title IV of the Higher Education Act for RPIs who had entered the United States before age 16. This group would only have been eligible for federal student loans, federal Work-Study programs, and services. In addition, the bill would have repealed Section 505 of IIRIRA, which, as discussed, restricts the provision of postsecondary educational benefits for aliens who are not lawfully present. \n\n\tDACA Since 2017\n\nOn September 5, 2017, Attorney General Jeff Sessions announced that DACA was being terminated. A related memorandum released by DHS the same day rescinded the 2012 memorandum that established the initiative. As part of the rescission, DHS had planned to \"execute a wind-down\" of DACA, under which no new initial DACA requests would have been accepted after September 5, 2017, and no new renewal requests would have been accepted after October 5, 2017. This wind-down did not proceed as planned, however, because DACA recipients and others filed federal lawsuits challenging the legality of the rescission. Under rulings in these cases, to date, individuals who have been granted DACA in the past continue to be able to submit DACA requests. Individuals who have never been granted DACA cannot submit new initial requests. The U.S. Supreme Court is scheduled to hear arguments on the DACA rescission on November 12, 2019.\nIndividuals who have been granted DACA in the past and whose DACA grants have expired or been terminated are still able to apply for a renewal. As of August 1, 2019, USCIS has reinstated its past DACA \"late renewal policy,\" under which an individual whose previous DACA grant expired more than one year ago or whose previous DACA grant was terminated must submit an initial DACA request rather than a renewal request.\nAccording to USCIS data on the DACA population, there were approximately 689,000 active DACA recipients as of September 4, 2017, and approximately 669,080 active DACA recipients as of April 30, 2019. Regarding the latter group, about 80% were born in Mexico, 53% were female, and the median age was 25.\nIn notes accompanying the September 4, 2017, data tables, USCIS indicated that the total number of individuals who had ever been granted DACA as of that date was approximately 800,000. This number excluded individuals whose initial grants of DACA were later terminated. Of those 800,000 individuals, USCIS reported that about 40,000 had become LPRs and about 70,000 had either failed to apply to renew their DACA grants or had their renewal applications denied. As of July 31, 2019, according to USCIS data, the total number of individuals who had ever been granted DACA was 822,063. This number excluded individuals whose initial grants of DACA were later terminated. Of those 822,063 individuals, 73,043 had become LPRs and 4,448 had become citizens. \nThese data on DACA recipients can be compared with estimates of the DACA-eligible population. According to an analysis by the Migration Policy Institute (MPI), an estimated 1,307,000 unauthorized individuals were immediately eligible for DACA in 2016 based on the eligibility requirements for an initial DACA grant that MPI was able to model. In addition, an estimated 398,000 met the age, residence, and immigration status criteria but not the educational requirements. \nMPI updated its estimates of the DACA-eligible population as of 2018 based on the original DACA eligibility requirements and subject to the same model limitations as the 2016 estimates. It estimated that, as of 2018, 1,302,000 individuals met the DACA eligibility requirements and an additional 356,000 met the age, residence, and immigration status criteria but not the educational requirements. \n\n\tLegislative Activity in the 115th and 116th Congresses\n\nIn the fall of 2017, following the DACA rescission announcement, President Donald Trump and several Members of Congress discussed a possible deal on unauthorized childhood arrivals. Initially, these talks focused on a package combining provisions to \"enshrine the protections of DACA into law\" with border security provisions. Other immigration issues were subsequently introduced into the discussion, and in January 2018 the White House released its \"Framework on Immigration Reform & Border Security.\" This proposal called for legal status for DACA-eligible individuals as well as enhancements to border security and interior immigration enforcement and changes to the permanent immigration system. In the 115 th and 116 th Congresses, the Senate and the House have considered measures containing provisions to grant legal status to DACA recipients and unauthorized childhood arrivals along with other immigration provisions. \n\n\t\t115th Congress\n\nIn 2018, both the Senate and the House considered immigration legislation that contained language on unauthorized childhood arrivals. A greater number of proposals to provide immigration relief to this population received floor consideration in the 115 th Congress than in any prior Congress. Neither chamber passed any of these measures.\n\n\t\t\tSenate Amendments to H.R. 2579\n\nIn February 2018, the Senate considered three immigration proposals with language on unauthorized childhood arrivals as floor amendments to an unrelated bill, the Broader Options for Americans Act ( H.R. 2579 ). The Senate rejected motions to invoke cloture on all three amendments.\n\n\t\t\t\tS.Amdt. 1955\n\nThe Senate considered provisions on unauthorized childhood arrivals as Subtitle A of S.Amdt. 1955 , the Uniting and Securing America (USA) Act of 2018. Subtitle A was substantively identical to Title I of two bills with the same USA Act name, as introduced in the 115 th Congress\u00e2\u0080\u0094 S. 2367 and H.R. 4796 .\nS.Amdt. 1955 would have established a mechanism for certain childhood arrivals who were inadmissible to or deportable from the United States or were in temporary protected status (TPS) to become LPRs\u00e2\u0080\u0094in most cases through a two-stage process. Applicants would have been considered for conditional LPR status in stage 1. To receive such status, an applicant would have had to meet requirements including continuous presence in the United States since December 31, 2013; initial U.S. entry before age 18; no inadmissibility under specified grounds in the INA and no other specified ineligibilities; and either college admission, acquisition of a high school diploma or comparable credential, or enrollment in secondary school or a comparable educational program. S.Amdt. 1955 would have directed DHS to grant conditional LPR status to a DACA recipient unless the individual had subsequently engaged in conduct that would make him or her ineligible for DACA. Applicants also would have had to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status would have been valid for eight years.\nIn stage 2, a conditional LPR would have had to meet a second set of requirements to have the conditional basis of his or her status removed and become a full-fledged LPR. Among these requirements were achievement of one of the following, subject to a hardship exception: (1) attainment of a college degree, completion of at least two years in a bachelor's or higher degree program, or completion of at least two years in a postsecondary vocational program, (2) service in the uniformed services for the obligatory period, or (3) employment for at least three years and at least 80% of the time the alien had valid employment authorization. The other stage 2 requirements included submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, and, unless subject to an exception due to a disability, satisfaction of the English language and U.S. civics requirements for naturalization.\nUnder S.Amdt. 1955 , a conditional LPR could have applied to have the condition on his or her status removed at any time after meeting the stage 2 requirements. The time spent in conditional status would have counted as time in LPR status for purposes of naturalization, but the individual could not have applied for naturalization while in conditional status. In addition, the bill would have provided that an applicant meeting all the stage 1 and stage 2 requirements at the time of submitting his or her initial application would have been granted full-fledged LPR status directly (without first being granted conditional status). Earlier bills receiving floor action did not include such a provision.\nRegarding postsecondary education, S.Amdt. 1955 would have repealed Section 505 of IIRIRA. The measure did not include any language concerning federal student aid.\nOn February 15, 2018, the Senate voted (52 to 47) not to invoke cloture on S.Amdt. 1955 .\n\n\t\t\t\tS.Amdt. 1958\n\nS.Amdt. 1958 , the Immigration Security and Opportunity Act, would have established a two-stage pathway to LPR status for certain childhood arrivals who were inadmissible to or deportable from the United States. It incorporated some eligibility requirements for applicants at both stages that were not included in S.Amdt. 1955 . Under S.Amdt. 1958 , to obtain conditional LPR status in stage 1 an individual would have had to either be a DACA recipient or meet a set of requirements. For a DACA recipient to qualify, he or she could not have engaged in any conduct since being granted DACA that would have made the individual ineligible for DACA protection. \nRequirements applicable to a non-DACA recipient included continuous presence in the United States since June 15, 2012; initial U.S. entry before age 18; no inadmissibility under specified grounds in the INA and no other specified ineligibilities; and either satisfaction of educational requirements like those under S.Amdt. 1955 , or enlistment or service in the Armed Forces. In addition, a non-DACA recipient would have had to meet a maximum age requirement\u00e2\u0080\u0094having a birthdate after June 15, 1974\u00e2\u0080\u0094and to have satisfied any applicable federal tax liability. \nAll stage 1 applicants also would have had to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status under S.Amdt. 1958 would have been valid for seven years.\nTo have the conditional basis of his or her status removed and become a full-fledged LPR, a conditional LPR would have had to meet a second set of requirements. These stage 2 requirements included satisfaction of one of the following: (1) acquisition of a college degree or completion of at least two years in a program for a bachelor's or higher degree, (2) service in the uniformed services for at least two years, or (3) employment for at least three years and at least 75% of the time the alien had valid employment authorization. Other requirements included submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, satisfaction of the English language and civics requirements for naturalization, and satisfaction of any applicable federal tax liability. \nUnder S.Amdt. 1958 , the time spent in conditional status would have counted as time in LPR status for purposes of naturalization. In general, however, beneficiaries could not have been naturalized until 12 years after they had received conditional status. This period could have been reduced by up to two years for DACA recipients. \nS.Amdt. 1958 also would have limited the ability of the parents of its beneficiaries to obtain LPR status in the United States. Earlier measures receiving legislative action did not include such restrictions. S.Amdt. 1958 would have prevented a parent from obtaining LPR status based on an immigrant petition filed by a child who had received conditional permanent resident status under the bill if the parent had assisted in the child's unlawful entry into the United States. The amendment did not include any language on federal student aid or Section 505 of IIRIRA.\nOn February 15, 2018, the Senate voted (54 to 45) not to invoke cloture on S.Amdt. 1958 .\n\n\t\t\t\tS.Amdt. 1959\n\nProvisions on unauthorized childhood arrivals comprised Title III of S.Amdt. 1959 , the SECURE and SUCCEED Act. Title III, named the SUCCEED Act, was broadly similar to a Senate bill of the same name ( S. 1852 ), as introduced in the 115 th Congress, despite differences between the two measures.\nS.Amdt. 1959 would have established a three-stage process for unauthorized childhood arrivals to obtain LPR status. Applicants who met an initial set of requirements would have been granted conditional temporary resident status (rather than conditional LPR status, as under the other two Senate amendments). These requirements, which incorporated some of the initial criteria for DACA, included continuous presence in the United States since June 15, 2012; initial U.S. entry before age 16; a birthdate after June 15, 1981; not being in lawful status on June 15, 2012; no inadmissibility or deportability under specified grounds in the INA and no other specified ineligibilities; and educational or military requirements based on the applicant's age on the date of enactment. Those under age 18 would have had to be in school. Those age 18 and older would have had to have earned a high school diploma or comparable credential, been admitted to college, or served or enlisted in the Armed Forces.\nAs under one or both of the other amendments discussed, all stage 1 applicants would also have needed to submit biometric and biographic data for security and law enforcement background checks and to satisfy any applicable federal tax liability. In addition, S.Amdt. 1959 included some requirements to obtain conditional status that were not found in the other amendments. Among them, an applicant age 18 or older would have had to acknowledge being notified that if he or she violated a term of conditional temporary resident status, he or she would be ineligible for any immigration relief or benefits, with limited exceptions. Conditional temporary resident status would have been valid for an initial period of seven years or until the alien turned age 18, if longer.\nUnder S.Amdt. 1959 , an alien's initial period of conditional temporary residence would have been extended for five years if the alien met additional requirements. These included satisfying one of the following: (1) college graduation or college attendance for at least eight semesters, (2) service in the Armed Forces for at least three years, or (3) a combination of college attendance, military service, and\/or employment, as specified, for at least four years.\nAfter seven years in conditional temporary resident status, an alien could have applied for LPR status subject to another set of requirements. These requirements included continued compliance with the requirements for conditional temporary resident status, submission of biometric and biographic data for security and law enforcement background checks, satisfaction of the English language and civics requirements for naturalization (unless exempt due to a disability), and payment of any applicable federal tax liability.\nLike S.Amdt. 1958 , S.Amdt. 1959 would have placed limitations on the ability of its beneficiaries to naturalize and the ability of the family members of its beneficiaries to obtain lawful immigration status under existing law. The provisions in S.Amdt. 1959 , however, were more restrictive than those in S.Amdt. 1958 . An individual would have had to wait at least seven years after being granted LPR status to apply for naturalization. S.Amdt. 1959 would also have provided that a parent or other family member of an alien granted conditional temporary resident status or LPR status could not have gained any status under the immigration laws based on a parental or other family relationship. The amendment did not include any language on federal student aid or Section 505 of IIRIRA.\nOn February 15, 2018, the Senate voted (39 to 60) not to invoke cloture on S.Amdt. 1959 . \n\n\t\t\tHouse Bills\n\nIn June 2018, the House considered two major immigration reform bills with provisions on unauthorized childhood arrivals. Notably, unlike the Senate amendments discussed above and the bills considered in prior Congresses, these bills would not have established new mechanisms for unauthorized childhood arrivals to apply for LPR status on their own behalf. One bill ( H.R. 4760 ), which would have applied only to DACA recipients, would have provided eligible individuals with a renewable temporary status. The other ( H.R. 6136 ) would have enabled eligible individuals to adjust to LPR status in the United States if they were otherwise eligible for immigrant visas. Neither bill passed.\n\n\t\t\t\tH.R. 4760\n\nThe Securing America's Future Act of 2018 ( H.R. 4760 ) would have established a process for certain unauthorized childhood arrivals to obtain a new temporary immigration status\u00e2\u0080\u0094contingent nonimmigrant (CNI) status. To be eligible for CNI status, individuals would have had to have on the bill's date of enactment valid work authorization that was issued pursuant to the DACA initiative (thus, they would have needed to be current DACA recipients). \nAmong the other eligibility criteria for CNI status, individuals would have had to be enrolled in and attending an educational institution full-time, or to have earned a high school diploma, General Educational Development certificate, or high school equivalency certificate. Applicants for CNI status also would have had to submit biometric and biographic data for security and law enforcement checks and clear specified INA inadmissibility and deportability criteria and other specified ineligibilities. The latter ineligibilities were stricter than those under the Senate amendments considered in the 115 th Congress and earlier bills on unauthorized childhood arrivals. Applicants also would have had to pay a border security fee. \nCNI status would have been granted for a period of three years and could have been extended in three-year increments. Contingent nonimmigrants would have been eligible for employment authorization and could have traveled outside the United States and been permitted to return. H.R. 4760 would not have provided a pathway to LPR status. \nOn June 21, 2018, the House voted (193 to 231) not to pass H.R. 4760 .\n\n\t\t\t\tH.R. 6136\n\nLike H.R. 4760 , the related Border Security and Immigration Reform Act of 2018 ( H.R. 6136 ) would have established a process for certain unauthorized childhood arrivals to obtain CNI status. This bill included many of the same eligibility and ineligibility criteria for CNI status as H.R. 4760 , but it would not have been as restrictive. For example, it would not have been limited to individuals who had DACA. Among other, specific differences between the criteria in the two bills, H.R. 4760 would have required applicants for CNI status to be under age 31 on June 15, 2012, which is a requirement for DACA, and also to be under age 31 at the time of filing the CNI application. H.R. 6136 would have required applicants to meet the former age requirement but not the latter. \nUnder H.R. 6136 , CNI status would have been granted for a period of six years and could have been extended in six-year increments. Contingent nonimmigrants would have been eligible for employment authorization and could have traveled outside the United States and been permitted to return. \nIn a key difference from H.R. 4760 , H.R. 6136 would have created a means for CNIs who met certain criteria to become LPRs through the INA adjustment of status provisions. As mentioned in the earlier discussion of the original Dream Act proposals, foreign nationals in the United States who have immigrant visas immediately available to them (based, for example, on an immigrant visa petition filed by a qualified family member) and meet other criteria can become LPRs without having to leave the country. However, in order to adjust to LPR status through these provisions, individuals (except for certain battered immigrants) must have been \"inspected and admitted or paroled into the United States.\" They also must be admissible to the United States for permanent residence under the grounds enumerated in the INA. In addition, with limited exceptions, these adjustment of status provisions are inapplicable to an individual who has engaged in unauthorized employment or \"who has failed (other than through no fault of his own or for technical reasons) to maintain continuously a lawful status since entry into the United States.\"\nH.R. 6136 would have provided that in applying the INA adjustment provisions to a CNI who has been in that status for five years, the CNI would have been considered to be inspected and admitted into the United States. It also would have provided that in making determinations about the CNI's admissibility to the United States, specified grounds of inadmissibility, including grounds related to unlawful presence and lack of proper documentation, would not have applied. The bill, however, did not explicitly address other disqualifications under the adjustment of status provisions, such as for unauthorized employment. The limited permanent immigration relief offered by H.R. 6136 can be seen as occupying a middle ground between H.R. 4760 's renewable temporary status and the special pathways to permanent resident status proposed under the Senate amendments. \nOn June 27, 2018, the House voted (121 to 301) not to pass H.R. 6136 .\n\n\t\t116th Congress\n\nAs of the date of this report, legislative activity in the 116 th Congress on unauthorized childhood arrivals has occurred in the House in connection with the American Dream and Promise Act of 2019 ( H.R. 6 ). This bill contains a Title I (Dream Act) on unauthorized childhood arrivals and a Title II (American Promise Act) on nationals of certain countries designated for TPS or deferred enforced departure (DED). Unlike other bills on unauthorized childhood arrivals that have seen floor action in recent Congresses H.R. 6 does not address an array of immigration issues. The House passed H.R. 6 on June 4, 2019, by a vote of 237 to 187.\nThe Dream Act title of H.R. 6 would establish a mechanism for certain childhood arrivals who are inadmissible or deportable from the United States or who have TPS or are covered by a grant of DED to become LPRs\u00e2\u0080\u0094in most cases through a two-stage process. \nTo obtain conditional LPR status in stage 1, an individual would need to meet a set of requirements, including continuous presence in the United States for at least four years since the date of enactment, initial U.S. entry before age 18, no inadmissibility under specified grounds in the INA and no other specified ineligibilities, and satisfaction of educational requirements. These educational requirements could be satisfied in various ways, including, as in some earlier bills, by attainment of a high school diploma or comparable credential or by enrollment in secondary school or a program to obtain a high school diploma or comparable credential. They also could be satisfied by obtaining a credential from a career and technical education school that provides education at the secondary level. DACA recipients who meet the requirements for a DACA renewal, as in effect in January 2017, would be subject to streamlined application procedures to be established by DHS. All applicants would need to submit biometric and biographic data for security and law enforcement background checks. Conditional LPR status would be valid for 10 years.\nIn stage 2, a conditional LPR would have to meet a second set of requirements to have the conditional basis of his or her status removed and become a full-fledged LPR. Among these requirements are achievement of one of the following, subject to a hardship exception: (1) attainment of a college degree, completion of at least two years in a program for a bachelor's or higher degree, or acquisition of a recognized postsecondary credential from an area career and technical education school; (2) service in the uniformed services for at least two years; or (3) earned income for at least three years and at least 75% of the time the alien had valid employment authorization. The other stage 2 requirements include submission of biometric and biographic data for security and law enforcement background checks, continued clearance of the inadmissibility and ineligibility criteria for conditional LPR status, and satisfaction of the English language and U.S. civics requirements for naturalization, subject to an exception due to disability.\nUnder H.R. 6 , a conditional LPR could apply to have the condition on his or her status removed at any time after meeting the stage 2 requirements. The time spent in conditional status would count as time in LPR status for purposes of naturalization, but the individual could not apply for naturalization while in conditional status. In addition, like S.Amdt. 1955 in the 115 th Congress, the bill would provide that an applicant meeting all the stage 1 and stage 2 requirements at the time of submitting his or her initial application would be granted full-fledged LPR status directly (without first being granted conditional status). \nRegarding postsecondary education, H.R. 6 would not place any restrictions on its beneficiaries' eligibility for federal student aid and would not repeal Section 505 of IIRIRA.\n\n\tConclusion\n\nThe Trump Administration's efforts to end the DACA program have focused renewed attention on the issue of unauthorized childhood arrivals. Passage of H.R. 6 in the House in the 116 th Congress can be seen as a result of this renewed attention. This bill is the latest of several measures to grant LPR status to unauthorized childhood arrivals, and the first in more than five years, to have passed one chamber. The question remains, however, if this bill or another measure to grant legal status to DACA recipients or unauthorized childhood arrivals will be enacted into law.","output":null}
{"id":"gao_GAO-20-73","pid":"gao_GAO-20-73_0","input":"\tBackground\n\nCERCLA established the Superfund program to clean up contaminated  sites to protect human health and the environment from the effects of  hazardous substances. CERCLA requires the President to establish  procedures and standards for prioritizing and responding to releases of  hazardous substances, pollutants, and contaminants into the environment  and to incorporate these procedures and substances into the National Oil  and Hazardous Substances Pollution Contingency Plan (National  Contingency Plan).\nUnder CERCLA, PRPs are liable for conducting or paying for the cleanup  of hazardous substances at contaminated sites. EPA and PRPs 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. Remedial actions can take a considerable amount  of time and money, depending on the nature of the contamination and  other site-specific factors.\nEPA\u2019s Office of Superfund Remediation and Technology Innovation,  which is part of the Office of Land and Emergency Management,  oversees remedial actions at NPL sites, including nonfederal NPL sites.  At each nonfederal NPL site, the lead official who is responsible for  compliance with the National Contingency Plan is the remedial project  manager. Management of nonfederal NPL sites is the responsibility of  the EPA region in which a site is located. EPA has 10 regional offices,  and each one is responsible for executing EPA programs within several  states and, in some regions, territories. Figure 1 illustrates EPA\u2019s 10  regions.\nThe Superfund process begins with the discovery of a potentially  hazardous site or notifications to EPA regarding the possible release of  hazardous substances that may pose a threat to human health or the  environment. EPA\u2019s Superfund remedial cleanup process for nonfederal  NPL sites includes the actions shown in figure 2.\nSite assessment. EPA, states, tribes, or other federal agencies  evaluate site conditions to identify appropriate responses to releases  of hazardous substances to the environment. During this process,  EPA or other entities, such as state or tribal agencies, collect data to  identify, evaluate, and rank sites using agency criteria.\nSite listing. EPA considers whether to list a site 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.\nRemedial investigation and feasibility study. EPA or the PRP will  generally begin the remedial cleanup process for an NPL site by  conducting a two-part study of the site. First, EPA or the PRP  conducts a remedial investigation to characterize site conditions and  assess the risks to human health and the environment, among other  actions. Second, EPA or the PRP conducts a feasibility study to  assess various alternatives to address the problems identified through  the remedial investigation. Under the National Contingency Plan, EPA  considers nine criteria, including long-term effectiveness and  permanence, in its assessment of alternative remedial actions.\nRecord of decision. EPA issues a record of decision that identifies  its selected remedy for addressing the contamination at a site. A  record of decision typically lays out the planned cleanup activities for  each operable unit of the site as well as an estimate of the cost of the  cleanup.\nRemedial design and remedial action. EPA or the PRP plans to  implement the selected remedy during the remedial design phase,  and then, in the remedial action phase, EPA or the PRP carries out  one or more remedial action projects.\nConstruction completion. EPA generally considers construction of  the remedial action 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.\nPostconstruction completion. EPA, the state, or the PRP performs  operation and maintenance for the remedy, if needed, such as by  operating a groundwater extraction and treatment system. EPA  generally performs reviews of the remedy at least every 5 years to  evaluate whether it continues to protect human health and the  environment.\nDeletion from the NPL. 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.\n\n\t\tContaminants and Remedies at Nonfederal NPL Sites\n\nNonfederal NPL sites may include a variety of contaminants, and EPA  may select different types of remedies to clean up the sites. EPA had  recorded more than 500 contaminants at nonfederal NPL sites as of fiscal  year 2014, the most recently available data. According to the Agency for  Toxic Substances and Disease Registry, the highest-priority  contaminants\u2014based on a combination of their prevalence, toxicity, and  potential for human exposure\u2014are arsenic, lead, mercury, vinyl chloride,  and polychlorinated biphenyls. For example, in 2016, the Agency for  Toxic Substances and Disease Registry reported that exposure to arsenic  in drinking water is associated with various health effects, such as  pulmonary and cardiovascular disease, diabetes, and certain cancers.  Contaminants may be found in different media at nonfederal NPL sites. In  2017, EPA reported that groundwater and soil were the most common  contaminated media, including at the nonfederal NPL sites it analyzed.\nTo clean up a nonfederal NPL site, EPA may select various on-site or off- site remedies. For example, EPA may select on-site remedies that  include treatment as well as those that do not, such as on-site  containment, monitored natural recovery, and institutional controls. In  2017, EPA reported that about a quarter of the decision documents for  sites it analyzed included on-site treatment. EPA may also treat or  dispose the contamination off-site. Examples of off-site treatment and  disposal include incineration and recycling. EPA reported that sites it  analyzed may have various combinations of remedies, including  treatment, on-site containment, off-site disposal, and institutional controls.\n\n\t\tAvailable Federal Data on Flooding, Storm Surge, Wildfires, and Sea Level Rise\n\nVarious federal agencies provide nationwide data on flooding, storm  surge from hurricanes, wildfires, and sea level rise. Data on flooding,  storm surge, and wildfires are generally based on current or past  conditions. NOAA models the extent of inundation for various heights of  sea level rise compared to the most recently available data on average  high tide.\n\n\t\t\tFlooding\n\nFEMA provides flood hazard and risk information to communities  nationwide. Among other information, FEMA provides data on coastal and  riverine flooding in the National Flood Hazard Layer, a database that  contains the most current flood hazard data. Federal law requires FEMA  to assess the need to revise and update the nation\u2019s flood maps at least  every 5 years. Among other uses, the flood hazard data are used for  flood insurance ratings and floodplain management. The National Flood  Hazard Layer identifies areas at the highest risk of flooding, which are  those that have a 1 percent or higher annual chance of flooding. In  some locations, the National Flood Hazard Layer also identifies areas  with 0.2 percent or higher annual chance of flooding, which FEMA  considers to be a moderate flood hazard, as well as other flood hazards.  The National Flood Hazard Layer also identifies areas with minimal flood  hazard, including those with less than 0.2 percent annual chance of  flooding, and unknown flood hazard, including areas FEMA had not  assessed for flood hazards. In 2018, the Technical Mapping Advisory  Council noted that FEMA has produced modernized data (i.e., digital  maps) for areas of the United States where 98 percent of the population  resides, but has not determined the flood hazard for 40 percent of  streams. In general, flood hazards are based on existing conditions in  the watershed and floodplains. However, in certain cases, FEMA may  include flood hazard information that is based on future conditions,  according to FEMA regulations.\n\n\t\t\tStorm Surge\n\nNOAA provides estimates of hurricane storm surge using a model called  Sea, Lake and Overland Surges from Hurricanes. Estimates are  available for eastern U.S. coastal areas from Texas through Maine and  other areas affected by storm surge, including Hawaii, Puerto Rico, and  the U.S. Virgin Islands. As of June 2019, NOAA had not modeled storm  surge for the West Coast of the United States or other Pacific islands.  The model takes into account a specific locale\u2019s shoreline, incorporating  bay and river configurations, water depths, bridges, roads, levees, and  other physical features. It estimates the maximum extent of storm surge  at high tide by modeling hypothetical hurricanes under different storm  conditions, such as landfall location, storm trajectory, and forward speed.  NOAA models storm surge from Category 1 through Category 5  hurricanes for the Atlantic coast south of the North Carolina\u2013Virginia  border, the Gulf of Mexico, Puerto Rico, and the U.S. Virgin Islands and  Category 1 through Category 4 hurricanes for the Atlantic coast north of  the North Carolina\u2013Virginia border and Hawaii. According to NOAA\u2019s  website, the model is to be used for educational purposes and awareness  of the storm surge hazard at a city or community level. In accordance with  federal law, the model is also used for other purposes, such as hurricane  evacuation studies. According to NOAA\u2019s website, the agency updates  the model for portions of the shoreline each year to account for, among  other changes, new data and the addition of flood protection devices,  such as levees. The model does not account for future conditions such as  erosion, subsidence (i.e., the sinking of an area of land), construction, or  sea level rise.\n\n\t\t\tWildfires\n\nThe U.S. Forest Service maps wildfire hazard potential based on  landscape conditions and other observations. According to the U.S.  Forest Service, the primary intended use of the wildfire hazard potential  map is to identify priority areas for hazardous fuels treatments from a  broad, national- to regional-scale perspective. The U.S. Forest Service  maps an index of wildfire hazard potential for the contiguous United  States, based on, among other factors, annual burn probabilities and  potential intensity of large fires. The U.S. Forest Service categorizes the  wildfire hazard potential index into five classes of very low, low, moderate,  high, and very high. For example, the U.S. Forest Service designates as  \u201chigh\u201d those areas with wildfire hazard potential index from the 85th to the  95th percentile, and \u201cvery high\u201d above the 95th percentile. The U.S.  Forest Service also categorizes areas as nonburnable (including  agricultural and developed lands) and water. According to the U.S. Forest  Service, areas with higher values of wildfire hazard potential represent  vegetation that is more likely to burn with high intensity under certain  weather conditions. However, areas with moderate, low, and very low  wildfire hazard potential may still experience wildfire, particularly if they  are near areas that have higher wildfire hazard potential. Wildfire hazard  potential is not a forecast or wildfire outlook for any particular season as it  does not include any information on current or forecasted weather or fuel  moisture conditions.\n\n\t\t\tSea Level Rise\n\nNOAA models the extent of inundations from various heights of sea level  rise (up to 10 feet above average high tides) for the contiguous United  States, Hawaii, the Pacific islands, Puerto Rico, and the U.S. Virgin  Islands and provides the results in a web mapping tool called the Sea  Level Rise Viewer. NOAA\u2019s guidance on the Sea Level Rise Viewer  states that data are not available for Alaska. The uses of the sea level  rise data include planning and education but not site-specific analysis,  according to a NOAA document. NOAA labels areas as not mapped if  elevation data of sufficient quality for the areas are not available. NOAA  does not model natural processes, such as erosion, subsidence, or future  construction, or forecast how much sea level is likely to rise in a given  area. Rather, for various heights of local sea level rise, NOAA determines  extent of inundation based on the elevation of an area and the potential  for water to flow between areas.\n\n\t\tEnterprise Risk Management\n\nEnterprise risk management is a tool that allows agencies to assess  threats and opportunities that could affect the achievement of their goals.  In a December 2016 report, we updated our 2005 risk management  framework to reflect changes to the Office of Management and Budget\u2019s  Circular A-123, which calls for agencies to implement enterprise risk  management. We also incorporated recent federal experience and  identified essential elements of federal enterprise risk management.\nOur December 2016 report states that beyond traditional internal controls,  enterprise risk management promotes risk management by considering  the effect of risk across the entire organization and how it may interact  with other identified risks. Additionally, it addresses other topics, such as  strategy determination, governance, communicating with stakeholders,  and measuring performance. The principles of enterprise risk  management apply at all levels of the organization and across all  functions, such as those related to managing risk to human health and  the environment from the potential impacts of climate change effects at  nonfederal NPL sites. The six essential elements of enterprise risk  management that we identified in our December 2016 report are as  follows:  1.  Align risk management process with goals and objectives.  Ensure that the process maximizes the achievement of agency  mission and results. Agency leaders examine strategic objectives by  regularly considering how risks could affect the agency\u2019s ability to  achieve its mission.  2.  Identify risks. Assemble a comprehensive list of risks\u2014both threats  and opportunities\u2014that could affect the agency\u2019s ability to achieve its  goals and objectives.  3.  Assess risks. Examine risks, considering both the likelihood of the  risk and the impact of the risk to help prioritize risk response.  4.  Respond to the risks. Select risk treatment response (based on risk  appetite), including acceptance, avoidance, reduction, sharing, or  transfer.  5.  Monitor risks. Monitor how risks are changing and whether  responses are successful.  6.  Communicate and report on risks. Communicate risks with  stakeholders and report on the status of addressing the risks.\n\n\tAbout 60 Percent of Nonfederal NPL Sites Are Located in Areas That May Be Impacted by Selected Climate Change Effects, According to Available Data\n\nAvailable federal data on flooding, storm surge, wildfires, and sea level  rise suggest that about 60 percent (945 of 1,571) of all nonfederal NPL  sites are located in areas that may be impacted by one or more of these  potential climate change effects. These data, however, may not fully  account for the number of nonfederal NPL sites that may be in such areas  because (1) federal data are generally based on current or past  conditions; (2) data are not available for some areas; and (3) the NCA  has reported that climate change may exacerbate flooding, storm surge,  and wildfires in certain regions of the United States. In addition, EPA does  not have quality information on the boundaries of nonfederal NPL sites,  which could affect its ability to identify the number of sites that may be  impacted by one or more of these potential climate change effects.\n\n\t\tAbout 60 Percent of Nonfederal NPL Sites Are Located in Areas That May Be Impacted by Selected Climate Change Effects; Additional Sites May Be Impacted in the Future\n\nAvailable federal data suggest that 945 of 1,571 nonfederal NPL sites, or  about 60 percent, are located in areas that may be impacted by selected  climate change effects\u2014that is, 0.2 percent or higher annual chance of  flooding or other flood hazards, storm surge from Category 4 or 5  hurricanes, high and very high wildfire hazard potential, and sea level rise  of up to 3 feet. The locations of these sites are shown in figure 3; the full  results of our analysis and additional information on these sites is  available in the interactive map and downloadable data file, which can be  viewed at https:\/\/www.gao.gov\/products\/GAO-20-73.\nOur analysis, however, may not fully account for the number of  nonfederal NPL sites that may be impacted by the effects of climate  change for various reasons. First, we represented the areas of nonfederal  NPL sites based on a 0.2-mile radius around their primary geographic  coordinates, which may not accurately reflect their area (i.e., they may be  larger or smaller). We did not analyze site-specific information for these  nonfederal NPL sites, including the extent of contamination and location  of remedies. Such site-specific analyses would be needed to determine  whether there is a risk to human health and the environment at  nonfederal NPL sites as a result of these potential climate change effects.\nFurther, according to the NCA, EPA documents, and interviews with EPA  officials, there may be other climate change effects that could impact  nonfederal NPL sites, such as potential increases in salt water intrusion  (the movement of saline water into freshwater aquifers), drought,  precipitation, hurricane winds, and average and extreme temperatures;  we did not analyze these effects because we did not identify relevant  national-level federal data sets.\n\n\t\t\tFlooding\n\nWe identified 783 nonfederal NPL sites\u2014approximately 50 percent\u2014in  areas that FEMA had identified as having 0.2 percent or higher annual  chance of flooding, which FEMA considers moderate flood hazard, or  other flood hazards, as of October 2018. Of these 783 sites, our  analysis shows that 713\u2014approximately 45 percent of all sites\u2014are  currently located in areas with 1 percent or higher annual chance of  flooding, FEMA\u2019s highest flood hazard category. We provide information  on the number of sites in areas with moderate or other flood hazards  because, according to the NCA, heavy rainfall is increasing in intensity  and frequency across the United States and is expected to continue to  increase, which may lead to an increase in flooding in the future. The full  results of our analysis\u2014which include information on the sites in areas  that may have 1 percent or higher annual chance of flooding, 0.2 percent  or higher annual chance of flooding or other identified flood hazards,  unknown flood hazard or no data, and minimal flood hazard\u2014are  available in our interactive map, which can be viewed here. For example,  there are a number of nonfederal NPL sites in EPA Region 7, where  states experienced record flooding in early 2019. Specifically, as seen in  figure 4, there are 51 sites that are located in areas with 0.2 percent or  higher annual chance of flooding or other identified flood hazards, of  which 42 are located in areas with 1 percent or higher annual chance of  flooding.\nNationwide, the number of nonfederal NPL sites in areas that may be  impacted by flooding currently may be higher than 783. Specifically, 217  nonfederal NPL sites are located in areas that FEMA has not assessed  for flood hazards or that we did not analyze because the data were not  available in a form we could use with our mapping software.\n\n\t\t\tStorm Surge\n\nWe identified 187 nonfederal NPL sites\u201412 percent\u2014in areas that may  be inundated by storm surge corresponding to Category 4 or 5  hurricanes, the highest possible category, based on NOAA\u2019s storm surge  model as of November 2018. Of these sites, 102 are located in areas  that may be inundated by a storm surge corresponding to Category 1  hurricanes. We analyzed areas that may be inundated by a storm surge  corresponding to the highest possible category because, according to the  NCA, a projected increase in the intensity of hurricanes in the North  Atlantic could increase the probability of extreme flooding because of  storm surge along most of the Atlantic and Gulf Coast states, beyond  what would be projected based solely on relative sea level rise. However,  the NCA stated that there is uncertainty in the projected increase in  frequency or intensity of Atlantic hurricanes, and other factors may affect  the potential for flooding because of storm surge, such as changes in  overall storm frequency or tracks. The full results of our analysis, which  include information on the number of sites in areas that may be inundated  by storm surge from Category 1 and from Category 4 or 5 hurricanes, are  available in our interactive map, which can be viewed here. In EPA  Regions 2 and 3, where states experienced damage from two major  hurricanes in 2017, there are 87 nonfederal NPL sites located within  areas that may be inundated by storm surge from Category 4 or 5  hurricanes. Figure 5 shows these 87 sites, of which 54 sites may be  inundated by storm surge from Category 1 hurricanes.\nNationwide, the number of nonfederal NPL sites in areas that may be  impacted by storm surge may be higher than 187 because NOAA has not  modeled areas along the West Coast and Pacific islands other than  Hawaii. Further, our analysis did not include other potential impacts  from hurricanes, such as rainfall. Figure 6 shows an example of the  impact of rainfall caused by a hurricane at the American Cyanamid NPL  site.\nWe identified 234 nonfederal NPL sites\u201415 percent\u2014located in areas  that have high or very high wildfire hazard potential\u2014those more likely to  burn with a higher intensity, based on a U.S. Forest Service model as of  July 2018. For this analysis, we combined the high and very high wildfire  hazard potential categories; we did not identify the number of sites in  each of these categories separately. We did not analyze areas that  currently have moderate or lower wildfire hazard potential because those  with moderate or lower wildfire hazard potential are less likely to  experience high-intensity wildfire and the extent to which wildfire hazard  potential may change in the future is unknown. The full results of our  analysis on the number of sites in areas with high or very high wildfire  hazard potential are available in our interactive map, which can be viewed  here. As seen in figure 7, there are 22 nonfederal NPL sites in areas with  high or very high wildfire hazard potential in EPA Region 9, a region that  experienced wildfires in 2018, including the highly destructive Carr Fire.\nNationwide, the number of nonfederal NPL sites in areas that currently  have high wildfire hazard potential may be higher than 234 because  wildfire hazard data are only available for the contiguous United States  (i.e., there are no data for Alaska, Hawaii and other Pacific islands,  Puerto Rico, and the U.S. Virgin Islands). According to the NCA, the  incidence of large forest fires in the western United States and Alaska has  increased since the early 1980s and is projected to further increase in  those regions as the climate changes. However, the NCA noted that  analyses regarding the effect of climate change on the incidence of  wildfire in other parts of the United States are not readily available, so it is  unknown how climate change will affect the number of nonfederal NPL  sites in areas rated with high or very high wildfire hazard potential  nationwide. As figure 8 shows, wildfires can pose risks at nonfederal NPL  sites, such as the Iron Mountain Mine site near Redding, California.\nWe identified 110 nonfederal NPL sites\u20147 percent\u2014located in areas that  would be inundated by a sea level rise of 3 feet, based on our analysis of  EPA and NOAA data as of March 2019 and September 2018,  respectively. Our analysis shows that if sea level in these areas rose by 1  foot, 97 sites would be inundated. If sea level in these areas rose by 8  feet, 158 sites would be inundated. We also identified 84 nonfederal NPL  sites that are located in areas that may already be inundated at high  tide. We provide the number of sites in areas that may be impacted by  these sea level rise heights because, according to the NCA, global  average sea levels are very likely to continue to rise by at least several  inches in the next 15 years and by 1.0 to 4.3 feet by 2100. Further, the  NCA states that a rise of as much as 8 feet by 2100 cannot be ruled out.  The full results of our analysis, which include information on the number  of sites in areas that may already be inundated at high tide and that would  be inundated if sea level rose by 1 foot, 3 feet, and 8 feet, are available in  our interactive map, which can be viewed here. There are 23 nonfederal  NPL sites located within areas that may be impacted if sea level rose by  up to 3 feet in EPA Region 6, a region that has experienced land loss  because of sea level rise and coastal flooding, according to the NCA. In  addition, as seen in figure 9, 16\u2014or 70 percent\u2014of these sites may  already be inundated at high tide.\nNationally, the number of nonfederal NPL sites that may be inundated by  various heights of sea level rise will vary from the results of our analysis  because different parts of the United States may experience higher or  lower sea level rise than the global average. For example, the NCA states  that sea level rise will be higher than the global average on the East and  Gulf Coasts of the United States and lower than the global average in  most of the Pacific Northwest and in Alaska. As can be seen in figure 10,  sea level rise and other coastal hazards may impact nonfederal NPL  sites, such as the one in the San Jacinto River Waste Pits site in Texas,  parts of which are already under water.\n\n\t\tEPA Does Not Have Quality Information on the Boundaries of Nonfederal NPL Sites\n\nEPA does not have quality information on the boundaries of nonfederal  NPL sites, which could affect its ability to identify the number of sites that  may be impacted by one or more of these potential climate change  effects. According to EPA officials, EPA has not validated data on site  boundaries and EPA\u2019s regional offices do not use a consistent geographic  standard, which makes it difficult to produce a national data set. In  general, EPA officials told us that information on the boundaries of NPL  sites has not been a focus at a national level and is not yet subject to  quality standards. For example, EPA officials told us that boundary  information for each NPL site represents the remedial project manager\u2019s  professional judgment and remedial project managers may determine and  record the boundaries of sites differently.\nEPA has taken some initial actions to improve the quality of information  on the boundaries of nonfederal NPL sites. In November 2017, the Office  of Superfund Remediation and Technology Innovation issued a directive  to all regional Superfund division directors recommending national  standards for collecting and maintaining geographic information, including  site boundaries. EPA\u2019s 2017 directive notes that using national  standards to collect geographic information, including site boundaries,  promotes EPA\u2019s reporting and analytical efforts to support program  implementation and evaluation. In addition, in May 2018, EPA\u2019s Office of  Land and Emergency Management developed technical guidance for all  its regions and programs for collecting, documenting, and managing  geographic information on Superfund sites, including their boundaries.  EPA officials told us that in 2019 and 2020, the agency plans to move  toward recording site boundaries in a consistent format across regions  and instituting procedures to validate and update them at least annually.\nHowever, EPA officials told us that there is no schedule in place for  completing this effort and they are uncertain when they will complete it  because of competing priorities. By developing a schedule for completing  the standardization and improvement of the quality of the information on  the boundaries of nonfederal NPL sites, EPA could more reasonably  ensure that it would have quality information with which to fully identify  nonfederal NPL sites that are located in areas that may be impacted by  climate change effects.\n\n\tEPA Has Taken Some Actions to Manage Risks from the Potential Impacts of Climate Change Effects at Nonfederal NPL Sites\n\nEPA\u2019s actions to manage risks from the potential impacts of climate  change effects align with three of the six essential elements of enterprise  risk management. Specifically, for the six essential elements, EPA\u2019s  actions do not align with one essential element, aligning its enterprise risk  management process with goals and objectives; partially align with two  essential elements, assessing risks and responding to risks; and align  with three essential elements, identifying risks, monitoring risks, and  communicating about and reporting on risks. Table 1 shows the alignment  of EPA\u2019s actions with the essential elements of enterprise risk  management.\n\n\t\tAligning Risk Management Process with Goals and Objectives\n\nThis essential element calls for agencies to align their risk management  processes with the goals and objectives of the agency, but EPA has not  taken action to clearly align its process for managing risks to human  health and the environment from the potential impacts of climate change  effects at nonfederal NPL sites with agency-wide goals and objectives.  For example, the 2018 to 2022 EPA strategic plan does not include goals  and objectives related to climate change or discuss strategies for  addressing the impacts of climate change effects. Moreover, neither the  fiscal years 2018 to 2019 nor fiscal years 2020 to 2021 national program  manager guidance for EPA\u2019s Office of Land and Emergency Management  mentions climate change among its goals and priorities. In contrast to  the current strategic plan, the 2014 to 2018 EPA strategic plan included  addressing climate change as one of four strategic goals and specifically  discussed climate change as an external factor or emerging issue in the  context of planned, current, and completed cleanups, including at  nonfederal NPL sites. In addition, the fiscal years 2016 to 2017 national  program manager guidance for the office that oversees the Superfund  program listed climate change adaptation as one of four national areas of  focus for the office.\nAccording to an EPA official, when the 2018 to 2022 strategic plan was  drafted, senior agency officials were not aware of the potential risks to the  Superfund program mission from the impacts of climate change effects.  According to this official, senior EPA officials have expressed support for  certain activities related to climate change, such as the work of the Cross- EPA Work Group on Climate Adaptation, but have not issued related  documents or policy statements. Without clarifying how the agency\u2019s  ongoing actions to manage these risks at nonfederal NPL sites align with  current agency goals and objectives, EPA will not have reasonable  assurance that senior officials will take an active role in supporting these  actions, which would help EPA achieve its mission of protecting human  health and the environment.\n\n\t\tIdentifying Risks\n\nEPA\u2019s actions to identify risks to human health and the environment from  the potential impacts of climate change effects at nonfederal NPL sites  align with this essential element of enterprise risk management.  Specifically, EPA identified climate change effects that may impact  nonfederal NPL sites\u2014and pose risks to human health and the  environment\u2014in studies and climate change adaptation and  implementation plans. For example, in a 2012 study of adaptation of  Superfund remediation to climate change, EPA identified eight climate  change effects that may impact certain NPL site remedies: flooding, sea  level rise, extreme storms, large snowfall, wildfires, drought, extreme  heat, and landslides. In 2014, EPA issued an agency-wide climate  change adaptation plan, which identified climate change effects that may  impact NPL sites. The same year, EPA issued a climate change  adaptation implementation plan for the office that oversees the Superfund  program that identified nine climate change effects that may impact NPL  sites.\nEach of the 10 EPA regional offices identified relevant regional climate  change effects in their 2014 climate change adaptation implementation  plans. For example, the Region 3 plan states that increased flooding  and sea level rise may increase risks of releases of contaminants, salt  water intrusion may impact the performance of remedies, and increased  temperatures may impact vegetation that prevents erosion. Additionally,  five regional offices have conducted or are conducting additional  screening-level studies to identify which climate change effects, if any,  may impact each of the NPL sites in these regions. For example,  Region 10 conducted a study in 2015 that identified, among other effects,  sea level rise and wildfires as potential climate change effects that may  impact NPL sites in the region.\n\n\t\tAssessing Risks\n\nEPA\u2019s actions to assess risks to human health and the environment from  the potential impacts of climate change effects at nonfederal NPL sites  partially align with this essential element. In a 2012 study of adaptation of  Superfund remediation to climate change, EPA assessed the impacts of  eight climate change effects on certain remedies to determine the risk  they presented to the agency\u2019s mission to protect human health and the  environment. EPA issued climate change adaptation implementation  plans for the office that oversees the Superfund program and all regions,  as described above, which assessed potential impacts of climate change  effects. In addition, five EPA regional offices assessed or are assessing  potential impacts of climate change effects on NPL sites in their regions  as a whole, and one of these regions assessed both the impacts and  likelihood of climate change effects, consistent with this essential  element. Specifically, Region 4 identified the sites most likely to face  major climate change risks and then examined these sites in greater  detail. Additionally, Region 3 has developed a mapping tool on climate  change vulnerability that provides site-level assessments of sea level rise,  among other potential impacts.\nEPA provides training and direction to remedial project managers\u2014the  lead EPA officials at nonfederal NPL sites\u2014on conducting site-level risk  assessments that incorporate information on potential impacts of climate  change effects. Since 2014, EPA has offered optional training to remedial  project managers and others on integrating climate change into the  Superfund cleanup process. From 2013 through 2015, EPA issued fact  sheets as guidance for assessing the potential impacts of climate change  effects for three types of remedies. According to EPA officials, these  fact sheets constitute the direction that EPA provides to remedial project  managers on assessing risks from climate change effects. EPA plans to  update these fact sheets in 2019 and is also in the process of developing  a compilation of resources for assessing potential flood risks in coastal  areas to inform cleanup and reuse decision-making, according to an EPA  official. In addition, EPA provides resources on climate change on the  Superfund program website, such as links to tools and data on drought  and coastal flooding. EPA also offers technical assistance on  incorporating climate change information into risk assessments to  remedial project managers through groups such as the Contaminated  Sediments Technical Advisory Group and the Cross-EPA Work Group on  Climate Adaptation.\nEPA officials in four regions provided us with site-specific examples of  how they used climate change information to assess risks from the  potential impacts of climate change effects, but officials from other  regions stated that they have not always integrated climate change  information into their risk assessments. For example, according to a  record of decision for the site, EPA Region 2 incorporated the potential for  increased storm flow intensities into the model of the Passaic River used  in the remedial investigation and feasibility study at the Diamond Alkali  site in Newark, New Jersey. Conversely, officials in six regions told us  that they have not used climate change projections for flooding or rainfall  in site-level risk assessments. In addition, officials in Region 6 told us that  they do not incorporate potential impacts of climate change effects or  changes in the frequency of natural disasters into their assessments.\nEPA officials have not consistently incorporated climate change  information into their assessment of site-level risks because they do not  always have the climate data they need to do so, according to our review  of EPA documents and interviews with EPA officials and stakeholders.  For example, officials in three regions told us that they have not used  rainfall or flood projections because the data are not available or they  were unsure which data to use. In addition, in the record of decision for  the Diamond Alkali site in New Jersey, Region 2 officials stated that they  did not integrate sea level rise information into their storm flow modeling  for the Passaic River at the site because of the uncertainty in expected  future sea level rise values, especially at the regional and local levels. We  reported on similar challenges with climate data in our 2015 report on  climate information, which found that existing federal efforts do not fully  meet the climate information needs of federal, state, local, and private  sector decision makers, and we made a related recommendation in that  report.\nFurther, current EPA practice for assessing risks at NPL sites does not  always include consideration of climate change, according to agency  documents we reviewed and officials from three regions and a  stakeholder we interviewed. EPA\u2019s climate change adaptation plan noted  that EPA and its partners will need to alter their standard practices\u2014such  as their standard methods for estimating the frequency of floods or runoff  of pollutants into rivers\u2014to account for a continuously changing climate.  The Region 4 climate change adaptation implementation plan, for  instance, noted that preliminary assessments and site investigations are  typically based on historic information, not future projections and  therefore may not fully address risks. Officials in two regions told us that  they do not have direction on how to alter their practices to account for  climate change. For example, officials in Region 2 said they do not have  instructions that identify a particular set of expectations, data, or maps  that they should use when considering future risks from flooding. Officials  in Region 5 told us that they do not have any formal direction on how to  address risks from climate change and are waiting for EPA headquarters  to provide information on how to do so.\nAccording to EPA documents and a headquarters official, EPA believes  that its existing direction, including general guidance on conducting risk  assessments and the fact sheets for assessing potential impacts of  climate change effects for three types of remedies, discussed above,  provide a robust structure for considering such impacts. However, without  providing direction to remedial project managers on how to integrate  information on the potential impacts of climate change effects into site- level risk assessments at nonfederal NPL sites across all regions and  types of remedies, EPA cannot ensure that remedies will protect human  health and the environment in the long term.\n\n\t\tResponding to Risks\n\nEPA\u2019s actions to respond to risks that potential impacts of climate change  effects may pose to human health and the environment at nonfederal  NPL sites partially align with this essential element. In two national  studies EPA conducted in 2012 and 2017, EPA examined potential  impacts of some climate change effects on selected remedies at NPL  sites, including nonfederal NPL sites, and generally found that it has  taken actions to respond to risks through its existing cleanup processes.  In 2012, as noted above, EPA studied the vulnerability of selected  remedies to some climate change effects and found that existing  processes\u2014such as EPA\u2019s Five-Year Review and operation and  maintenance\u2014could adequately address the potential impacts of climate  change effects. In addition, EPA studied the impacts of three hurricanes  in 2017 on sites with selected remedies in place, including nonfederal  NPL sites, and found that the agency has generally taken resiliency  measures to respond to risks at these sites.\nEPA also provided guidance and training to remedial project managers on  responding to risks to human health and the environment from the  potential impacts of climate change effects and recently added  requirements for certain potential site contractors to describe their  capacity to respond to such risks. EPA provided guidance in its fact  sheets on integrating climate change information into risk response  decisions at nonfederal NPL sites and optional training on integrating  climate change into the Superfund cleanup process. In addition, EPA  provided relevant information and resources for EPA officials on resiliency  measures on the agency website. In 2016, EPA issued performance work  statements to potential contractors for environmental services and  operations and for remediation environmental services that required  contractors to describe their ability to conduct climate change vulnerability  analyses and adaptation, as needed, to ensure the resiliency of remedies  to climate change impacts. According to an EPA headquarters official,  EPA is currently working on developing technical guidance on how  remedial project managers can integrate requests for climate change\u2013 related analysis into their task orders for contractors.\nWith respect to site-level responses, EPA officials from three regions  provided us with examples of site decision documents that described how  climate change information will be incorporated into remedy selection and  design. For example, the record of decision for the Portland Harbor site in  Oregon states that a containment cap will be constructed to withstand  more frequent floods with higher peak flows more common with climate  change. Officials from Region 3 told us that they take into account a  number of factors, including climate change impacts, if any, when they  design and select site remedies.\nHowever, according to our interviews with regional officials, they have not  consistently integrated climate change information into remedy selection  and design. For example, officials from two regions stated that they are  not aware of any remedial project managers in their regions who are  taking action at nonfederal NPL sites to respond to climate change or  consider future conditions. EPA officials have not consistently taken the  potential impacts of climate change effects into account in site-level risk  response decision making because they do not always have sufficient  direction to do so, according to our interviews with EPA officials. EPA  officials from three regions told us that they are unsure how to translate  data on potential impacts of climate change effects into the design of  remedies. For example, officials from Region 10 told us that EPA does  not have direction for remedial project managers on how to integrate  response to climate change impacts into remedial design. These officials  noted that it is up to remedial project managers to be aware of this issue  and it is done on an ad hoc basis. Further, EPA headquarters officials  who review proposed remedies told us that additional guidance from EPA  on managing the risks from potential impacts of climate change effects  would be useful.\nAccording to EPA documents and another EPA headquarters official,  EPA has determined that existing direction\u2014guidance and processes\u2014 for risk response provide a robust structure to integrate climate change  information into remedy selection and design. However, without providing  direction for remedial project managers on how to integrate information  on potential impacts of climate change effects into site-level risk response  decision making at nonfederal NPL sites, EPA cannot ensure that  remedies will protect human health and the environment in the long term.\n\n\t\tMonitoring Risks\n\nEPA\u2019s actions to monitor risks to human health and the environment from  the potential impacts of climate change effects at nonfederal NPL sites  through its Five-Year Review process align with this essential element. In  2016, EPA introduced a new recommended template for the Five-Year  Review that includes a section for officials to document their  consideration of whether any newly available information related to  climate change may call into question a remedy\u2019s protectiveness.\nOfficials in three regions told us they use the Five-Year Review process  to identify and evaluate newly available information on climate change  effects that may impact nonfederal NPL sites. For example, in the 2014  Five-Year Review report for the Publicker Industries site in Pennsylvania,  Region 3 considered newly available information on projected sea level  rise in the region to determine if those projections called into question the  protectiveness of the existing remedies at the site. Officials in that region  told us that they rely on their biological and technical assistance group to  identify any new relevant climate change data to incorporate into their  Five-Year Reviews. Region 7 officials also told us that they assess any  potential changes in future conditions, especially flooding, during the  Five-Year Review process. Officials from two other regions told us that  they monitor changes in site conditions that may be related to climate  change during the Five-Year Review process. For example, Region 2  officials developed additional guidance to help remedial project managers  and site project teams consider changes in site conditions related to  climate change in the Five-Year Review process. Region 6 officials told  us that during the Five-Year Review process, they take into account any  current flood hazard information from FEMA as well as current sea levels,  but they do not monitor projections about sea level rise.\n\n\t\tCommunicating and Reporting on Risks\n\nEPA\u2019s actions to communicate about and report on risks to human health  and the environment from the potential impacts of climate change effects  at nonfederal NPL sites align with this essential element. For example, as  described above, EPA reported on the potential impacts of climate  change effects\u2014which may pose risks to human health and the  environment\u2014on NPL sites in its 2014 national climate change  adaptation plan and the climate change adaptation implementation plans  for the office that oversees the Superfund program and all regions. In  addition, publicly available site-level documents, such as the records of  decision described above, may include information on risks from climate  change and EPA\u2019s actions to manage these risks. EPA officials may also  communicate this information in response to questions from the public.  EPA officials from four regions told us that they have not received many  direct questions on risks from climate change from the public. However,  members of the public can comment on climate change risks through  EPA\u2019s existing public engagement mechanisms, and some have done  so. For example, EPA officials in Region 7 received questions on the draft  record of decision for the West Lake Landfill site in Missouri during the  public comment period and responded to those questions in the final  version of the document, describing how they addressed risks of  increased flooding from climate change in the remedy selection  processes.\nEPA has also communicated with stakeholders and the public on risks to  human health and the environment from the potential impacts of climate  change effects in other ways. For example, officials from Region 10  convened a workshop in 2017 to discuss climate change impacts on  sediment cleanup and upland source control for the Lower Duwamish  Waterway site in Washington with other federal agencies, state and local  officials, universities, companies, and community groups. In addition, EPA  provides an online mapping tool that can help members of the public  identify sites located in areas that would be impacted by up to 6 feet of  sea level rise or in flood hazard areas as determined by FEMA.\n\n\tEPA Recognizes Various Challenges in Managing Risks from the Potential Impacts of Climate Change Effects at Nonfederal NPL Sites\n\nEPA recognizes institutional, resource, and technical challenges in  managing risks to human health and the environment from the potential  impacts of climate change effects at nonfederal NPL sites, according to  agency and other documents that we reviewed and EPA officials and  stakeholders we interviewed.\n\n\t\tInstitutional Challenges\n\nAccording to agency and other documents we reviewed and officials and  stakeholders that we interviewed, EPA faces institutional challenges in  managing risks to human health and the environment from the potential  impacts of climate change effects. As discussed above, officials from  three regions told us that they do not have the direction they need to  manage these risks. For example, EPA officials in Region 2 told us that  during Five-Year Reviews, engineers may analyze several different maps  on flooding potential and must use their professional judgment to  determine how resilient to design the remedy, because there is no  standard guidance on how to do so. Further, EPA officials in two regions  and stakeholders we interviewed stated that it may not be clear whether  EPA could require PRPs to consider climate change impacts in the  cleanup process. However, according to EPA headquarters officials,  considering climate change is consistent with the National Contingency  Plan and the CERCLA criterion that requires officials to consider the long- term effectiveness of remedies when evaluating cleanup alternatives.\nAnother institutional challenge that EPA faces is that its ability to manage  these risks may depend on actions of other entities that are outside of  EPA\u2019s control, according to EPA documents we reviewed and EPA  officials we interviewed. For example, EPA officials from Region 1 told us  that they are not certain whether a hurricane barrier built by the U.S.  Army Corps of Engineers that protects the New Bedford Harbor site in  Massachusetts is designed to withstand future storms. Managing risks  may also require internal coordination within EPA, which presents another  challenge. For example, an EPA headquarters official told us that it can  be challenging for regional Superfund program staff to connect with EPA  experts on climate change, who may be in different program offices. In  April 2019, EPA restructured its regional offices, consolidating cross- cutting issue areas in the immediate office of each Regional Administrator  and Deputy Regional Administrator. Although it is too early to evaluate  the effect of this restructuring, EPA headquarters officials told us that the  restructuring may help address this challenge. Furthermore, EPA officials  from three regions told us that they face challenges related to the  sensitive nature of climate change. For example, officials in Region 6 told  us that when they engaged with the local community during the decision  making process for the San Jacinto River Waste Pits site in Texas, they  avoided using the term climate change because of concerns that the  charged term would alienate some community members.\n\n\t\tResource Challenges\n\nDocuments from four EPA regions and headquarters officials and officials  from three regions we interviewed stated that insufficient or changing  resources\u2014specifically funding and staffing\u2014makes managing risks to  human health and the environment from the potential impacts of climate  change effects challenging for EPA. For example, according to two  regional climate change adaptation implementation plans and EPA  officials, assessing these risks may require more resources than  assessing risks based on current or past conditions. In addition, designing  or modifying existing remedies to respond to these risks could increase  costs, according to EPA documents we reviewed and EPA officials we  interviewed.\nEPA officials from three regions told us that staffing constraints can make  it difficult to manage risks. For example, EPA officials from Region 9 told  us that the need for remedial project managers to respond to other  emergencies, such as overseeing hazardous materials removal after  fires, means that they have less time to oversee cleanup of nonfederal  NPL sites. Officials from Region 10 told us that they had a climate  change advisor who helped integrate climate change into all aspects of  the region\u2019s work, but that person retired, and the region was unable to fill  the position because of resource constraints. As noted above, according  to an EPA headquarters official, EPA\u2019s recent restructuring of its regional  offices may help address this challenge.\n\n\t\tTechnical Challenges\n\nEPA faces technical challenges in managing risks to human health and  the environment from the potential impacts of climate change effects in  terms of available expertise and data, according to documents we  reviewed and EPA regional officials we interviewed. In its 2014 agency- wide climate change adaptation plan, EPA reported that site  vulnerabilities may be difficult to assess because of limited scientific  understanding. EPA officials told us that they need additional expertise  and training to better manage risks. For example, an EPA official in  Region 2 told us that it would be useful to have training on assessing  risks for projects located in floodplains. As noted above, EPA has  developed training for officials on managing risks from climate change,  such as a course on building resilient Superfund remedies that EPA  offered at the annual National Association of Remedial Project Managers  meeting in August 2019. The course\u2019s focus is to help remedial project  managers incorporate consideration of adaptation and build resilience  into Superfund remedies at extreme weather event\u2013impacted sites,  according to the course agenda.\nAccording to EPA documents and EPA officials from two regions,  appropriate climate change data may not be available to inform  assessments that help manage risk. For example, the Region 4 study of  the vulnerability of NPL sites stated that climate model projections of  temperature and precipitation patterns are not available at a spatial  resolution that is useful for assessing vulnerabilities at the site level. In  Region 6, officials told us that when the U.S. Army Corps of Engineers  modeled flooding for the San Jacinto River Waste Pits site in Texas, it  had to rely on past flooding data because the only information available  was on historical storms. In addition, the level of uncertainty inherent in  climate change data may make it challenging for EPA to incorporate that  information into risk management processes, according to agency  documents we reviewed and some agency officials we interviewed. As  noted above, we made recommendations to address similar challenges  with climate data in a prior report.\n\n\tConclusions\n\nClimate change may result in more frequent or intense extreme events,  such as flooding, storm surge, and wildfires, among other effects, which  could damage remedies at nonfederal NPL sites and lead to releases of  contaminants that could pose risks to human health and the environment.  Our analysis of EPA, FEMA, NOAA, and U.S. Forest Service data has  shown that more than half of nonfederal NPL sites\u2014based on a point  coordinate with a 0.2-mile radius as a proxy for the site boundaries\u2014are  located in areas that may be impacted by selected climate change  effects. To help ensure the long-term protectiveness of remedies, it is  important for EPA to understand how climate change effects may impact  nonfederal NPL sites, and the agency has taken steps to do this.  However, EPA does not have quality information on the precise  boundaries of nonfederal NPL sites, which could make it difficult to  determine the nonfederal sites located in areas that may be impacted by  climate change effects. The agency has taken initial steps to develop this  information but does not have a schedule in place for completing this  effort.\nEPA has taken actions to manage risks to human health and the  environment from the potential impacts of climate change effects at  nonfederal NPL sites. These actions align with three of the six essential  elements of enterprise risk management. However, EPA has not clarified  how its actions to manage risks from these effects at nonfederal NPL  sites align with current agency goals and objectives, which could limit its  senior officials\u2019 ability to manage these risks. Further, EPA officials do not  always have direction to ensure that they consistently integrate climate  change information into site-level risk assessments and risk response  decisions, according to EPA documents and officials. Without providing  such direction for remedial project managers, EPA cannot ensure that  remedies at nonfederal NPL sites will protect human health and the  environment in the long term.\n\n\tRecommendations for Executive Action\n\nWe are making the following four recommendations to EPA:\nThe Director of the Office of Superfund Remediation and Technology  Innovation should establish a schedule for standardizing and  improving information on the boundaries of nonfederal NPL sites.  (Recommendation 1)\nThe Administrator of EPA should clarify how EPA\u2019s actions to manage  risks to human health and the environment from the potential impacts  of climate change effects at nonfederal NPL sites align with the  agency\u2019s current goals and objectives. (Recommendation 2)\nThe Director of the Office of Superfund Remediation and Technology  Innovation should provide direction on how to integrate information on  the potential impacts of climate change effects into risk assessments  at nonfederal NPL sites. (Recommendation 3)\nThe Director of the Office of Superfund Remediation and Technology  Innovation should provide direction on how to integrate information on  the potential impacts of climate change effects into risk response  decisions at nonfederal NPL sites. (Recommendation 4)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to EPA for its review and comments. In  its comments, reproduced in appendix II, EPA stated that it recognizes  the importance of ensuring Superfund sites cleanups are resilient in the  face of existing risks and extreme weather events. EPA added that it has  taken actions to include vulnerability analyses and adaptation planning in  its Superfund activities. We acknowledge that EPA has taken some action  to manage risks. However, EPA has not clarified how its risk-related  actions align with agency goals and objectives. Further, it has not  provided direction to ensure that officials consistently integrate climate  change information into site-level risk assessments and risk response  decisions.\nRegarding our recommendations, EPA agreed with one and disagreed  with the other three. We continue to believe that all recommendations are  warranted.\nIn response to our recommendation that the Director of the Office of  Superfund Remediation and Technology Innovation establish a schedule  for standardizing and improving information on the boundaries of  nonfederal NPL sites, EPA noted that it agrees with our finding and  acknowledges a lack of consistent standards to identify site boundaries at  the national level. According to EPA, it has taken initial steps to develop  an approach to standardize and improve information on nonfederal NPL  site boundaries. EPA stated that it expects to establish a schedule for this  effort by the second quarter of fiscal year 2020, with the aim to have  collected an initial set of site boundaries for all NPL sites by the fourth  quarter of fiscal year 2021.\nIn response to our recommendation that EPA clarify how its actions to  manage risks to human health and the environment from the potential  impacts of climate change effects at nonfederal NPL sites align with the  agency\u2019s current goals and objectives, EPA said that it believes managing  risks from exposure to contaminants in the environment is integral to  EPA\u2019s current strategic goal 1.3, Revitalize Land and Prevent  Contamination. We agree that protectiveness is a key part of strategic  objective 1.3. However, this strategic objective does not include any  measures related to climate change or discuss strategies for addressing  the impacts of climate change effects. An essential element of enterprise  risk management is to align risk management processes with goals and  objectives. Consequently, we believe that our recommendation is still  warranted.\nIn response to our recommendations that the Director of the Office of  Superfund Remediation and Technology Innovation provide direction on  how to integrate information on the potential impacts of climate change  effects into risk assessments and risk response decisions at nonfederal  NPL sites, EPA said that it strongly believes the Superfund program\u2019s  existing processes and resources adequately ensure that risks and any  effects of severe weather events are woven into risk assessments and  risk response decisions at nonfederal NPL sites. However, as we noted in  our report, EPA\u2019s current direction does not address all types of cleanup  actions or climate change effects. Further, EPA officials from some  regions told us that current EPA practice for assessing risks at NPL sites  does not always include consideration of climate change and that they  have not consistently integrated climate change information into site- specific remedy selection and design. EPA noted that it may issue a  memorandum to reinforce the tools and resources available to NPL site  teams and would determine whether to issue this memorandum by the  end of January 2020.\nEPA also provided technical comments, which we incorporated as  appropriate.\nAs 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 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.\nIf 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 III.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines (1) what available federal data suggest about the  number of nonfederal National Priorities List (NPL) sites that are located  in areas that may be impacted by selected climate change effects; (2) the  extent to which the Environmental Protection Agency (EPA) has managed  risks to human health and the environment from the potential impacts of  climate change effects at nonfederal NPL sites; and (3) the challenges, if  any, EPA faces in managing these risks.\nTo determine what available federal data suggest about the number of  nonfederal NPL sites that are located in areas that may be impacted by  selected climate change effects, we reviewed the Fourth National Climate  Assessment (NCA) to identify potential climate change effects. Based on  our review of the NCA, we identified the following potential climate  change effects: sea level rise, which may lead to increased frequency and  extent of extreme flooding from coastal storms; greater frequency and  magnitude of drought; increased intensity and frequency of heavy  precipitation events, which may lead to increased local flooding; salt  water intrusion; increased incidence of large wildfires; increased  frequency and intensity of extreme high temperatures and sustained  increases in average temperatures; decreased permafrost; and increased  intensity\u2014including higher wind speeds and precipitation rates\u2014and  frequency of very intense hurricanes and typhoons. We reviewed EPA  documents (such as EPA\u2019s climate change adaptation implementation  plans) to identify potential climate change effects that may impact  nonfederal NPL sites and interviewed EPA officials.\nThrough a review of federal agencies\u2019 documents and databases and  interviews with officials about their data and research on these effects, we  identified available national federal data sets on three current hazards:  flooding, storm surge, and wildfires\u2014which the NCA reports will be  exacerbated by climate change\u2014from the Federal Emergency  Management Agency (FEMA), the National Oceanic and Atmospheric  Administration (NOAA), and the U.S. Forest Service. We also identified  data on sea level rise from NOAA.\nIn this report, we refer to (1) flooding, (2) storm surge, (3) wildfires, and  (4) sea level rise as potential climate change effects. We used the most  recently available data for each of these climate change effects; these  data do not provide estimates of the projected changes in the future. To  the extent that data were available, we analyzed a range of these  potential climate change effects. For example, we used the maximum  extent of storm surge from Category 1 hurricanes as well as Category 4  or 5 hurricanes, the highest possible categories, as modeled by NOAA.  We focused on a range because, for three of the four effects, we had data  on current hazards, which may become more intense and frequent in the  future, according to the NCA. Additionally, the Comprehensive  Environmental Response, Compensation, and Liability Act of 1980  (CERCLA) directs EPA to give preference to remedies that would result in  the permanent and significant decrease in toxicity, mobility, or volume of  the contamination. According to EPA officials, remedies at nonfederal  NPL sites may have to be operational indefinitely, during which time the  potential effects of climate change may become more extreme.\nThe range of estimates we provide in our report is as follows:\nFor flooding, we used data from FEMA\u2019s National Flood Hazard Layer  as of October 2018. FEMA identifies a variety of flood hazards, and  for reporting purposes, we grouped flood hazard zones into four  categories: (1) 1 percent or higher annual chance of flooding, (2) 0.2  percent or higher annual chance of flooding or other flood hazards,  (3) unknown flood hazards, and (4) minimal flood hazard.\nFor storm surge, we used data from NOAA\u2019s model on Sea, Lake and  Overland Surges from Hurricanes as of November 2018 for Category  1 and Category 4 or 5 hurricanes.\nFor wildfire, we used data from the U.S. Forest Service\u2019s 2018 wildfire  hazard potential map, which the U.S. Forest Service released in July  2018. We used areas with high or very high wildfire hazard potential in  our analysis. The U.S. Forest Service based the 2018 map on wildfire  likelihood and intensity data from 2016, spatial fuels and vegetation  data from 2012, and point locations of past fire occurrence from 1992  to 2013.\nFor sea level rise, we used NOAA data, last updated in September  2018. We downloaded inundation data on 0, 1, 3, and 8 feet of sea  level rise and \u201cnot mapped\u201d areas.\nWe obtained data from EPA\u2019s Superfund Enterprise Management System  on the location and other characteristics of active and deleted nonfederal  NPL sites. In our analysis, we used a 0.2-mile radius around the primary  geographic coordinate point of each nonfederal NPL site, which may not  accurately represent their actual areas because the sites vary in size and  shape. The EPA data we used in our analysis on the location of  nonfederal NPL sites are current as of March 2019. We also obtained  EPA data on contaminants and types of remedies that are current as of  fiscal year 2014 to determine the number of contaminants EPA has  identified in nonfederal NPL sites. We did not conduct further site-specific  analyses, such as those related to the extent of contamination and  location of remedies. We reviewed documents from the Agency for Toxic  Substances and Disease Registry on the health effects of hazardous  substances in nonfederal NPL sites and interviewed officials from that  agency.\nTo analyze whether nonfederal NPL sites are located in areas that may  be impacted by flooding, we used ArcGIS mapping software to intersect  the area of a 0.2-mile radius around the primary coordinate of the sites  with the categories we defined from the National Flood Hazard Layer. If a  site overlapped with areas in more than one of the four reporting groups,  we categorized the site in the group representing the highest flood  hazard. For the purposes of our report, we considered the highest flood  hazard to be, in descending order, 1 percent or higher annual chance of  flooding, other flood hazards (including 0.2 percent or higher annual  chance of flooding), unknown flood hazard or no data, and minimal flood  hazard. To analyze whether nonfederal NPL sites are located in areas  that may be impacted by storm surge, wildfires, and sea level rise, we  used MapInfo mapping software to intersect the area of a 0.2-mile radius  around the primary coordinates of sites with each of these layers. Overlap  indicates that a site is potentially in an area that may be impacted.\nTo assess the reliability of FEMA\u2019s National Flood Hazard Layer, we  reviewed FEMA\u2019s methodology, guidelines, and standards; interviewed  FEMA officials to assess the timeliness and accuracy of the data as well  as any limitations of the data; conducted data testing to check for missing  data and inconsistencies; and reviewed internal controls. We also  reviewed a prior GAO report on the methodology FEMA uses to map  flood hazards. To assess the reliability of NOAA\u2019s data on Sea, Lake and  Overland Surges from Hurricanes, we reviewed NOAA\u2019s methodology for  developing the model, interviewed NOAA officials to assess the  timeliness and accuracy of the data as well as any limitations of the data,  and reviewed internal controls. To assess the reliability of the U.S. Forest  Service\u2019s wildfire hazard potential data, we reviewed the agency\u2019s  documentation of the methodology, interviewed U.S. Forest Service  officials to assess the timeliness and accuracy of the data as well as any  limitations of the data, and reviewed internal controls. We also reviewed  our past reports that cited the 2014 versions of these data. To assess  the reliability of NOAA\u2019s data on sea level rise, we reviewed the  methodology NOAA used for developing the model, interviewed NOAA  officials to assess the timeliness and accuracy of the data as well as any  limitations of the data, and reviewed internal controls.\nTo assess the reliability of EPA\u2019s data, we reviewed agency manuals and  data dictionaries to understand data elements, interviewed EPA officials  to assess the timeliness and accuracy of the data and related internal  controls, conducted data testing, discussed inaccuracies with EPA  officials; and obtained corrected data. For example, we compared the zip  code of each nonfederal NPL site to its coordinate to check the accuracy  of site locations. We shared potential errors with EPA officials, who  corrected the coordinates of six sites. As a result of the steps described  above, we found data from EPA, FEMA, NOAA, and the U.S. Forest  Service to be sufficiently reliable for our purposes.\nTo determine the extent to which EPA has managed risks to human  health and the environment from the potential impacts of climate change  effects on nonfederal NPL sites, we examined relevant provisions in  CERCLA, EPA\u2019s implementing regulations, and executive orders. We  also reviewed EPA documents, including climate change adaptation and  implementation plans; vulnerability studies; training materials; and site- specific documents, our prior work, and relevant documents from other  organizations, such as the National Research Council. We identified  these documents by conducting a search of (1) websites of relevant  agencies and organizations and (2) article databases. We also reviewed  documents provided to us by agency officials and stakeholders that we  identified as described below. We interviewed EPA officials at  headquarters and all regional offices to identify information on agency  actions for managing risks. In addition, to obtain their views of EPA\u2019s  actions, we interviewed former EPA officials, representatives of two  associations representing state officials (the Environmental Council of  States and the Association of State and Territorial Solid Waste  Management Officials), a professor of environmental law, and a private  consultant who has worked on Superfund issues, which we identified in  the search described above and recommendations from other  interviewees. We generally contacted all stakeholders that we identified  who appeared to be currently working on issues related to Superfund and  climate change and who agreed to speak with us. We also interviewed  stakeholders at the three sites we selected as illustrative examples in  order to obtain their views of EPA\u2019s actions.\nWe selected three nonfederal NPL sites as illustrative examples of how  EPA has managed risks to human health and the environment from  potential impacts of climate change effects and challenges EPA may face  in managing these risks. The three sites we selected are the (1) American  Cyanamid site in Bridgewater, New Jersey; (2) Iron Mountain Mine site  near Redding, California; and (3) San Jacinto River Waste Pits site in  Channelview, Texas. To select these sites, we initially identified 43 sites  based on information in EPA documents, news articles, and interviews  with EPA officials and other stakeholders as described above. We  selected relevant sites in three different EPA regions that illustrate a  variety of potential climate change effects and that had experienced an  extreme weather event in the past 10 years. To gather more in-depth  information about these sites, we reviewed EPA and other documents;  toured the sites; and interviewed EPA officials and relevant stakeholders  at these sites, including state and local officials, representatives of  potentially responsible parties, and community organizations. The results  from these illustrative examples are not generalizable to nonfederal NPL  sites that we did not select.\nWe compared EPA\u2019s actions to manage risks to human health and the  environment from the potential impacts of climate change effects with  essential elements for managing risk as identified in our prior work on  enterprise risk management. These essential elements are as follows:  (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 assessed  information on EPA\u2019s actions to determine the extent to which the  agency\u2019s actions aligned with these elements. In assessing EPA\u2019s actions  against these essential elements, we used \u201caligned,\u201d \u201cpartially aligned,\u201d or  \u201cnot aligned\u201d to reflect the extent to which EPA took actions aligned with  each essential element. If EPA provided evidence that it had taken major  actions in alignment with that essential element, we determined the  actions were aligned. If EPA provided evidence that it had taken some  actions in alignment with that essential element, we determined the  actions were partially aligned. If EPA took only a few or no actions in  alignment with that essential element, we determined the actions were  not aligned. Two GAO analysts independently reviewed the information  on EPA\u2019s actions and then reached consensus on the extent to which  EPA\u2019s actions were aligned with each element.\nTo identify the challenges EPA faces in managing these risks, we  reviewed EPA documents; our prior work; and relevant documents from  other organizations, including the National Research Council, that we  obtained as described above. We interviewed EPA officials at  headquarters and all regional offices and stakeholders in order to obtain  their views on the challenges EPA faces. The views of stakeholders we  interviewed are illustrative and not generalizable to all stakeholders. We  reviewed the challenges that we identified in these documents and  interviews and grouped all the challenges into three categories for  reporting purposes: institutional, resource, and technical. Two GAO  analysts independently reviewed the information and then reached  consensus on the challenges and their grouping in the three categories.\nWe conducted this performance audit from April 2018 to October 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.\n\nAppendix II: Comments from the Environmental Protection Agency\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Barbara Patterson (Assistant  Director), Ruth Solomon (Analyst in Charge), Breanne Cave, Charles  Culverwell, Cindy Gilbert, Richard Johnson, Gwen Kirby, Krista Mantsch,  Patricia Moye, Eleni Orphanides, Ernest Powell Jr., Dan Royer, and Kiki  Theodoropoulos made key contributions to this report.","output":null}
{"id":"crs_R41219","pid":"crs_R41219_0","input":"\tIntroduction\n\nThe United States and Russia signed a new strategic arms reduction treaty\u2014known as New START\u2014on April 8, 2010. This treaty replaced the 1991 Strategic Arms Reductions Treaty (START), which expired, after 15 years of implementation, on December 5, 2009. The U.S. Senate provided its advice and consent to ratification of New START on December 22, 2010, by a vote of 71-26. The Russian parliament, with both the Duma and Federation Council voting, did so on January 25 and January 26, 2011. The treaty entered into force on February 5, 2011, after Secretary of State Clinton and Foreign Minister Lavrov exchanged the instruments of ratification. New START superseded the 2002 Strategic Offensive Reductions Treaty (known as the Moscow Treaty), which then lapsed in 2012. New START provided the parties with 7 years to reduce their forces, and it will remain in force for a total of 10 years, unless the parties agree to extend it for no more than five additional years. Both parties completed their required reductions by February 5, 2018. \nWith the reductions now complete, questions about whether the two nations will extend the treaty have begun to dominate public discussions. The Obama Administration briefly considered pursuing an extension of New START before it left office in 2016, but did not raise the issue with Russia. Press reports indicate that the President Trump rejected a proposal from Russian President Putin to extend the treaty during their first phone call in February 2017. The Presidents reportedly discussed the treaty during their summit in Helsinki in July 2018, with President Putin presenting President Trump with a document suggesting that they extend the treaty after resolving \"existing problems related to the Treaty implementation,\" but the two reportedly did not reach an agreement on the issue. The Administration's Nuclear Posture Review (NPR), completed in February 2018, confirmed that the United States would continue to implement the treaty, at least through 2021, but was silent on the prospects for extension through 2026. Trump Administration officials have indicated that they are reviewing the treaty and assessing whether it continues to serve U.S. national security interests before deciding whether the United States would propose or accept a five-year extension. They noted, in testimony before the Senate Foreign Relations Committee in May 2019, that an interagency review was continuing, but they refused to elaborate on the substance of that review or speculate on the implications of a decision to allow New START to lapse in 2021.\nDuring this hearing, Under Secretary of State Andrea Thompson and Deputy Under Secretary of Defense David Trachtenberg emphasized that the New START Treaty might not be sufficient to address emerging threats to U.S. national security. They noted that Russia was developing new kinds of strategic offensive arms that would not count under the treaty, that Russia was expanding its stockpile of shorter-range nonstrategic nuclear weapons that were outside the scope of the treaty, and that China was modernizing and expanding its nuclear arsenal but was not a part of the treaty at all. These comments were consistent with press reports indicating that President Trump would like to pursue a new arms control agreement that captured all types of nuclear weapons and included China's forces under the limits. The witnesses were unable, however, to articulate a reason for why China would be willing to participate in such negotiations when its nuclear arsenal of around 300 warheads was far smaller than the arsenals of several thousand warheads held by the United States and Russia. Instead, when asked, Under Secretary Thompson provided a rationale for why the United States would want China to participate in the talks, noting that China wants \"to be a responsible player on the world stage. They want to be part of this great power competition. And with that comes responsibilities.\"\nSome U.S. officials, including General John Hyten, the commander of U.S. Strategic Command (STRATCOM), have noted that New START serves U.S. national security interests because its monitoring regime provides transparency and visibility existing into Russian nuclear forces and because its limits provide predictability about the future size and structure of those forces. However, in testimony before the Senate Armed Services Committee in February 2019, General Hyten also expressed concern about new kinds of nuclear forces that Russia may develop in the coming years. He noted that these weapons could eventually pose a threat to the United States and said he thought the United States and Russia should expand New START so they would count them under the treaty limits. \nAs is noted below, Article V, paragraph 2 of the treaty provides a mechanism for the parties to address concerns about the emergence of new kinds of strategic offensive arms. It states that the parties should raise their concerns about such weapons in the Bilateral Consultative Commission (BCC) established by the treaty, and seek to reach a resolution there. In May 2019, Undersecretary of State Andrea Thompson stated that the United States had begun to have discussions with Russia about these systems at the technical expert level, but she did not specify whether these discussions were occurring in the BCC. Russian officials have stated that some of its new systems should not count under New START because they do not meet the treaty's definition of deployed missile launchers or heavy bombers. \nNevertheless, the public debate about the possible extension of New START has begun to incorporate views about how to address these weapons. For example, some experts believe the United States and Russia should extend the treaty before 2021, then use the time during the extension to discuss how to include these new systems under the treaty limits. Some, however, have suggested the opposite, arguing that the United States should not agree to extend New START unless Russia agrees, before the extension takes effect, to count its new systems under the treaty limits. Others believe that the United States should agree to extend New START only if Russia agrees, before the extension takes effect, to use the time during the extension to negotiate a new treaty that not only captures the new kinds of weapons, but also imposes limits on Russia's nonstrategic nuclear forces.\nRussian officials have also questioned whether the United States and Russia are in a position to extend New START before it expires in 2021. At a conference in Washington in March 2019, Anatoly Antonov, Russia's ambassador to the United States, noted that Russia is not interested in expanding New START so that it would count new kinds of strategic systems and that Russia would be unwilling to discuss an extension of New START until the United States addresses Russia's concerns with U.S. implementation of the treaty's conversion and elimination procedures. Moreover, he noted that, if the two sides negotiated a new treaty to capture the systems of concern to the United States, Russia would insist on addressing U.S. systems\u2014like ballistic missile defenses and strategic conventional weapons\u2014that are of concern to Russia.\n\n\tBackground\n\nPresident Obama and and Russia's President Medvedev outlined their goals for the negotiations on a new START Treaty in early April 2009. In a joint statement issued after they met in London, they indicated that the subject of the new agreement \"will be the reduction and limitation of strategic offensive arms.\" This statement indicated that the new treaty would not address missile defenses, nonstrategic nuclear weapons, or nondeployed stockpiles of nuclear weapons. The Presidents also agreed that they would seek to reduce their forces to levels below those in the 2002 Moscow Treaty, and that the new agreement would \"mutually enhance the security of the Parties and predictability and stability in strategic offensive forces, and will include effective verification measures drawn from the experience of the Parties in implementing the START Treaty.\"\nThe Presidents further refined their goals for New START, and gave the first indications of the range they were considering for the limits in the treaty, in a Joint Understanding signed at their summit meeting in Moscow in July 2009. They agreed that the new treaty would restrict each party to between 500 and 1,100 strategic delivery vehicles and between 1,500 and 1,675 associated warheads. They also agreed that the new treaty would contain \"provisions on definitions, data exchanges, notifications, eliminations, inspections and verification procedures, as well as confidence building and transparency measures, as adapted, simplified, and made less costly, as appropriate, in comparison to the START Treaty.\"\nThe New START Treaty follows many of the same conventions as the 1991 START Treaty. It contains detailed definitions and counting rules that the parties use to identify the forces limited by the treaty. It also mandates that the parties maintain an extensive database that describes the locations, numbers, and technical characteristics of weapons limited by the treaty. It allows the parties to use several types of exhibitions and on-site inspections to confirm information in the database and to monitor forces and activities limited by the treaty. \nBut the new treaty is not simply an extension of START. The United States and Soviet Union negotiated the original START Treaty during the 1980s, during the latter years of the Cold War, when the two nations were still adversaries and each was still wary of the capabilities and intentions of the other. Many of the provisions in the original treaty reflect the uncertainty and suspicion that were evident at that time. The New START Treaty is a product of a different era and a different relationship between the United States and Russia. In some ways, its goals remain the same\u2014the parties still sought provisions that would allow for predictability and transparency in their current forces and future intentions. But, the United States and Russia have streamlined and simplified the central limits and the monitoring and verification provisions. The new treaty does not contain layers of limits and sublimits; each side can determine its own mix of land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers. Moreover, in the current environment, the parties were far less concerned with choking off avenues for potential evasion schemes than they were with fostering continued cooperation and openness between the two sides.\n\n\tCentral Limits and Key Provisions\n\n\t\tCentral Limits\n\n\t\t\tLimits on Delivery Vehicles\n\nThe New START Treaty contains three central limits on U.S. and Russian strategic offensive nuclear forces; these are displayed in Table 1 , below. First, it limits each side to no more than 800 deployed and nondeployed ICBM and SLBM launchers and deployed and nondeployed heavy bombers equipped to carry nuclear armaments. Second, within that total, it limits each side to no more than 700 deployed ICBMs, deployed SLBMs, and deployed heavy bombers equipped to carry nuclear armaments. Third, the treaty limits each side to no more than 1,550 deployed warheads. Deployed warheads include the actual number of warheads carried by deployed ICBMs and SLBMs, and one warhead for each deployed heavy bomber equipped for nuclear armaments. Table 1 compares these limits to those in the 1991 START Treaty and the 2002 Moscow Treaty.\nAccording to New START's Protocol a deployed ICBM launcher is \"an ICBM launcher that contains an ICBM and is not an ICBM test launcher, an ICBM training launcher, or an ICBM launcher located at a space launch facility.\" A deployed SLBM launcher is a launcher installed on an operational submarine that contains an SLBM and is not intended for testing or training. A deployed mobile launcher of ICBMs is one that contains an ICBM and is not a mobile test launcher or a mobile launcher of ICBMs located at a space launch facility. These deployed launchers can be based only at ICBM bases. A deployed ICBM or SLBM is one that is contained in a deployed launcher. Nondeployed launchers are, therefore, those that are used for testing or training, those that are located at space launch facilities, or those that are located at deployment areas or on submarines but do not contain a deployed ICBM or SLBM.\nThe New START Treaty does not limit the number of nondeployed ICBMs or nondeployed SLBMs. It does, however, state that these missiles must be located at facilities that are known to be within the infrastructure that supports and maintains ICBMs and SLBMs. These include \"submarine bases, ICBM or SLBM loading facilities, maintenance facilities, repair facilities for ICBMs or SLBMs, storage facilities for ICBMs or SLBMs, conversion or elimination facilities for ICBMs or SLBMs, test ranges, space launch facilities, and production facilities.\" Nondeployed ICBMs and SLBMs may also be in transit between these facilities, although Article IV of the treaty indicates that this time in transit should be \"no more than 30 days.\" \nThe parties share information on the locations of these missiles in the database they maintain under the treaty and notify each other when they move these systems. These provisions are designed to allow each side to keep track of the numbers and locations of nondeployed missiles and to deter efforts to stockpile hidden, uncounted missiles. A party would be in violation of the treaty if one of its nondeployed missiles were spotted at a facility not included on the list, or if one were found at a location different from the one listed for that missile in the database.\nAccording to the Protocol to New START, a deployed heavy bomber is one that is equipped for nuclear armaments but is not a \"test heavy bomber or a heavy bomber located at a repair facility or at a production facility.\" Moreover, a heavy bomber is equipped for nuclear armaments if it is \"equipped for long-range nuclear ALCMs, nuclear air-to-surface missiles, or nuclear bombs.\" All deployed heavy bombers must be located at air bases, which are defined as facilities \"at which deployed heavy bombers are based and their operation is supported.\" If an air base cannot support the operations of heavy bombers, then the treaty does not consider it to be available for the basing of heavy bombers, even though they may land at such bases under some circumstances. Test heavy bombers can be based only at heavy bomber flight test centers and nondeployed heavy bombers other than test heavy bombers can be located only at repair facilities or production facilities for heavy bombers. Each party may have no more than 10 test heavy bombers.\nHeavy bombers that are not equipped for long range nuclear ALCMs, nuclear air-to-surface missiles, or nuclear bombs will not count under the treaty limits. However, the treaty does specify that, \"within the same type, a heavy bomber equipped for nuclear armaments shall be distinguishable from a heavy bomber equipped for non-nuclear armaments.\" Moreover, if a party does convert some bombers within a given type so that they are no longer equipped to carry nuclear weapons, it cannot base the nuclear and nonnuclear bombers at the same air base, unless otherwise agreed by the parties. \nHence, the United States could reduce the number of bombers that count under the treaty limits by altering some of its B-52 bombers so that they no longer carry nuclear weapons and by basing them at a separate base from those that still carry nuclear weapons. In addition, if the United States converted all of the bombers of a given type, so that none of them could carry nuclear armaments, then none of the bombers of that type would count under the New START treaty. This provision allows the United States to remove its B-1 bombers from treaty accountability. They no longer carry nuclear weapons, but they still counted under the old START Treaty and were never altered so that they could not carry nuclear weapons. The conversion rules that would affect the B-1 bombers are described below.\n\n\t\t\tLimits on Warheads\n\n Table 1 summarizes the warheads limits in START, the Moscow Treaty, and the New START Treaty. Two factors stand out in this comparison. First, the original START Treaty contained several sublimits on warheads attributed to different types of strategic weapons, in part because the United States wanted the treaty to impose specific limits on elements of the Soviet force that were deemed to be \"destabilizing.\" Therefore, START sought to limit the Soviet force of heavy ICBMs by cutting in half the number of warheads deployed on these missiles, and to limit future Soviet deployments of mobile ICBMs. The Moscow Treaty and New START, in contrast, contain only a single limit on the aggregate number of deployed warheads. They provide each nation with the freedom to mix their forces as they see fit. This change reflects, in part, a lesser concern with Cold War models of strategic and crisis stability. It also derives from the U.S. desire to maintain flexibility in determining the structure of its own nuclear forces.\n Table 1 also highlights how the planned numbers of warheads in the U.S. and Russian strategic forces have declined in the years since the end of the Cold War. Before START entered into force in 1991, each side had more than 10,000 warheads on its strategic offensive delivery vehicles. If the parties implement the New START Treaty, that number will have declined by more than 80%. However, although all three treaties limit warheads, each uses different definitions and counting rules to determine how many warheads each side has deployed on its strategic forces.\nUnder START, the United States and Russia did not actually count deployed warheads. Instead, each party counted the launchers\u2014ICBM silos, SLBM launch tubes, and heavy bombers\u2014deployed by the other side. Under the terms of the treaty, they then assumed that each operational launcher contained an operational missile, and each operational missile carried an \"attributed\" number of warheads. The number of warheads attributed to each missile or bomber was the same for all missiles and bombers of that type. It did not recognize different loadings on individual delivery vehicles. This number was listed in an agreed database that the parties maintained during the life of the treaty. The parties then multiplied these warhead numbers by the number of deployed ballistic missiles and heavy bombers to determine the number of warheads that counted under the treaty's limits.\nIn most cases, the number of warheads attributed to each type of ICBM and SLBM was equal to the maximum number that missile had been tested with. START did, however, permit the parties to reduce the number of warheads attributed to some of their ballistic missiles through a process known as \"downloading.\" When downloading missiles, a nation could remove a specified number of reentry vehicles from all the ICBMs at an ICBM base or from all the SLBMs in submarines at bases adjacent to a specified ocean. They could then reduce the number of warheads attributed to those missiles in the database, and therefore, the number that counted under the treaty limits.\nUnlike ballistic missiles, bombers counted as far fewer than the number of warheads they could carry. Bombers that were not equipped to carry long-range nuclear-armed cruise missiles counted as one warhead, even though they could carry 16 or more bombs and short-range missiles. U.S. bombers that were equipped to carry long-range nuclear-armed cruise missiles counted as 10 warheads, even though they could carry up to 20 cruise missiles. Soviet bombers that were equipped to carry long-range nuclear-armed cruise missiles counted as 8 warheads, even though they could carry up to 16 cruise missiles. These numbers were then multiplied by the numbers of deployed heavy bombers in each category to determine the number of warheads that would count under the treaty limits.\nIn contrast with START, the Moscow Treaty did not contain any definitions or counting rules to calculate the number of warheads that counted under the treaty limit. Its text indicated that it limited deployed strategic warheads, but the United States and Russia could each determine its own definition of this term. The United States counted \"operationally deployed\" strategic nuclear warheads and included both warheads on deployed ballistic missiles and bomber weapons stored near deployed bombers at their bases. Russia, in contrast, did not count any bomber weapons under its total, as these weapons were not actually deployed on any bombers. Moreover, because the Moscow Treaty did not contain any sublimits on warheads deployed on different categories of delivery vehicles, the two parties only had to calculate an aggregate total for their deployed warheads. In addition, while they exchanged data under START on the numbers of accountable launchers and warheads every six months, they only had to report the number of warheads they counted under the Moscow Treaty once, on December 31, 2012, at the end of the treaty's implementation period.\nLike START, the New START Treaty contains definitions and counting rules that will help the parties calculate the number of warheads that count under the treaty limits. For ballistic missiles, these rules follow the precedent set in the Moscow Treaty and count only the actual number of warheads on deployed delivery vehicles. For bombers, however, these rules follow the precedent set in START and attribute a fixed number of warheads to each heavy bomber.\nArticle III of the New START Treaty states that \"for ICBMs and SLBMs, the number of warheads shall be the number of reentry vehicles emplaced on deployed ICBMs and on deployed SLBMs.\" Missiles will not count as if they carried the maximum number of warheads tested on that type of missile. Each missile will have its own warhead number and that number can change during the life of the treaty. The parties will not, however, visit each missile to count and calculate the total number of warheads in the force. The New START database will list total number of warheads deployed on all deployed launchers. The parties will then have the opportunity, 10 times each year, to inspect one missile or three bombers selected at random. At the start of these inspections, before the inspecting party chooses a missile or bomber to view, the inspected party will provide a list of the number of warheads on each missile or bomber at the inspected base. The inspecting party will then choose a missile at random, and confirm that the number listed in the database is accurate. This is designed to deter the deployment of extra warheads by creating the possibility that a missile with extra warheads might be chosen for an inspection.\nAs was the case under START, this inspection process does not provide the parties with the means to visually inspect and count all the deployed warheads carried on deployed missiles. Under START, this number was calculated by counting launchers and multiplying by an attributed number of warheads. Under New START, as was the case in the Moscow Treaty, each side simply declares its number of total deployed warheads and includes that number in the treaty database. Unlike the Moscow Treaty, however, the parties will provide and update these numbers every six months during the life of the treaty, rather than just once at the end of the treaty.\nUnder the New START Treaty, each deployed heavy bomber equipped with nuclear armaments counts as one nuclear warhead. This is true whether the bomber is equipped to carry cruise missiles or gravity bombs. Neither the United States nor Russia deploys nuclear weapons on their bombers on a day-to-day basis. Because the treaty is supposed to count, and reduce, actual warheads carried by deployed delivery vehicles, the bomber weapons that are not deployed on a day-to-day basis are excluded. In addition, because the parties will use on-site inspections to confirm the actual number of deployed warheads on deployed delivery vehicles, and the bombers will have no warheads on them during inspections, the parties needed to come up with an arbitrary number to assign to the bombers. That number is one.\n\n\t\tConversion and Elimination\n\nAccording to New START, ICBM launchers, SLBM launchers, and heavy bombers equipped to carry nuclear armaments shall continue to count under the treaty limits until they are converted or eliminated according to the provisions described in the treaty's Protocol. These provisions are far less demanding than those in the original START Treaty and will provide the United States and Russia with far more flexibility in determining how to reduce their forces to meet the treaty limits.\n\n\t\t\tICBM Launchers\n\nUnder START, ICBM launchers were \"destroyed by excavation to a depth of no less than eight meters, or by explosion to a depth of no less than six meters.\" If missiles were removed from silos, and the silos were not eliminated in this fashion, then the silos still counted as if they held a deployed missile and as if the deployed missile carried the attributed number of warheads.\nNew START lists three ways in which the parties may eliminate ICBM silo launchers. It states that silo launchers \"shall be destroyed by excavating them to a depth of no less than eight meters or by explosion to a depth of no less than six meters.\" It also indicates that the silos can be \"completely filled with debris resulting from demolition of infrastructure, and with earth or gravel.\" Finally, it indicates the party carrying out the elimination can develop other procedures to eliminate its silos. It may have to demonstrate this elimination alternative to the other party, but that party cannot dispute or deny the use of that method.\nHence, instead of blowing up the silos or digging them out of the ground, the parties to the treaty might choose to disable the silo using measures it identifies itself, so that it can no longer launch a missile. This could be far less costly and destructive than the procedures mandated under START, and would help both nations eliminate some silos that have stood empty for years while continuing to count under the old START Treaty. For the United States, this would include the 50 silos that held Peacekeeper missiles until 2005 and the 50 silos that held Minuteman III missiles until 2008. The United States has never destroyed these silos, so they continued to count under START. It can now disable theses silos and remove them from its tally of launchers under the New START Treaty. According to the recent reports, the Air Force Global Strike Command began preparations to eliminate these silos in March 2011, and plans to fill them with gravel. It expects to complete this process by 2017.\n\n\t\t\tMobile ICBM launchers\n\nUnder START, the elimination process for launchers for road-mobile ICBMs required that \"the erector-launcher mechanism and leveling supports shall be removed from the launcher chassis\" and that \"the framework of the erector-launcher mechanism on which the ICBM is mounted and erected shall be cut at locations that are not assembly joints into two pieces of approximately equal size.\" It also required that the missile launch support equipment be removed from the launcher chassis, and that the \"mountings of the erector-launcher mechanism and of the launcher leveling supports shall be cut off the launcher chassis\" and cut into two pieces of approximately equal size. START also required that 0.78 meters of the launcher chassis be cut off and cut into two parts, so that the chassis would be too short to support mobile ICBMs.\nUnder New START, the elimination process for launchers for road mobile ICBMs is far more simple and far less destructive. As was the case under START, the elimination \"shall be carried out by cutting the erector-launcher mechanism, leveling supports, and mountings of the erector-launcher mechanism from the launcher chassis and by removing the missile launch support equipment ... from the launcher chassis.\" But neither the framework nor the chassis itself have to be cut into pieces. If the chassis is going to be used \"at a declared facility for purposes not inconsistent with the Treaty\" the surfaces of the vehicle that will be visible to national technical means of verification must be painted a different color or pattern than those surfaces on a deployed mobile ICBM launcher.\n\n\t\t\tSLBM Launchers\n\nUnder START, the SLBM launch tubes were considered to be eliminated when the entire missile section was removed from the submarine; or when \"the missile launch tubes, and all elements of their reinforcement, including hull liners and segments of circular structural members between the missile launch tubes, as well as the entire portion of the pressure hull, the entire portion of the outer hull, and the entire portion of the superstructure through which all the missile launch tubes pass and that contain all the missile launch-tube penetrations\" were removed from the submarine. The missile launch tubes then had to \"be cut into two pieces of approximately equal size.\"\nUnder New START, SLBM launch tubes can be eliminated \"by removing all missile launch tube hatches, their associated superstructure fairings, and, if applicable, gas generators.\" In other words, the missile section of the submarine and the individual launch tubes can remain in place in the submarine, and cease to count under the treaty limits, if they are altered so that they can no longer launch ballistic missiles. Moreover, according to the Ninth Agreed Statement in the New START Protocol, SLBM launch tubes that have been converted in accordance with this procedure and are \"incapable of launching SLBMs may simultaneously be located on a ballistic missile submarine\" with launch tubes that are still capable of launching SLBMs. After a party completes this type of conversion, it \"shall conduct a one-time exhibition of a converted launcher and an SLBM launcher that has not been converted\" to demonstrate, to the other party, \"the distinguishing features of a converted launcher and an SLBM launcher that has not been converted.\" The United States plans to use this procedure to reduce the number of launch tubes on each SSBN from 24 to 20. According to recent reports, it will begin this process in 2015, so that it will have no more than 240 operational launchers for SLBMs by the treaty deadline of February 2018.\nUnder START, the United States had to essentially destroy an entire submarine to remove its launch tubes from accountability under the treaty limits. With these provisions in New START, the United States cannot only convert ballistic missile submarines to other uses without destroying their missile tubes and missile compartments; it can also reduce the number of accountable deployed SLBM launchers on ballistic missile submarines that continue to carry nuclear-armed SLBMs. These provisions will provide the United States a great deal of flexibility when it determines the structure of its nuclear forces under New START. \nDuring the past decade, the United States converted four of its Trident ballistic missile submarines so that they no longer carry ballistic missiles but now carry conventional cruise missiles and other types of weapons. These are now known as SSGNs. Because the United States did not remove the missile compartment from these submarines, they continued to count as if they carried 24 Trident missiles, with 8 warheads per missile, under the old START Treaty. These submarines will not count under the New START Treaty. \nIn the Second Agreed Statement in the New START Protocol, the United States has agreed that, \"no later than three years after entry into force of the Treaty, the United States of America shall conduct an initial one-time exhibition of each of these four SSGNs. The purpose of such exhibitions shall be to confirm that the launchers on such submarines are incapable of launching SLBMs.\" Moreover, if an SSGN is located at an SSBN base when a Russian inspection team visits that base, the inspection team will have the right to inspect the SSGN again to confirm that the launchers have not been converted back to carry SLBMs. Russia can conduct six of these re-inspections during the life of the treaty, but no more than two inspections of any one of the SSGNs.\n\n\t\t\tHeavy Bombers\n\nUnder START, heavy bombers were eliminated by having the tail section cut off of the fuselage at a location that obviously was not an assembly joint; having the wings separated from the fuselage at any location by any method; and having the remainder of the fuselage cut into two pieces, with the cut occurring in the area where the wings were attached to the fuselage, but at a location obviously not an assembly joint. \nSTART also allowed the parties to remove heavy bombers from treaty accountability by converting them to heavy bombers that were not equipped to carry nuclear armaments. According to the elimination and conversion Protocol in START, this could be done by modifying all weapons bays and by removing or modifying the external attachment joints for either long-range nuclear ALCMs or other nuclear armaments that the bombers were equipped to carry. \nThe elimination procedure for heavy bombers has also been simplified under New START. To eliminate bombers, the parties must cut \"a wing or tail section from the fuselage at locations obviously not assembly joints,\" or cut \"the fuselage into two parts at a location obviously not an assembly joint.\" It no longer has to remove the wings from the fuselage. In addition, to convert a bomber counted under the treaty to a heavy bomber no longer equipped to carry nuclear armaments, the parties can either modify the weapons bays and external attachments for pylons so that they cannot carry nuclear armaments, or modify all internal and external launcher assemblies so that they cannot carry nuclear armaments, or develop any other procedure to carry out the conversion. As was the case with the conversion and elimination of missile launchers, the party may have to demonstrate its conversion procedure, but the other party does not have the right to object or reject the procedure.\nThe United States no longer equips its B-1 bombers with nuclear weapons, and has no plans to do so in the future. It has not, however, converted these bombers to nonnuclear heavy bombers using the procedures outlined in START. As a result, they continued to count as one delivery vehicle and one warhead under the counting rules in START. The United States does not, however, want to count these bombers under the New START Treaty. As a result, in the First Agreed Statement, the United States and Russia agreed, during the first year that the treaty is in force, the United States will conduct a \"one-time exhibition\" to demonstrate to Russia that these bombers are no longer equipped to carry nuclear weapons. The bombers that no longer carry nuclear weapons will have a \"distinguishing feature\" that will be recorded in the treaty database and will be evident on all B-1 bombers that are no longer equipped to carry nuclear weapons. After all the B-1 bombers have been converted in this manner, they will no longer count against the limits in the New START Treaty.\n\n\t\tMobile ICBMs\n\n\t\t\tMobile ICBMs in START\n\nMobile ICBMs became an issue in the original START negotiations in the mid-1980s, as the Soviet Union began to deploy a single-warhead road-mobile ICBM, the SS-25, and a 10-warhead rail-mobile ICBM, the SS-24. The United States initially proposed that START ban mobile ICBMs because the United States would not be able to locate or target these systems during a conflict. Some also questioned whether the United States would be able to monitor Soviet mobile ICBM deployments well enough to count the missiles and verify Soviet compliance with the limits in START. Some also argued that the Soviet Union might be able to stockpile hidden missiles and launchers, and to reload mobile ICBM launchers during a conflict because the United States could not target and destroy them.\nThe Soviet Union refused to ban mobile ICBMs. As a result, START limited the United States and Soviet Union to 1,100 warheads on mobile ICBMs. The treaty also limited the numbers of nondeployed missiles and nondeployed launchers for mobile ICBMs. Each side could retain 250 missiles and 110 launchers for mobile ICBMs, with no more than 125 missiles and 18 launchers for rail mobile ICBMs. This did not eliminate the risk of \"breakout,\" which refers to the rapid addition of stored missiles to the deployed force, but it did limit the magnitude of the breakout potential and the number of missiles that the Soviet Union could \"reload\" on deployed launchers during a conflict.\nSTART also contained a number of complementary, and sometimes overlapping, monitoring mechanisms that were designed to help the parties keep track of the numbers and locations of permitted missiles. Each side could monitor the final assembly facility for the missiles to count them as they entered the force. The parties also agreed to record the serial numbers, referred to in the treaty as \"unique identifiers,\" for the mobile ICBMs, and to list these numbers in the treaty's database. These numbers were used to help track and identify permitted missiles because the parties could check the serial numbers during on-site inspections to confirm that the missiles they encountered were those that they expected to see at the facility during the inspection. The parties also had to provide notifications when mobile ICBMs moved between permitted facilities and when mobile ICBMs moved out of their main operating bases for an exercise. These notifications were designed to complicate efforts to move extra, hidden missiles into the deployed force. Finally, missiles and launchers removed from the force had to be eliminated according to specific procedures outlined in the treaty. This not only helped the parties keep an accurate count of the deployed missiles, but served as a further deterrent to efforts to hide extra missiles outside the treaty regime.\n\n\t\t\tMobile ICBMs in New START\n\nThe New START Treaty contains many limits and restrictions that will affect Russia's force of mobile ICBMs, but it does not single them out with many of the additional constraints that were contained in START. Russia pressed for an easing of the restrictions on mobile ICBMs in New START, in part because these restrictions were one sided and only affected Russian forces. But Russian officials also noted, and the United States agreed, that mobile ICBMs could enhance the survivability of Russia's nuclear forces, and therefore strengthen strategic stability under the new treaty.\nThe United States was also willing to relax the restrictions on mobile ICBMs because it is far less concerned about Russia's ability to break out of the treaty limits than it was in the 1980s. After 15 years of START implementation, the United States has far more confidence in its knowledge of the number of deployed and nondeployed Russian mobile ICBMs, as it kept count of these missiles as they entered and left the Russian force during START. There is also far less concern about Russia stockpiling extra missiles while New START is in force. During the 1980s, the Soviet Union produced dozens of new missiles each year; Russia now adds fewer than 10 missiles to its force each year. Some estimates indicate that, with this level of production, Russia will find it difficult to retain the 700 deployed missiles permitted by the treaty. In such a circumstance, it would have neither the need nor the ability to stockpile and hide extra missiles. Moreover, where the United States was once concerned about Russia's ability to reload its mobile launchers with spare missiles, after launching the first missiles during a conflict, this scenario no longer seems credible. It would mean that Russia maintained the ability to send extra missiles and the equipment needed to load them on launchers out on patrol with its deployed systems and that it could load these missiles quickly, in the field, in the midst of a nuclear war, with U.S. weapons falling all around. Yet, Russia has not practiced or exercised this capability and it is hard to imagine that it would try it, for the first time, in the midst of a nuclear war. \nThe New START Treaty does not contain a sublimit on mobile ICBMs or their warheads. It also does not contain any limits on the number of nondeployed mobile ICBMs or the number of nondeployed mobile ICBM launchers. These launchers and warheads will, however, count under the aggregate limits set by the treaty, including the limit of 800 deployed and nondeployed launchers. As a result, the United States will still need to count the number of mobile ICBMs in Russia's force.\nNew START will not permit perimeter and portal monitoring at missile assembly facilities. The parties must, however, provide notification at least 48 hours before the time when solid-fuel ICBMs and solid-fuel SLBMs leave the production facilities. Moreover, the parties will continue to list the serial numbers, or unique identifiers, for mobile ICBMs in the shared database.\nNew START limits the locations of mobile ICBMs and their launchers, both to help the United States keep track of the missiles covered by the treaty and to deter Russian efforts to hide extra missiles away from the deployed force. Deployed mobile ICBMs and their launchers must be located only at ICBM bases. All nondeployed launchers for mobile ICBMs must be located at \"production facilities, ICBM loading facilities, repair facilities, storage facilities, conversion or elimination facilities, training facilities, test ranges, and space launch facilities.\" The locations of nondeployed mobile ICBMs are also limited to loading facilities, maintenance facilities, repair facilities, storage facilities, conversion or elimination facilities test ranges, space launch facilities, and production facilities. Some of these facilities may be at bases for operational mobile ICBMs, but, in that case, the nondeployed missiles must remain in the designated facility and cannot be located in deployment areas. \nMoreover, when deployed or nondeployed missiles or launchers move from one facility to another, the parties will have to update the database so each facility contains a complete list of each item located at that facility, and of the unique identifier associated with each item. Then, according to the Protocol to the Treaty, \"inspectors shall have the right to read the unique identifiers on all designated deployed ICBMs or designated deployed SLBMs, non-deployed ICBMs, non-deployed SLBMs, and designated heavy bombers that are located at the inspection site.\" Hence, the parties will have the opportunity to confirm that items located at the facilities are supposed to be there.\nThis is designed not only to increase transparency and understanding while the treaty is in force, but also to discourage efforts to hide extra missiles and break out of the treaty limits. The treaty does not limit the number of nondeployed missiles, but it does provide the United States with continuous information about their locations and the opportunity, during on-site inspections, to confirm that these missiles are not mixed into the deployed force. Moreover, the number of nondeployed launchers for these missiles is limited, under the 800 limit on deployed and nondeployed launchers. So, even if Russia did accumulate a stock of nondeployed missiles, the number that it could add to its force in a relatively short amount of time would be limited.\nSome have questioned whether Russia might use these stored mobile ICBMs to break out of the treaty by deploying them on mobile launchers that are not limited by the treaty. Specifically, they have questioned whether the New START Treaty would count rail-mobile ICBMs, and, if not, whether Russia could develop and deploy enough of these launchers to gain a military advantage over the United States. This concern derives from the definition of mobile launcher in the paragraph 45 of the Protocol to the Treaty, which indicates that a mobile launcher is \"an erector-launcher mechanism for launching ICBMs and the self-propelled device on which it is mounted [emphasis added].\" This definition clearly captures road-mobile launchers, such as those that Russia uses for its SS-25 and SS-27 missiles, because the transporters for these missiles are self-propelled. But a rail car that carried an erector-launcher for an ICBM would not be self-propelled; it would be propelled by the train's locomotive.\nOthers, however, point to several provisions in the treaty that indicate that rail-mobile launchers of ICBMs would count under the treaty limits. First, they note that the treaty limits all deployed and nondeployed ICBM launchers. It defines ICBM launcher, in paragraph 28 of the Protocol to the Treaty, as \"a device intended or used to contain, prepare for launch, and launch an ICBM.\" Any erector-launcher for ICBMs would be covered by this definition, regardless of whether it was deployed on a fixed site, on a road-mobile transporter, or on a railcar.\nMoreover, the article-by-article analysis of the treaty specifically states that \"all of the defined terms are used in at least one place elsewhere in the Treaty documents.\" Article III, paragraph 8 of the treaty lists the current types of weapons deployed by each side and notes that these all count against the limits. It does not list any missiles deployed on rail-mobile launchers, and, therefore, the Protocol does not define rail-mobile launchers, because Russia no longer deploys any missiles on rail-mobile launchers. It had deployed SS-24 missiles on such launchers during the 1980s and 1990s, but these were all retired in the past decade, and the last operating base for these missiles and railcars was closed in 2007. \nThe treaty would not prohibit Russia from deploying these types of systems again in the future. Article V specifically states that \"modernization and replacement of strategic offensive arms may be carried out.\" However, the second paragraph of this article indicates that, \"when a party believes a new kind of strategic offensive arms is emerging, that party shall have the right to raise the question of such a strategic offensive arm for consideration in the Bilateral Consultative Commission.\" Section 6 of the Protocol to the Treaty, which describes the Bilateral Consultative Commission, states that this body should \"resolve questions related to the applicability of provisions of the treaty to a new kind of strategic offensive arm.\" In addition, Article XV of the treaty states that \"if it becomes necessary to make changes in the Protocol ... that do not affect the substantive rights or obligations under this Treaty,\" the parties can use the BCC to reach agreement on these changes without amending the treaty. Hence, if Russia were to deploy ICBMs on rail-mobile launchers, the parties could modify the definition to \"mobile launcher\" to confirm that these weapons count under the treaty limits. \nNew START does not define rail-mobile launchers for ICBMs because neither the United States nor Russia currently deploys these systems and the treaty does not specifically prohibit their deployment in the future. If, however, either party installs an erector-launcher for an ICBM on a rail car, that launcher would count under the treaty limits, and the new type of strategic arm, represented by the launcher on a railcar, would be covered by the limits in the treaty. The parties would then use the BCC to determine which of the monitoring provisions and elimination and conversion rules applied to that type of weapons system.\n\n\t\tMonitoring and Verification29\n\nThe original START Treaty included a comprehensive and overlapping set of provisions that was designed to allow the United States and Soviet Union to collect a wide range of data on their forces and activities and to determine whether the forces and activities were consistent with the limits in the treaty. While each party would collect most of this information with its own satellites and remote sensing equipment\u2014known as national technical means of verification (NTM)\u2014the treaty also called for the extensive exchange of data detailing the numbers and locations of affected weapons, numerous types of on-site inspections, notifications, exhibitions, and continuous monitoring at assembly facilities for mobile ICBMs. Further, in START, the parties agreed that they would not encrypt or otherwise deny access to the telemetry generated during missile flight tests, so that the other side could record these data and use them in evaluating the capabilities of missile systems.\nThe New START Treaty contains a monitoring and verification regime that resembles the regime in START, in that its text contains detailed definitions of items limited by the treaty, provisions governing the use of NTM to gather data on each side's forces and activities, an extensive database that identifies the numbers, types, and locations of items limited by the treaty, provisions requiring notifications about items limited by the treaty, and inspections allowing the parties to confirm information shared during data exchanges. At the same time, the verification regime has been streamlined to make it less costly and complex than the regime in START. It also has been adjusted to reflect the limits in New START and the current circumstances in the relationship between the United States and Russia. In particular, it focuses on maintaining transparency, cooperation, and openness, as well as on deterring and detecting potential violations.\nUnder New START, the United States and Russia continue to rely on their NTM to collect information about the numbers and locations of their strategic forces. They may also broadcast and exchange telemetry\u2014the data generated during missile flight tests\u2014up to five times each year. They do not need these data to monitor compliance with any particular limits in New START, but the telemetry exchange will provide some transparency into the capabilities of their systems. The parties also exchange a vast amount of data about their forces, specifying not only their distinguishing characteristics, but also their precise locations. They will notify each other, and update the database, whenever they move forces between declared facilities. The treaty also requires the parties to display their forces, and allows each side to participate in exhibitions, to confirm information listed in the database.\nNew START permits the parties to conduct up to 18 short-notice on-site inspections each year. These inspections began in early April 2011, 60 days after the treaty entered into force. These inspections can occur at facilities that house both deployed and nondeployed launchers and missiles. The treaty divides these into Type One inspections and Type Two inspections. Each side can conduct up to 10 Type One inspections and up to 8 Type Two inspections. Moreover, during each Type One inspection, the parties will be able to perform two different types of inspection activities\u2014these are essentially equivalent to the data update inspections and reentry vehicle inspections in the original START Treaty. As a result, the 18 short-notice inspections permitted under New START are essentially equivalent to the 28 short-notice inspections permitted under START.\n\n\t\t\tType One Inspections\n\nType One inspections are those that occur at ICBM bases, submarine bases, and air bases that house deployed or nondeployed launchers, missiles, and bombers. The parties use these inspections \"to confirm the accuracy of declared data on the numbers and types of deployed and non-deployed strategic offensive arms subject to this treaty. During Type One inspections, the parties may also confirm that the number of warheads located on deployed ICBMs and deployed SLBMs and the number of nuclear armaments located on deployed heavy bombers\" are consistent with the numbers declared deployed on those specific launchers.\nThe inspections used to confirm the number of deployed warheads in New START will be distinctly different from the inspections in START because the counting rules for ballistic missiles have changed. Under START, the treaty database listed the number of warheads attributed to a type of missile, and each missile of that type counted as the same number of warheads. The parties then inspected the missiles to confirm that the number of warheads on a particular missile did not exceed the number attributed to that type of missile. The database in New START will list the aggregate number of warheads deployed on all the missiles at a given base, but before beginning a Type One inspection, the team will receive a briefing on the actual number of warheads deployed on each missile at the base. During the inspections, the parties will have the right to designate one ICBM or one SLBM for inspection, and, when inspecting that missile, the parties will be able to count the actual number of reentry vehicles deployed on the missile to confirm that it equals the number provided for that particular missile prior to the inspection. The inspected party can cover the reentry vehicles to protect information not related to the number of warheads, but the party must use covers that allow the inspectors to identify the actual number of warheads on the missile.\nBecause these inspections are random, and occur on short notice, they provide the parties with a chance to detect an effort by the other party to deploy a missile with more than its listed number of warheads. As a result, the inspections may deter efforts to conceal extra warheads on the deployed force. These inspections, by allowing the parties to count the actual number of deployed warheads, provide added transparency. \n\n\t\t\tType Two Inspections\n\nType Two inspections occur at facilities that house nondeployed or converted launchers and missiles. These include \"ICBM loading facilities; SLBM loading facilities; storage facilities for ICBMs, SLBMs, and mobile launchers of ICBMs; repair facilities for ICBMs, SLBMs, and mobile launchers of ICBMs; test ranges; and training facilities.\" The parties will perform these inspections \"to confirm the accuracy of declared technical characteristics and declared data, specified for such facilities, on the number and types of non-deployed ICBMs and non-deployed SLBMs, first stages of ICBMs and SLBMs, and nondeployed launchers of ICBMs.\" In addition, they can conduct these inspections at formerly declared facilities, \"to confirm that such facilities are not being used for purposes inconsistent with this Treaty.\" They can also use Type II inspections to confirm that solid-fueled ICBMs, solid-fueled SLBMs, or mobile launchers of ICBMs have been eliminated according to treaty procedures.\n\n\t\tBallistic Missile Defense\n\nPresidents Obama and Medvedev had agreed, when they met in April 2009, that the two nations would address Russia's concerns with U.S. missile defense programs in a separate forum from the negotiations on a New START Treaty. However, during their meeting in Moscow in July 2010, Presidents Obama and Medvedev agreed that the treaty would contain a \"provision on the interrelationship of strategic offensive arms and strategic defensive arms.\" This statement, which appears in the preamble to New START, states that the parties recognize \"the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that this interrelationship will become more important as strategic nuclear arms are reduced, and that current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties.\"\nRussia and the United States each issued unilateral statements when they signed New START that clarified their positions on the relationship between New START and missile defenses. Russia stated that \nthe Treaty can operate and be viable only if the United States of America refrains from developing its missile defense capabilities quantitatively or qualitatively. Consequently, the exceptional circumstances referred to in Article 14 of the Treaty include increasing the capabilities of the United States of America's missile defense system in such a way that threatens the potential of the strategic nuclear forces of the Russian Federation. \nIn its statement, the United States stated that its \nmissile defense systems are not intended to affect the strategic balance with Russia. The United States missile defense systems would be employed to defend the United States against limited missile launches, and to defend its deployed forces, allies and partners against regional threats. The United States intends to continue improving and deploying its missile defense systems in order to defend itself against limited attack and as part of our collaborative approach to strengthening stability in key regions.\nThese statements do not impose any obligations on either the United States or Russia. As Senator Lugar indicated before New START was signed, these statements are, \"in essence editorial opinions.\" Under Secretary of State Ellen Tauscher also stated that \"Russia's unilateral statement on missile defenses is not an integral part of the New START Treaty. It's not legally-binding. It won't constrain U.S. missile defense programs.\" These statements also do not provide Russia with \"veto power\" over U.S. missile defense systems. Although Russia has said it may withdraw from the treaty if the U.S. missile defenses threaten \"the potential of the strategic nuclear forces of the Russian Federation,\" the United States has no obligation to consult with Russia to confirm that its planned defenses do not cross this threshold. It may develop and deploy whatever defenses it chooses; Russia can then determine, for itself, whether those defenses affect its strategic nuclear forces and whether it thinks the threat to those forces justifies withdrawal from the treaty.\nArticle V, paragraph 3 of New START also mentions ballistic missile defense interceptors. It states that the parties cannot convert ICBM launchers and SLBM launchers to launchers for missile defense interceptors and that they cannot convert launchers of missile defense interceptors to launchers for ICBMs and SLBMs. At the same time, the treaty makes it clear that the five ICBM silos at Vandenberg Air Force Base that have already been converted to carry missile defense interceptors are not affected by this prohibition. It states that \"this provision shall not apply to ICBM launchers that were converted prior to signature of this Treaty for placement of missile defense interceptors therein.\"\nThis provision is designed to address Russian concerns about the U.S. ability to \"break out\" of the treaty by placing ICBMs in silos that had held missile defense interceptors or by converting ICBM silos to missile interceptor silos then quickly reversing that conversion to add offensive missiles to its forces with little warning. Russia began to express this concern after the United States converted the five ICBM silos at Vandenberg for missile defense interceptors. It initially sought to reverse this conversion, or at least to count the silos under the New START limits. The United States refused, but, in exchange for Russia accepting that the five converted silos would not count under New START, the United States agreed that it would not convert additional silos.\nThe provision will also protect U.S. missile defense interceptors from the START inspection regime. If the parties were permitted to convert missile defense silos to ICBM silos, they would also have been able to visit and inspect those silos to confirm that they did not hold missiles limited by the treaty. The ban on such conversions means that this type of inspection is not only unnecessary, but also not permitted.\nThe Obama Administration has stated on many occasions that the New START Treaty does not contain any provisions that limit the numbers or capabilities of current or planned U.S. ballistic missile defense systems. The ban on launcher conversion does not alter this conclusion because the United States has no plans to use any additional ICBM launchers or any SLBM launchers to hold missile defense interceptors. It is constructing new launchers for its missile defense systems. Some have questioned, however, whether the ban on silo conversion may limit missile defenses in the future, particularly if the United States wanted to respond to an emerging missile threat by quickly expanding its numbers of missile defense interceptors.\nGeneral Jim Jones, President Obama's National Security Adviser during the negotiations, stated that this provision is a \"limit in theory, but not in reality.\" It is not just that the United States has no plans to convert ICBM silos to missile defense interceptor silos, it is that it would be quicker and less expensive for the United States to build new silos for missile defense interceptors than to remove the ICBMs and all their equipment, reconfigure the silo, and install all the equipment for the missile defense interceptors. Moreover, given that the missile defense interceptor launched from the central United States, where U.S. ICBM silos are located, would drop debris on U.S. territory, the United States might prefer to locate its missile defense interceptors in new launchers near the U.S. coast.\nGeneral Patrick O'Reilly, then the Director of the Missile Defense Agency, also stated that his agency \"never had a plan to convert additional ICBM silos at Vandenberg and intends to hedge against increased BMDS [ballistic missile defense system] requirements by completing construction of Missile Field 2 at Fort Greely. Moreover, we determined that if more interceptors were to be added at Vandenberg AFB, it would be less expensive to build a new GBI [ground-based interceptor] missile field (which is not prohibited by the treaty).\" He went on to note that \"some time ago we examined the concept of launching missile defense interceptors from submarines and found it an unattractive and extremely expensive option.\" Putting missile defense interceptors in SLBM launchers would undermine the primary mission of the submarine, which is designed to patrol deeply and quietly to remain invulnerable to attack, by requiring it to remain in one place near the surface while it sought to track and engage attacking missiles.\n\n\t\tConventional Long-Range Strike\n\nDuring their summit meeting in July 2009, Presidents Obama and Medvedev agreed that the New START Treaty would contain \"a provision on the impact of intercontinental ballistic missiles and submarine-launched ballistic missiles in a non-nuclear configuration on strategic stability.\" This statement, which is in the preamble to the treaty, simply states that the parties are \"mindful of the impact of conventionally armed ICBMs and SLBMs on strategic stability.\"\nDuring the negotiations on New START, Russia voiced concerns about U.S. plans to deploy conventional warheads on ballistic missiles that now carry nuclear warheads. Russian officials have argued that these weapons could upset stability for several reasons. First, even if Russia were not the target of an attack with these missiles, it might not know whether the missile carried a nuclear warhead or a conventional warhead, or whether it was headed toward a target in Russia. Moreover, ballistic missiles armed with conventional warheads could destroy significant targets in Russia and, therefore, they might provide the United States with the ability to attack such targets, with little warning, without resorting to nuclear weapons. Finally, some argued that the United States might replace the conventional warheads with nuclear warheads to exceed the limits in a treaty. \nRussia initially sought to include a provision in New START that would ban the deployment of conventional warheads on strategic ballistic missiles. The United States rejected this proposal. It was considering this capability as a way to attack targets around the world promptly, and did not envision using these weapons against Russia. As a result, as the White House noted in its Fact Sheet on New START, \"the Treaty does not contain any constraints on ... current or planned United States long-range conventional strike capabilities.\" However, if the United States deployed conventional warheads on missiles that are covered by the limits in START, the warheads on these missiles would count under the treaty limit on deployed warheads. Because the United States expected to deploy very small numbers of these systems, this trade-off would not have a significant effect on U.S. nuclear capabilities. \nMoreover, if the United States deployed conventional warheads on new types of long-range strike systems, these systems would not necessarily count under or be affected by the limits in New START. The United States would likely consider these to be a \"new type of strategic offensive arms.\" Under Article V, paragraph 2, Russia would have the right to raise its concerns about these weapons within the Bilateral Consultative Commission (BCC), but the United States would not have to accept Russia's interpretation or accede to any requests to count the systems under the treaty. The same procedures would apply if Russia were to develop new types of strategic offensive arms\u2014with either nuclear or conventional warheads. The United States could raise its concerns with these weapons in the BCC, but Russia would not have to accept a U.S. request to count these weapons under the treaty.\n\n\tU.S. and Russian Forces Under New START\n\n\t\tU.S. Forces\n\nAccording to the 2010 Nuclear Posture Review (NPR), which was released by DOD on April 6, 2010, the United States planned to maintain a triad of ICBMs, SLBMs, and heavy bombers under New START. The 2010 NPR did not specify how many ICBMs would remain in the force, but indicated that each would be deployed with only one warhead. It also indicated that the United States would, initially at least, retain 14 Trident submarines. It might, however, reduce its fleet to 12 submarines after 2015. The NPR did not indicate whether the Trident submarines would continue to be deployed with 24 missiles on each submarine, or if the Navy would eliminate some of the launchers on operational submarines in accordance with the treaty's Ninth Agreed Statement. Finally, the NPR indicated that the United States would convert some of its 76 dual-capable B-52 bombers to a conventional-only role.\nThe Obama Administration clarified its plans for U.S. forces under New START in the 1251 plan that it submitted to the Senate with the treaty documents on May 13, 2010. This plan indicated that the United States would eliminate at least 30 deployed ICBMs, retaining a force of up to 420 deployed launchers under the treaty limits. It would also retain 14 Trident submarines, but each submarine would contain only 20 launchers, and two of the submarines would be in overhaul at any time, so only 240 launchers would count under the limit on deployed launchers. In addition, the report indicated that the United States would retain up to 60 deployed bombers equipped for nuclear weapons, including all 18 B-2 bombers in the current force.\nThis force would have included up to 720 deployed ICBMs, SLBMs, and heavy bombers, a number that exceeds the 700 deployed missiles and bombers permitted by the treaty. In a hearing before the Senate Armed Services Committee on June 17, 2010, Secretary of Defense Gates and Admiral Mullen, then Chairman of the Joint Chiefs of Staff, acknowledged that the United States would have to make a small number of further reductions, or convert a small number of additional systems to nondeployed status, to meet the treaty limits. However, they noted that because the United States would have seven years to reduce its forces to these limits, they saw no reason to identify a final force structure at that point. Secretary Gates noted that DOD was considering a number of options for the final force structure, and would make a decision on this force structure after considering the international security environment and Russia's force structure in the treaty's later years.\nThe Obama Pentagon released its plans for the New START force structure in April 8, 2014. As was indicated in May 2010, this force will include 14 submarines with 20 launchers on each submarine. Because two submarines will be in overhaul at any time, these submarines will count as carrying 240 deployed launchers within a total of 280 deployed and nondeployed launchers. The force also calls for a reduction in the number of deployed ICBMs from 450 to 400, with the retention of all 50 empty launchers, for a total force of 450 deployed and nondeployed ICBM launchers. The Air Force will also count 4 ICBM test launchers as nondeployed launchers within the total. Finally, New START force will include 60 deployed bombers and 6 nondeployed bombers.\nEven before it determined the final force structure, the Pentagon had requested funding to pursue activities that would enable these reductions, regardless of the specific force structure decisions. For example, in the FY2014 budget, the Pentagon requested funding for an environmental assessment (EA) that would be needed before it could eliminate ICBM silos. Several Members of Congress objected to this study, arguing that it would allow the Administration to eliminate an ICBM squadron regardless of whether this turned out to be the preferred option for force reductions. Several Members strongly supported the retention of all 450 ICBM silos, even if a portion of them were nondeployed, with the missiles removed to meet the New START limit of 700 deployed launchers. \nThe Pentagon responded to this criticism by noting that the EA would not predetermine the outcome of the force structure decision. However, if it were not initiated by the end of 2013, it would not be completed in time to support reductions by 2018, if the Pentagon chose to pursue those reductions. In other words, even if the study were completed, the ICBM silos could remain in the force, but if the study was not begun in time, the ICBM silos could not be eliminated, even if that proved to be the preferred force structure option. In response to these concerns, Congress included a provision in the National Defense Authorization Act for 2014 ( H.R. 3304 , \u00a71056) that limited the Pentagon's ability to reduce U.S. forces under New START. Specifically, the legislation states that \"the Secretary of Defense may only use funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2014 to carry out activities to prepare for such reductions.\" Further, the legislation states that only 50% of the funds authorized for the EA can be obligated or expended until the Secretary of Defense submits the required plan that describes preferred force structure option under New START. The Pentagon has now submitted the plan, but it is unclear whether the EA will proceed.\n Table 2 , below, contains an estimated force structure of the United States prior to New START's entry into force; the force structure as of February 5, 2018 (when the reductions were required to meet the treaty limits); and the New START force outlined by the Administration in April 2014. As these data demonstrate, the United States reached the reduced force level required by the treaty. Within these limits, the United States retains a triad of ICBMs, SLBMs, and heavy bombers. It has reduced the number of deployed nuclear-armed B-52 bombers by converting many to conventional missions. It has reduced the number of launchers on its Trident submarines and retains 400 Minuteman III missiles. An additional 54 Minuteman III launchers do not hold ICBMs and therefore do not count under the 700 limit for deployed launchers. As noted below, when two additional Trident submarines return to the fleet, the United States will have the treaty-permitted 700 deployed launchers and it will adjust the number of warheads on deployed SLBMs to meet the treaty limit of 1,550 warheads.\nThe United States did not have to destroy many ICBM or SLBM launchers to reach the limits in New START. The treaty includes provisions that allowed the United States to exempt many of its existing nondeployed launchers, including 94 B-1 bombers, and 4 ballistic missile submarines that have been converted to carry cruise missiles, from treaty limits. Moreover, as it reduced its deployed forces, the United States did not have to destroy either ICBM or SLBM launchers; it could deactivate them so that they could no longer launch ballistic missiles. Instead of eliminating missiles and launchers, the United States reached the limits in New START by deploying its missiles with far fewer than the maximum number of warheads that each could be equipped to carry. The Air Force has completed the deactivation of 50 Minuteman III missiles that will be removed from the force under New START, and the Navy has completed the elimination of four launch tubes on all 14 of its Trident submarines.\n\n\t\tRussian Forces\n\nOn February 5, 2018, when the treaty reductions were complete, Russia announced that it had reduced its forces to 1,444 warheads on 527 deployed ICBMs, SLBMs, and heavy bombers, within a total of 779 deployed and nondeployed launchers.\nDuring the implementation of New START, the number of warheads deployed on Russian missiles and bombers climbed above the New START limits, leading some to express concerns about Russia's intention to comply with the treaty. Others noted that this was a reflection of Russia's modernization program, as it deployed new multiple-warhead ballistic missiles in place of older single-warhead missiles, and waited until late in the implementation process to eliminate older multiple-warhead land-based missile. Russia also retired many of its older ballistic missile submarines, replacing them with several new Borey-class submarines; three of these have entered the force, and three more are under construction. This submarine is deployed with the new Bulava missile. The missile failed many of its early flight tests, and continues to experience some failed tests, although it has had more several successful tests since late 2010. \n Table 3 , below, presents estimates of Russia's force structure in 2010, before New START entered into force, and potential forces that it might deploy under the New START Treaty. It does not contain an estimate of the current force structure, as the New START data only include aggregate totals across the force and provides no information about the current structure of this force. This table assumes that, under New START, Russia's new RS-24 missile would carry four warheads. However, according to accounts in the Russian press this missile will carry \"no fewer than 4\" warheads. If each of these missiles were to carry 6-7 warheads, Russia could retain the 1,550 warheads permitted by the treaty. Russia has announced plans to deploy a new heavy, liquid-fueled multiple-warhead missile to replace the SS-18, although this missile is not likely to enter the force until at least 2020. \n Table 3 indicates that Russia may deploy fewer than the permitted number of deployed and nondeployed launchers under New START. This is evident in the data provided by the Russian Ministry of Foreign Affairs on February 5, 2018. Because it still had significant numbers of warheads on older missiles that it eliminated late in the implementation process, it was able to reach the New START limits. But, as is discussed below, observers disagree about whether Russia can remain at the New START limits through 2021.\n\n\tRatification\n\n\t\tU.S. Ratification Process\n\nThe Obama Administration submitted the New START Treaty to the Senate on May 13, 2010. The treaty package included the treaty text, the Protocol, the Annexes, the Article-by-Article analysis prepared by the Administration, and the 1251 report on future plans and budgets for U.S. nuclear weapons required by Congress. It also included the text of the unilateral statements made by the United States and Russia when they signed the treaty. The Senate offered its advice and consent to the ratification of the treaty by voting on a Resolution of Ratification. The treaty's approval requires a vote of two-thirds of the Senate, or 67 Senators.\nThe Senate Foreign Relations Committee held 12 hearings on the treaty. These began in April 2009, with testimony from former Secretaries of Defense William Perry and James Schlesinger. In total, the committee received testimony from more than 20 witnesses from both inside and outside the Obama Administration. It received testimony from current senior officials from the State Department, the Defense Department, and the Department of Energy, and from several former officials from past Administrations. The committee completed its hearing process in mid-July, after receiving a National Intelligence Estimate on the future of Russian forces and a report on the verifiability of the treaty.\nThe Senate Armed Services Committee held a total of eight hearings and briefings on the treaty. The Armed Services Committee heard testimony from Secretary of State Clinton, Secretary of Defense Gates, Secretary of Energy Chu, and Admiral Mullen on June 17, 2010. It also received testimony and briefings from other Administration officials and from experts from outside the government. The Intelligence Committee also held a closed hearing to discuss U.S. monitoring capabilities and the verifiability of the treaty.\nThe Senate Foreign Relations Committee held a business meeting to mark up the Resolution of Ratification for New START on September 16, 2010. The committee began its consideration with a draft proposed by Senator Lugar, then addressed a number of amendments proposed by members of the committee. Both the Lugar draft and many of the proposed amendments addressed the members' concerns with U.S. missile defense programs, U.S. conventional prompt global strike capabilities, monitoring and verification, and Russian nonstrategic nuclear weapons. Most of these amendments were defeated, although the committee did modify and incorporate some into the resolution.\nThe Senate Foreign Relations Committee approved the Resolution of Ratification by a vote of 14-4, and sent the resolution to the full Senate. The Senate did not address the treaty before the November elections. The Administration pressed the Senate to debate the treaty during the lame-duck session of Congress in December 2010. Many Senators supported this goal. Some, however, suggested that the Senate would not have time to debate the treaty during the lame-duck session, and indicated that they preferred the Senate wait until 2011 to debate the treaty. \nThe Senate began the debate on New START on December 16, 2010. During the debate, some Senators proposed amendments to the treaty, both to strike language related to ballistic missile defenses and to add language related to nonstrategic nuclear weapons. The treaty's supporters argued that these amendments would \"kill\" the treaty because they would require Russian approval and could lead to the reopening of negotiations on a wide range of issues addressed in the treaty. The Senate rejected these amendments, but it did accept amendments to the Resolution of Ratification that underlined the U.S. commitment to modernizing its nuclear weapons infrastructure and its commitment to deploying ballistic missile defenses. In addition, President Obama sent a letter to the Senators confirming his view that the New START Treaty places \"no limitations on the development or deployment of our missile defense programs,\" highlighting his commitment to proceed with the deployment of all four phases of the missile defense system planned for Europe, and noting that the continued development and deployment of U.S. missile defenses would not threaten the strategic balance with Russia and would not \"constitute the basis for questioning the effectiveness and viability of the New START Treaty.\"\nThe Senate gave its advice and consent to ratification of New START on December 22, 2010, approving the Resolution of Ratification by a vote of 71-26. President Obama signed the instruments of ratification in early February 2011.\n\n\t\tRussian Ratification Process\n\nRussia's President Medvedev submitted the New START Treaty to the Russian Parliament on May 28, 2010. Both houses of the Russian Parliament, the Duma and the Federation Council, will vote on the treaty, with a majority vote required to approve the law on ratification. Russia's president said he hoped that the two sides could \"synchronize\" their ratification, voting on the treaty at about the same time. This would avoid the circumstances that existed on the second START Treaty in the late 1990s, when the U.S. Senate gave its consent to ratification of START II in January 1996, but by the time the Russian Parliament voted in 2000, the parties had negotiated a Protocol to the Treaty that also required ratification. The Senate never voted on the new version of the treaty, and START II never entered into force. Most experts agreed that President Medvedev should be able to win approval for the treaty in the Russian Parliament with little difficulty.\nThe Foreign Affairs Committee of the Russian Duma had initially supported the treaty. However, in early November 2010, Konstantin Kosachev, the head of the committee, indicated that the committee would reconsider the treaty. He indicated that this was in response to both the delay in the U.S. Senate's consideration of the treaty and the conditions and understandings that the Senate Foreign Relations Committee included in the U.S. Resolution of Ratification. Nevertheless, after the Senate voted on the treaty on December 22, members of the Duma called for the prompt ratification of New START. Reports indicated they received the documents from the Senate on December 23, and they held their first vote on the Draft Law on Ratification by Friday, December 24. The Duma then crafted amendments and declarations to the Federal Law on Ratification, and, after two more votes, approved the treaty by a vote of 350-96 (with one abstention) on January 25, 2011. \nThe upper chamber of Russia's parliament, the Federation Council, also voted on the ratification of the treaty. Sergei Mironov, the Speaker of the Federation Council, indicated that the vote would take place after the vote in the Duma. This occurred on January 26, 2011, when the Federation Council unanimously approved the ratification of the treaty. President Medvedev signed the instruments of ratification on January 28, 2011. Russia's Federal Law on Ratification contains a number of declarations and understandings that highlight the Duma and Federation Council's concerns with the New START Treaty. These do not alter the text of the treaty and, therefore, did not require U.S. consent or agreement. Many of the provisions in the law call on Russia's leadership to pursue funding for the modernization and sustainment of Russia's strategic nuclear forces. They also reiterate Russia's view that the preamble to the treaty, and its reference to the relationship between offensive and defense forces, is an integral part of the treaty. The law does not indicate that this language imposes any restrictions on the United States. It does, however, reiterate that Russia has a right to withdraw from the treaty, and could do so if the United States deploys defenses that undermine Russia's strategic deterrent. In addition, the law indicates that new kinds of strategic offensive weapons, such as the potential U.S. conventional prompt global strike weapons, should count under the treaty limits. The law indicates that the parties should meet in the BCC and agree on how to count these systems before either party deploys the system. This differs from the U.S. interpretation because the United States has indicated that it could deploy such systems before completing the discussions in the BCC. These differing interpretations did not delay the entry into force of the treaty, but could raise questions in the future, if the United States deploys a PGS system that it does not consider to count under the treaty limits.\n\n\t\tEntry into Force and Implementation\n\nSecretary Clinton and Foreign Minister Lavrov exchanged the instruments of ratification for the New START Treaty on February 5, 2011. This act brought the treaty into force and started the clock on early activities outlined in the treaty. For example, the United States and Russia conducted their initial data exchange, 45 days after the treaty entered into force, on March 22, 2011, within 45 days of entry into force. They also had the right to begin on-site inspection activities in early April, 60 days after the treaty entered into force. Reports indicate that this process began in the United States with the display of a B-1 bomber and in Russia with the display of Russia's new RS-24 missile.\n\n\t\t\tConsultations\n\nThe United States and Russia also met in Geneva, from March 28 through April 8, 2011, in the first meeting of the treaty's Bilateral Consultative Commission. The representatives issued two joint statements at the conclusion of the meeting that addressed procedures that would be used during the on-site inspection process. The parties met for the second session of the BCC from October 19 to November 2, 2011.\nThe third meeting of the BCC occurred in late January 2012. During that meeting, the parties signed several statements on the sharing telemetry on missile test launches. They agreed that they would exchange telemetric data on one ICBM or SLBM launch that had occurred between February 5, 2011, when the treaty entered into force, and the end of 2011. They also agreed on when they would begin and end the sharing of telemetric data during the flight test of an ICBM or SLBM. They also agreed on the procedures they would use when demonstrating the recording media and playback equipment used when providing telemetric information.\nThe BCC met for a fourth time in September 2012. During this meeting, the two sides agreed on the use of tamper detection equipment during on-site inspections. The BCC met again in February 2013. At this meeting, the two sides signed an agreement indicating that they would exchange telemetry on the launch of ICBM or one SLBM during the time between January 1 and December 31, 2012. The BCC met again in January 2014, with the two sides, again, agreeing that they would exchange telemetric information on the launch of one ICBM or SLBM from 2013. They also agreed to use an additional measuring device during reentry vehicle inspections at SSBN bases. In October 2016, the parties met in the 12 th session of the BCC; the State Department did not provide any public details about the substance of the meeting. The 13 th session of the BCC met from late March to mid-April 2017; the State Department, again, did not offer any details about the substance of the meeting.\nAccording to a State Department Fact Sheet released at the conclusion of the reduction period, on February 5, 2018, the two sides conducted a total of \"14 meetings of the Treaty's Bilateral Consultative Commission (twice each Treaty year) to discuss issues related to implementation, with no interruption to the Parties' work during global crises causing friction elsewhere in the bilateral relationship.\" Two sessions also occurred in 2018.\n\n\t\t\tReductions\n\nIn a data exchange released in February 2011, with numbers drawn from the treaty's initial data exchange, the U.S. State Department noted that the United States had 1,800 warheads on 882 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. These deployed forces were within a total of 1,124 deployed and nondeployed launchers of ICBMs and SLBMs, and deployed in nondeployed heavy bombers. By September 2011, the United States had reduced these numbers to 1,790 warheads on 882 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. The total number of deployed and nondeployed launchers had declined to 1,043. The reduction in 81 nondeployed launchers likely reflects the conversion or elimination of some of the \"phantom\" launchers that remained in the U.S. force but no longer carried nuclear warheads. In the most recent exchange, with data current as of April 1, 2014, the United States indicated that it had 778 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 952 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,585 warheads. \nIn data released on January 1, 2015, from the exchange that occurred on September 1, 2014, the United States had 794 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 912 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,642 warheads. The increase in deployed forces reported in this exchange likely reflected the return to service of one SSBN, after it completed its overhaul process. The numbers declined again, by the time of the October 2015 exchange, both because another SSBN has begun its overhaul and because the U.S. Air Force has completed the \"de-MIRVing\" of the ICBM force. Each Minuteman III missile now carries a single warhead.\nIn addition, in September 2015, the Air Force announced that it had begun to convert a portion of the B-52H bomber force from nuclear to conventional-only capability, thus removing 30 operational bombers from accountability under New START. While the Air Force has not provided any public statements about the changes made to the B-52 bombers, these changes are likely consistent with the objective of rendering the bombers unable to carry or launch nuclear-armed cruise missiles.\nAccording to the State Department, as of September 1, 2016, the United States had a force of 1,367 warheads on 681 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 848 deployed and nondeployed launchers. This included 416 deployed ICBM launchers, with a total of 454 deployed and nondeployed ICBM launchers; 209 deployed SLBM launchers within a total of 320 deployed and nondeployed launchers; 10 deployed B-2 bombers, within a total of 20 deployed and nondeployed B-2 bombers; and 46 deployed B-52 bombers, within a total of 54 deployed and nondeployed B-52 bombers. These data show that the United States has continued to convert B-52 bombers from nuclear to conventional-only capability; to remove ICBMs from operational launchers, on the path to 400 deployed ICBM launchers; and to reduce the number of launchers from 24 to 20 on each ballistic missile submarine. The data released in April 2017, from the March 1, 2017, data exchange, show that the United States counted 1,411 warheads on 673 deployed launchers, within a total of 820 deployed and nondeployed launchers. The increase in warheads possibly reflects the return to service of ballistic missile submarines, following the elimination of the four excess launchers. \nThe data exchange from September 2017, which shows the U.S. aggregate numbers of warheads and launchers, indicates that United States has met the New START limits. It now has 1,393 warheads on 660 deployed launchers, within a total of 800 deployed and nondeployed launchers.\nSome analysts questioned whether the U.S. reductions through September 2016, which placed the United States below the New START limits of 1,550 warheads on 700 deployed launchers, indicated that the Obama Administration had decided to reduce U.S. nuclear forces, unilaterally, to levels below the New START limits. However, these reductions were temporary, and the number of deployed launchers and warheads has now risen and should reach the levels permitted by the treaty when implementation is complete in 2018. For example, while the United States was reducing the number of launch tubes on deployed submarines, it removed them from deployment and removed the missiles from the launchers. These launchers and warheads did not count in the deployed force. Because each submarine now counts as 20 launchers, the September 2017 total of 660 deployed launchers can be read to indicate that two submarines, with 40 launchers, were still in nondeployed status at the time. \nThe data exchanges from 2018 and 2019 show that the United States continues to have fewer than the permitted number of deployed missiles and warheads, as it continues to remove systems from deployment for short periods of time. In September 2018, it reported that it had 1,398 warheads deployed on 659 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 800 deployed and nondeployed launchers for missiles and bombers. On March 1, 2019, it reported that it had 1,365 warheads deployed on 656 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 800 deployed and nondeployed launchers for missiles and bombers.\nThe State Department fact sheets also include the summary of Russia's force data. In February 2011, Russia reported that it had 1,537 warheads on 521 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Russia also reported a total of 865 deployed and nondeployed delivery vehicles. At the time of this report, analysts expressed surprise that Russian forces were already below the treaty limits in New START when the treaty entered into force. Some argued that this indicated the United States did not have to sign the treaty to bring about reductions in Russian forces, and that the treaty represented unilateral concessions by the United States. Others noted that the number of deployed warheads possibly reflected the ongoing retirement of older Russian missiles and could change in the future as Russia deployed new, multiple-warhead land-based missiles. In September 2011, in the second treaty data exchange, Russia reported that it had 1,566 deployed warheads on 516 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Hence, although the number of deployed delivery vehicles declined, the number of warheads increased by a small amount, and then exceeded the treaty limit of 1,550 warheads. Because the data provide no details of the force composition, this increase could have either been due to the deployment of the new MIRVed RS-24 missiles, which carry more warheads than the single-warhead SS-25 missile they replace, or due to variations in the numbers of warheads carried on deployed SLBMs. The number of deployed and nondeployed delivery vehicles had increased slightly, to 871. This could reflect the retirement of some of Russia's older missiles, which would move their delivery vehicles from the deployed to nondeployed column in the data.\nIn the data exchange from April 1, 2014, Russia reported that it had 498 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 906 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,512 warheads. In the data exchanged in September 2014, and released in January 2015, Russia reported a force of 528 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 911 deployed and nondeployed launchers. It also indicated that these deployed forces carried a total of 1,643 warheads. Within these totals, Russia continued to deploy some new ICBMs and SLBMs while retiring older systems. However, as all categories had increased since the last data exchange, new deployments seemed to be outpacing retirements. This continued over the past year, as, in March 2016\u2014when Russia reported that it had 1,735 warheads on 521 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 856 deployed and nondeployed launchers. The pattern shifted a little in September 2016\u2014when Russia reported that it had 1,796 warheads on 508 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 847 deployed and nondeployed launchers\u2014as the number of warheads continues to rise while the number of deployed and nondeployed launchers has declined. \nThe data exchanged in March 2017 show that Russia had begun to reduce the number of deployed warheads while increasing the number of deployed launchers\u2014at that point it counted 1,765 warheads on 523 deployed launchers, within a total of 816 deployed and nondeployed launchers. The September 2017 data reinforce this trend. Russia reported a force 1,561 warheads, only 11 over the limit of 1,550 deployed warheads, on 503 deployed launchers. Hence, Russia appeared to be reducing older systems with larger numbers of warheads, while still deploying new missiles with fewer warheads, as it headed toward the New START limits by February 2018. On February 5, 2018, Russia reported that it had met the New START limits, with 1,444 warheads on 527 deployed ICBMs, SLBMs, and heavy bombers, within a total of 779 deployed and nondeployed launchers.\nThe data exchanges from 2018 and 2019 show that the Russia continues to comply with the New START limits. In September 2018, it reported that it had 1,420 warheads deployed on 517 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 775 deployed and nondeployed launchers for missiles and bombers. On March 1, 2019, it reported that it had 1,461 warheads deployed on 524 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 760 deployed and nondeployed launchers for missiles and bombers.\nSome analysts questioned whether the increase in Russian warheads reported in March 2016 and September 2016 indicated that Russia would eventually withdraw from New START without reducing to its limit of 1,550 deployed warheads. Others, however, noted that Russia did not need to meet the limits until February 2018, so the warhead levels in 2016 should not be of concern. They also noted that Russia continues to deploy new systems, like a third new submarine and new multiple-warhead land-based missiles, at a faster pace than it has retired older systems. Hence, as Russia retired older multiple-warhead missiles before the deadline, it succeeded in reducing its forces below the limit of 1,550 warheads.\nSome have also suggested that Russia's continuing deployment of new missiles systems, and its plans for modernization through the next 5-10 years, indicate that Russia may be prepared to exceed the limits under New START, either before or shortly after the treaty's 2021 expiration. They have suggested that the United States respond to Russia's plans with its own plans to modernize and expand its nuclear forces. Others, however, while agreeing with assessments of Russia's ability to expand its nuclear forces, argue that the United States should respond by pressing Russia to extend New START through 2026 so that limits on Russian forces remain in place.\n\n\t\t\tMonitoring, Verification, and Compliance\n\nThe United States has not raised any questions, in public, about Russia's compliance with the New START Treaty. In the January 2016 version of the Annual Report on Implementation of the New START Treaty, the State Department reported that \"the United States certifies the Russian Federation to be in compliance with the terms of the New START Treaty.\" The report indicated that the United States \"has raised implementation-related questions with the Russian Federation through diplomatic channels and in the context of the Bilateral Consultative Commission (BCC).\" \nRussia has also raised questions about U.S. implementation during BCC sessions. In its statement released on February 5, 2018, the Russian Ministry of Foreign Affairs indicated that it had concerns with the conversion procedures the United States had used to eliminate some missile launchers and B-52 bombers from its force structure. It noted that Russia could not verify that the conversions had been done in a way that permanently \"rules out the use of Trident II submarine-launched ballistic submarines and nuclear weapons of heavy bombers.\" The Protocol to New START states the parties must demonstrate their elimination procedures if there is a question about whether the method meets the treaty terms, but it does not allow for the other party to object and require changes in the procedures. As a result, although the United States has insisted that its procedures are sufficient, Russia continues to question this conclusion. Russian officials have indicated that the United States should address Russia's concerns with these procedures before the two parties agree to extend New START before it expires in 2021.\nIn a joint briefing provided by the United States and Russia in October 2011, the parties that, in the first six months of treaty implementation, they had exchanged almost 1,500 notifications and had conducted demonstrations of telemetric information playback equipment. By the end of the first year of implementation, on February 5, 2012, the parties had exchanged over 1,800 notifications. They had also conducted three required exhibitions, with Russia exhibiting the RS-24 missile and its launcher, and the United States exhibiting the B-1 and B-2 bombers. During the year, both parties had also conducted all 18 of the permitted inspections at facilities in the other nation. These inspections occurred at ICBM, SLBM, and heavy bomber bases; storage facilities; conversion and elimination facilities; and test ranges. In late November 2012, the State Department reported that the United States and Russia had each, as of November 26, conducted 15 of the 18 permitted inspections under the treaty. Both nations also completed their full complement of 18 inspections before the end of the second year of implementation, in February 2013. \nAccording to the State Department, the United States and Russia have both completed all 18 of their permitted Type 1 and Type 2 inspections during each of the eight full years of treaty implementation. They continued to conduct these inspections in spite of growing tensions after Russia's annexation of Crimea and aggression against Ukraine in early 2014. According to the State Department, the two sides also exchanged 17,516 notifications by early April 2019. These notifications report on the location, movement, and disposition of strategic offensive arms. They have also \"completed 14 exhibitions to demonstrate distinguishing features and technical characteristics of new types of strategic offensive arms or demonstrate the results of a conversion of a strategic offensive arm subject to New START.\" These monitoring activities will continue through 2021, or 2026 if New START is extended. \n\n\tIssues for Congress\n\n\t\tNew START and Strategic Stability\n\nWhen the Obama Administration released the 2010 Nuclear Posture Review, it indicated that the United States would retain a triad of ICBMs, SLBMs, and heavy bombers under the New START Treaty. The NPR indicates that this force structure supports strategic stability because it allows the United States to maintain an \"assured second-strike capability\" with warheads on survivable ballistic missile submarines and allows the United States to retain \"sufficient force structure in each leg to ... hedge effectively ... if necessary due to unexpected technological problems or operational vulnerabilities.\" The Trump Administration, in the 2018 NPR, also reaffirmed the support for the nuclear triad. Although it offered a more detailed rationale for the maintenance of a triad, the underlying themes of strengthening deterrence and supporting stability were part of the discussion.\nObama Administration officials also indicated that New START promoted strategic stability by \"discounting\" the weapons on heavy bombers. As President Reagan argued during his commencement address at Eureka College in 1982, ballistic missiles are the \"most destabilizing nuclear systems.\" As a result, in his START proposals, President Reagan sought deep reductions in ballistic missile warheads, but lesser reductions in the weapons on heavy bombers. The counting rules in New START reflect this logic. Because bomber weapons would take hours or days to reach their targets, and because they could be recalled after they were launched, they pose less of a threat to strategic stability than do ballistic missiles. As a result, some argue that, even if the United States and Russia retain hundreds of bomber weapons that do not count against the treaty limits, the reductions required in ballistic missile warheads will enhance strategic stability.\nSome have also noted that New START may strengthen strategic stability from the Russian perspective by removing the specific limits and restrictions on mobile ICBMs. Russia does not deploy many submarines at sea, and, therefore, lacks an assured second-strike capability on that leg of its triad. Instead, it has sought to improve the survivability of its forces by deploying ICBMs on mobile launchers. Under START, the United States sought to restrict these systems because it feared it would not be able to count them in peacetime and target them in wartime. In the current environment, concerns about wartime targeting played less of a role in the negotiations. Consequently, instead of limiting their numbers and restricting their operations, New START seeks to provide transparency and openness, so the United States can be confident in its ability to count these weapons in peacetime even though it might not be able to attack them during a conflict.\nCritics of the New START Treaty have questioned whether it serves U.S. security interests even if it did promote strategic stability. Some argued, during the negotiations, that the United States did not need to negotiate a new treaty to maintain its own triad, as this was possible with or without arms control. They also argued that the United States did not need to reduce its forces to bring about reductions in Russia's forces, as Russia would reduce its forces over the next decade as it retired aging systems, even in the absence of a new arms control agreement. Moreover, they questioned whether arms control should even be a part of the U.S.-Russian relationship, as arms control is a symbol of a Cold War, antagonistic relationship between the two nations. They believe that the United States and Russia should not measure their relationship with each other using Cold War-era measures like strategic stability and survivable warheads.\nThis last argument has faded as the U.S.-Russian relationship has changed over the past decade. Few now argue that arms control is irrelevant in the absence of an antagonistic relationship. Instead, they dispute the value of arms control precisely because the major-power rivalry has returned and the United States and Russia now have a more antagonistic relationship. They note that this change has occurred in spite of the presence of New START, and, therefore, is evidence of the failure of arms control to either support or strengthen strategic stability. Moreover, they note that New START did not include any limits on Russian shorter-range nonstrategic nuclear weapons, and, therefore, failed to capture the full scope of threats that Russia presents to the United States and its allies.\n\n\t\tMonitoring and Verification in New START\n\nMonitoring and verification were among the central concerns addressed in the Senate committees during their review of the New START Treaty. The cooperative monitoring measures in the treaty received special scrutiny, as many observers of the arms control process specifically measured the value of the monitoring and verification regime in the original START Treaty by its widespread use of notifications, on-site inspections, and other cooperative measures. \nSome critics of New START questioned whether the monitoring provisions in the new treaty were sufficient to provide the United States with enough information to either confirm Russian compliance with the treaty or to detect efforts to violate its terms. They pointed to differences between the verification regime in the original START Treaty and those in New START to argue that the new verification regime is less robust than the old regime. They noted that the United States would no longer maintain a monitoring presence outside the Votkinsk facility where Russia assembles its mobile ICBMs, which, they argued, could weaken the U.S. ability to count these missiles as they entered Russia's forces. They also noted that the United States and Russia would no longer exchange telemetry data on all their ballistic missile flight tests, which, over time, could lessen the U.S. ability to understand and evaluate the capabilities of Russian ballistic missiles.\nThe Obama Administration and others who supported the new treaty argued that the verification regime in New START would be more than sufficient to provide the United States with confidence in Russia's compliance with the treaty. They acknowledged that the regime is different from the regime in the original START Treaty, but noted that this was, in part, due to improvements in the relationship between Russia and the United States and differences between the limits and restrictions in the two treaties. They argued that the monitoring regime in New START was streamlined, both to reduce its costs and to ease the disruptions caused by monitoring for U.S. and Russian military forces. They also noted that it relied on as much or more cooperation between the two parties, which would continue to build confidence and reduce suspicions. \nMoreover, many in the Obama Administration noted that the United States had not had any opportunity to monitor Russian forces on Russian territory since the original treaty expired in December 2009. They argued that continuing delays in Senate consideration of New START could further reduce U.S. and Russian confidence in their knowledge of each other's forces, leading to worst-case assessments and possible instabilities. They further reminded those who contend that the verification regime in New START is less robust than the regime in old START that the absence of a treaty would have meant the absence of any monitoring and verification regime. The United States did not have the option of returning the regime of the original START Treaty; nor should it have wanted to do so since the new treaty has different limits and restrictions than the old treaty. Many U.S. officials, including Admiral Mullen and General Chilton, included their concerns about the absence of monitoring in their appeals for the prompt ratification of the New START Treaty.\nQuestions about the monitoring and verification regime in New START go beyond concerns about the specific monitoring mechanisms and the U.S. ability to confirm Russian compliance with individual limits in the treaty. Most experts agree that neither party can be absolutely certain that the other is in perfect compliance with all the limits and restrictions in the treaty. This is due, in some cases, to ambiguities in the treaty language and varying interpretations of the treaty requirements. It is also due to the fact that both sides may have gaps in their knowledge about the details of the other side's forces and activities. These uncertainties do not, by themselves, indicate that the parties should not ratify and implement the treaty. The broader question often asked by experts on treaty monitoring and verification is whether the parties, in general, and the United States, in particular, will have high confidence in Russia's compliance with the treaty, and, in those cases when compliance concerns may come up, whether the United States will be able to detect evidence of potential violations that might undermine U.S. security with enough warning to respond and adjust U.S. forces to offset those security concerns.\nThe Obama Administration indicated, in documents submitted to the Senate in July 2010, that the New START Treaty met this standard. The Administration concluded that the benefits to Russia of cheating would be minimal, as the United States, by maintaining a triad of ICBMs, SLBMs, and bombers, would be able to respond to any attempt to shift the strategic balance by adding significant numbers of warheads to its own forces. Moreover, if Russia were to cheat to any significant degree, it would undermine its relationship with the United States and interfere with any possible future arms control agreements. Therefore, in a letter sent to the Senate Foreign Relations Committee in September 2010, Secretary of Defense Gates concluded that Russia would not be able to achieve \"militarily significant cheating\" under the New START Treaty.\nA review of the verification regime in New START, and summary of some of the differences between the verification regime in the original START Treaty and the regime in New START can be found in CRS Report R41201, Monitoring and Verification in Arms Control .\n\n\t\tNew START and Ballistic Missile Defenses\n\nAs was noted above, during the debate over New START the Obama Administration testified repeatedly that the New START Treaty imposes no limits on current or planned ballistic missile defense programs in the United States. Some critics have claimed, however, that the United States might impose those limits itself, to ensure that Russia does not withdraw from New START, as it said it might do in the unilateral statement it released when it signed the treaty.\nOfficials from the Obama Administration argued that this concern was unfounded. They noted that the Soviet Union issued a similar statement when it signed the original START Treaty, threatening to withdraw if the United States withdrew from the 1972 Anti-ballistic Missile (ABM Treaty). Yet, when the United States withdrew from the ABM Treaty in 2002, Russia not only did not withdraw from START, it continued to participate in negotiations on the 2002 Strategic Offensive Reductions Treaty. Moreover, in the 1990s, when the United States might have altered its missile defense plans in response to the Soviet letter, the United States actually expanded its missile defense activities and increased spending on missile defense programs. As a result, there is little reason, based on historical data, to expect the United States to restrain its missile defense programs. Moreover, officials from the Obama Administration have highlighted that the Ballistic Missile Defense Review, the Nuclear Posture Review, and the 2011 budget all offer strong support for continuing U.S. missile defense programs.\nSome critics have also claimed that Russia might seek, and the United States might agree to, new limits on U.S. missile defense capabilities in the Bilateral Consultative Commission established by the treaty. According to the Protocol to New START, this commission is designed \"to promote the implementation of the provisions of the Treaty.\" The Protocol indicates that the United States and Russia will meet in the commission to \"resolve questions relating to compliance with the obligations assumed by the Parties,\" agree on \"additional measures as may be necessary to improve the viability and effectiveness of the Treaty,\" and \"discuss other issues raised by either Party.\" Some have claimed that because this agenda is somewhat open-ended, Russia may raise its concerns about U.S. missile defenses in the commission and propose limits on those systems. \nThe Obama Administration insisted that the parties could not, and would not use the BCC to negotiate new limits on ballistic missile defenses or any other elements of the U.S. strategic arsenal. In a fact sheet that accompanies the treaty, the State Department has indicated that the parties would use the BCC \"to reach agreement on changes in the Protocol to the Treaty, including its Annexes, that do not affect substantive rights or obligations. The BCC may in no way make changes that would affect the substantive rights and obligations contained in the New START Treaty.\" The parties may use the BCC to \"agree upon such additional measures as may be necessary to improve the viability and effectiveness of the Treaty\" but these measures would address concerns that came up while implementing the existing limits and restrictions in the treaty. They would not be able to impose new limits or restrictions without amending the treaty, and any amendment to the treaty would be subject to the same ratification process as the treaty itself. The Senate would have to offer its advice and consent.\nAlthough the Obama Administration pursued discussions with Russia on missile defense issues for several years, it never accepted any limitations on U.S. missile defense programs and insisted, repeatedly, that U.S. missile defense programs were not designed or capable of undermining Russia's ballistic missile defenses. Russia, however, continued to question U.S. intentions and press for limits on ballistic missile defenses. It has insisted that any negotiations on further reductions in nuclear weapons include discussions about limits on ballistic missile defenses.\nCongress remains concerned about the possibility that the United States might accept limits on missile defenses in exchange for limits on offensive nuclear forces. Senator Barrasso raised this issue in a hearing before the Senate Foreign Relations Committee on September 18, 2018. He asked officials from the State Department and Defense Department to assure him that \"in any arms control discussions with Russia for which you're responsible that the United States will not agree to limiting our own missile defense programs.\" Both Under Secretary of State Andrea Thompson and Under Secretary of Defense David Trachtenberg provided those assurances.\n\n\t\tModernization\n\nThe New START Treaty does not limit or restrict the ability of the United States or Russia to modernize strategic offensive nuclear forces. It specifically states, in Article V, paragraph 1, that, \"Subject to the provisions of this Treaty, modernization and replacement of strategic offensive arms may be carried out.\" Both nations are currently modernizing their forces and replacing aging missiles, submarines, and bombers.\nMoreover, while some Members of the Senate insisted that the Obama Administration commit to modernizing the U.S. nuclear arsenal before voting in support of the treaty, many have also indicated that their continuing support for the modernization programs is linked to ongoing implementation of New START. Several Senators emphasized this linkage during a hearing in the Senate Foreign Relations Committee in September 2018. Senator Menendez noted that \"bipartisan support for nuclear modernization is tied to maintaining an arms-control process that controls and seeks to reduce Russian nuclear forces.\" Senator Corker pointed out that, when the Senate gave its consent to the ratification of New START, \"there was no doubt\" about the \"tie between the two.\" He stated that \"the essence of this is that the modernization piece, and the reduction in warheads piece go hand in hand.\"\n\n\t\t\tU.S. Modernization\n\nThe United States is currently recapitalizing all three legs of its nuclear triad, with replacements planned for its bombers, air-delivered cruise missiles, land-based ballistic missiles, and ballistic missile submarines over the next 20 years. It is also pursuing life extension programs for many of the warheads in the U.S. stockpile, to ensure that the weapons remain safe, secure, and effective. The Obama Administration outlined much of this modernization program in a report, known as the 1251 Report, mandated by Congress in the FY2010 Defense Authorization Act ( P.L. 111-84 , \u00a71251). This provision required the Administration to submit a report to Congress when it submitted the New START Treaty to the Senate that described how it planned to \"enhance the safety, security, and reliability of the nuclear weapons stockpile of the United States; modernize the nuclear weapons complex; and maintain the delivery platforms for nuclear weapons.\" In this 1251 report, the Administration stated that the United States planned to spend $180 billion over the next 10 years to meet these objectives, with $80 billion allocated to the U.S. nuclear weapons complex and nuclear warheads and $100 billion allocated to the Navy and Air Force for the maintenance and modernization of their delivery systems. The program has expanded over the years, and, although cost estimates vary, the Congressional Budget Office has estimated that the United States is likely to spend around $350 billion over 10 years and $1.2 trillion over 30 years to modernize its nuclear arsenal. In the 2018 Nuclear Posture Review, the Trump Administration reaffirmed its support for the continuing modernization of the U.S. nuclear triad, advocating for the completion of all the programs initiated under the Obama Administration, while adding two new systems to the plan.\nDuring the debate over New START's ratification, some Members of Congress and analysts outside government questioned whether the Obama Administration was sufficiently committed to modernizing and maintaining its strategic nuclear forces, nuclear weapons complex, and nuclear warheads. Some also questioned whether the funding in the program would be sufficient to maintain and sustain the U.S. nuclear arsenal. Some argued that the totals did not add enough above the previously planned program to go far in expanding the U.S. capability to maintain and modernize its forces. Others questioned whether the Administration would sustain its commitment for more than a year or two, particularly in an era of tight defense budgets. These concerns grew as the fiscal constraints imposed through the Budget Control Act in 2011 reduced the resources available for modernization in the nuclear enterprise and have led to delays in some programs.\nOthers, however, argued that the Administration's budget for the nuclear weapons complex in FY2011 and the added funding outlined in the 1251 report demonstrated a strong commitment to recapitalizing the U.S. nuclear weapons complex, maintaining nuclear warheads, and maintaining and modernizing the delivery vehicles. The Administration added nearly 10%, or over $700 million, to the DOE budget for nuclear weapons in FY2011. Ambassador Linton Brooks, who had served as the Director of the National Nuclear Security Administration during the Bush Administration, indicated that he would have \"killed\" for a budget of that magnitude when he was managing the nuclear weapons complex for DOE. While the 2011 Budget Control Act required some delays in planned spending on nuclear weapons modernization, the Obama and Trump Administrations' budget proposals have continued to show increases above the levels expected before the ratification of New START.\n\n\t\t\tRussian Modernization\n\nRussia is also deploying new missiles, submarines, and bombers to replace aging systems within the limits of New START. At the same time, it may be developing new types of strategic offensive arms that might not be captured by the limits in the treaty. In his annual address on March 1, 2018, Russian President Putin announced that Russia was developing several new nuclear delivery vehicles that could evade or penetrate U.S. ballistic missile defenses. One of the new weapons mentioned in the speech, the large, multiple-warhead ICBM known as the Sarmat, would by most estimates clearly count under the New START Treaty. \nHowever, other systems\u2014including a long-range nuclear-powered cruise missile, a long-range nuclear-armed underwater drone, and an air-delivered hypersonic cruise missile\u2014may not be covered by the treaty's definitions of existing types of strategic offensive systems. As was noted above, the treaty addresses the possible emergence of new types of strategic offensive arms in paragraph 2 of Article V, where it states that the parties should raise their concerns about such weapons in the BCC. It does not, however, indicate how the parties will resolve such questions or whether they must agree before a weapon is included or excluded from the treaty limits. According to Under Secretary of State Thompson, in September 2018, the United States had not yet questioned Russia about these systems. However, these weapons would only raise concerns under New START if they were deployed before the treaty expired. Many analysts doubt that this will happen since most of the weapons mentioned in the speech seem to be in the early stages of development. \n\n\t\tNonstrategic Nuclear Weapons\n\nPresidents Obama and Medvedev agreed, in April 2009, when they initiated the negotiations on the New START Treaty, that this agreement would address only strategic nuclear forces, the long-range weapons that each side could use to reach the territory of the other side. It would not seek to limit or restrict the shorter-range nonstrategic nuclear weapons in either side's arsenal. This agreement derived not only from the fact that the existing START Treaty, and nearly all past bilateral arms control treaties, had addressed only strategic nuclear weapons, but also from the fact that many of the issues that would need to be addressed in a treaty that limited nonstrategic nuclear weapons would likely prove too complex to resolve in the near term, when both sides sought to replace the existing START Treaty.\nThere was widespread agreement in Congress, in the Obama Administration, and within the arms control community, that the United States and Russia should seek to negotiate a treaty that increases transparency and possibly imposes limits on nonstrategic strategic nuclear weapons. However, there is also widespread agreement that negotiating such a treaty would prove extremely difficult, as Russia maintains a far larger stock of these weapons than the United States, in part to compensate for perceived weaknesses in its conventional forces, and because U.S. nonstrategic nuclear weapons are a part of the U.S. commitment to NATO, and the United States believes that any changes in their deployment should be addressed by the alliance before they are addressed in an arms control negotiation.\nSome analysts and Senators questioned whether the United States should agree to further reductions in its strategic nuclear weapons in the absence of any limits on Russian nonstrategic nuclear weapons. They noted that Russia retains more than 2,000 operational nonstrategic nuclear weapons while the United States has around 200 in Europe, and that the value of these weapons could grow as the numbers of U.S. and Russian strategic nuclear weapons decline. They also noted that these weapons could seem particularly threatening to some of the new NATO states that are located near the periphery of Russia. Others however, argued that Russian nonstrategic nuclear weapons do not pose a threat to the United States or NATO, as Russia has indicated that these weapons would only be used in response to an attack on Russian territory. So, these analysts noted, as long as NATO does not initiate such an attack, NATO members would not be threatened by these weapons. Moreover, as Senator Lugar noted in his response to former Massachusetts Governor Mitt Romney's critique of New START, most of Russia's nonstrategic nuclear weapons do not pose a missile threat to Europe. Senator Lugar stated that \"most of Russia's tactical nuclear weapons either have very short ranges, are used for homeland air defense, are devoted to the Chinese border, or are in storage.\"\nMany of the experts who testified in support of the New START Treaty agreed that the United States and Russia should pursue negotiations on a treaty on nonstrategic nuclear weapons. However, most agreed that Russia would be unwilling to participate in such discussions, and the United States and Russia would be unlikely to find common ground on such an agreement, unless both sides ratified and implemented the New START Treaty first. For example, in testimony before the Senate Foreign Relations Committee on April 29, 2010, former Secretaries of Defense James Schlesinger and William Perry both indicated that nonstrategic nuclear weapons should be an issue for the next treaty, and that the United States should ratify New START as a step on the path to get to reduction in nonstrategic nuclear weapons.\nThe Trump Administration, in the Nuclear Posture Review released on February 2, 2018, also expressed concerns about Russia's stockpile of nonstrategic nuclear weapons. While it did not advocate for the negotiation of a treaty specifically limiting these weapons, it did indicate that Russia would have to address these concerns before the United States would be willing to negotiate further reductions in strategic nuclear weapons.\n\n\t\tNew START and the U.S. Nuclear Nonproliferation Agenda\n\nThe Obama Administration argued that U.S.-Russian cooperation on arms control, in general, and the New START Treaty, specifically, could help move forward the U.S. and international nuclear nonproliferation agenda. No one has argued that the treaty will convince nations who are seeking their own nuclear weapon that they should follow the U.S. and Russian lead and reduce those weapons or roll back those programs. However, some have argued that U.S.-Russian cooperation on arms control could strengthen the U.S.-Russian cooperation on a broader array of issues and that, \"cooperation is a prerequisite for moving forward with tough, internationally binding sanctions on Iran.\"\nMoreover, some have noted that U.S.-Russian cooperation on arms control would also demonstrate that these nations are living up to their obligations under the Nuclear Nonproliferation Treaty (NPT). Most nations that are parties to the NPT believe that reductions in the number of deployed nuclear weapons are a clear indicator of U.S. and Russian compliance with their obligations under Article VI of the NPT. During the preparatory committee meetings (PrepComs) leading up to the 2010 Review Conference of the NPT, many of the participants called on the United States and Russia to complete negotiations on a New START Treaty. While the completion of this treaty may not assure the United States of widespread agreement on U.S. goals and priorities at the NPT review conference, many argue that the absence of an agreement would have certainly complicated U.S. efforts and reduced the chances for a successful conference. \nIn contrast, some have argued that the New START Treaty will do little to advance U.S. nonproliferation goals. They noted that the parties at the NPT review conference may express their approval of the New START, but their positions on substantive issues would reflect their own national security interests and goals. Moreover, some critics argue that New START might undermine U.S. nonproliferation goals by calling into question U.S. security commitments and the continuing salience of U.S. nuclear weapons.\nThe State Department, in its press releasing announcing that the United States had met its obligation to reduce to the New START limits, noted that \"the United States continues to demonstrate its commitment to fulfilling its arms control obligations, including under the Treaty on the Non-Proliferation of Nuclear Weapons\" through its adherence to the New START limits.\n\n\t\tArms Control after New START\n\n\t\t\tProspects for Further Reductions\n\nIn 2010, when it signed the New START Treaty, the Obama Administration indicated that it hoped this would be the first step in a renewed arms control process with Russia. In his statement on April 8, 2010, President Obama indicated that \"this treaty will set the stage for further cuts. And going forward, we hope to pursue discussions with Russia on reducing both our strategic and tactical weapons, including nondeployed weapons.\" In his State of the Union Address on February 12, 2013, the President stated that, as a part of the \"effort to prevent the spread of the world's most dangerous weapons,\" the United States would \"engage Russia to seek further reductions in our nuclear arsenals.\" Then, on June 19, 2013, in a speech in Berlin, President Obama stated that, after a comprehensive review, he had \"determined that we can ensure the security of America and our allies, and maintain a strong and credible strategic deterrent, while reducing our deployed strategic nuclear weapons by up to one-third.\" He stated that he intended \"to seek negotiated cuts with Russia to move beyond Cold War nuclear postures.\"\nMany analysts outside government supported the idea of further reductions beyond New START. They had hoped New START would cut more deeply into U.S. and Russian forces, reducing them to perhaps 1,000 warheads on each side. Others focused their concern on the absence of limits on nonstrategic nuclear weapons and nondeployed nuclear warheads. They expected a second treaty to address some of these concerns. Some have suggested that the two sides pursue a single, comprehensive treaty that would limit strategic, nonstrategic, and nondeployed warheads. This is similar to the approach that the Obama Administration appeared willing to pursue in 2013. Others suggested that the United States and Russia accelerate their reductions under New START, amend the treaty to reduce the numbers of permitted weapons, or agree informally to reduce their forces below New START levels. They argued that these steps, if the nations took them together, could enhance stability and reduce nuclear dangers, without waiting for the completion a new, lengthy treaty negotiation process. Some have also suggested that the United States and Russia work to increase transparency on their nonstrategic nuclear weapons, even if they are not yet ready to agree to limits or reductions in these systems.\nOthers, however, disputed the notion that New START should be the first step in an ongoing process of further reductions in nuclear weapons. While some were willing to support the modest reductions of New START, they would not have supported a treaty that imposed deeper reductions on deployed nuclear weapons or limits on nondeployed nuclear weapons. They also objected to the broader arms control agenda that President Obama had outlined in his speech in Prague on April 5, 2009, including his call for the ratification of the Comprehensive Test Ban Treaty and his vision of a world free of nuclear weapons. Hence, some who concluded that the New START Treaty would not harm U.S. security by itself objected to its ratification because they believed its defeat would close the door on the rest of the President's arms control agenda.\nThe prospects of additional reductions below the New START levels were further dimmed by the fact that Russia has been uninterested in negotiating another treaty. Shortly after New START entered into force, Russian Foreign Minister Sergei Lavrov stated that Russia would not want to pursue further negotiations until New START had been implemented. Russian officials have stated, repeatedly, that a treaty mandating further reductions would not only have to include limits on U.S. ballistic missile defenses and nonnuclear strategic strike systems, but would also have to limit the forces of the other major nuclear powers. \nMost experts agree that a new treaty that addressed each of these issues raised by both parties would likely be extremely difficult to complete. Russia has been unwilling to negotiate reductions in its nonstrategic nuclear weapons, and neither side may be willing to adopt the amount of transparency necessary to negotiate verifiable limits on nondeployed warheads in storage. The United States has firmly rejected Russia's proposals for limits on ballistic missile defense and is unwilling to include conventional-armed cruise missiles or other long-range missiles in nuclear arms control negotiations. Moreover, Britain, France, and China\u2014the other declared nuclear weapons states under the NPT\u2014have not shown any willingness to participate in the U.S.-Russian arms control process.\nProspects for the negotiation of a follow-on treaty dimmed further in 2014, following Russia's annexation of Crimea and incursion into Ukraine. In addition, in July 2014, the Obama Administration\u2014in its Annual Report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments\u2014stated that the United States \"has determined that the Russian Federation is in violation of its obligations under the [1987] Intermediate Range Nuclear Forces (INF) Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles.\" While Russia appeared to be complying with New START, most agreed that further negotiations would be unwise; some also suggested that the United States suspend its implementation of New START until Russia returned to compliance with the INF Treaty. Others, however, have argued that the United States should continue to implement New START, as the limits on the size of Russia's strategic forces and the transparency provided by its verification regime continue to serve U.S. national security interests.\n\n\t\t\tProspects for New START Extension\n\nAbsent an agreement between the United States and Russia to extend New START for a period of no more than five years, the treaty will lapse in 2021. As was noted above, President Trump and President Putin reportedly discussed the treaty during their summit in Helsinki in July 2018, with President Putin presenting President Trump with a document suggesting that they extend the treaty after resolving \"existing problems related to the Treaty implementation,\" but the two did not reach an agreement on the issue. In the 2018 Nuclear Posture Review, the Trump Administration noted that the United States had met the treaty's central limits, and that it would \"continue to implement the New START Treaty and verify Russian compliance.\" It did not, however, indicate whether it might seek an extension of the treaty and made it clear that it was unlikely to negotiate a new treaty before New START's expiration in 2021. It noted that the United States is committed to \"arms control efforts that advance U.S., allied, and partner security; are verifiable and enforceable; and include partners that comply responsibly with their obligations.\" But it also noted that Russian actions, including its noncompliance with the INF Treaty and other arms control agreements, and its actions in Crimea and Ukraine made further progress difficult.\nThe Trump Administration is reportedly conducting an interagency review of New START to determine whether it continues to serve U.S. national security interests, and that this review will inform the U.S. approach to the treaty's extension. Among the issues that might be under consideration are whether the United States should be willing to extend New START following Russia's violation of the INF Treaty, whether the limits in the treaty continue to serve U.S. national security interests, whether the insights and data that the monitoring regime provides about Russian nuclear forces remain of value for U.S. national security, and whether an extension of the treaty should be linked to Russia's development of new kinds of strategic offensive arms.\nAdministration officials addressed this review during testimony before the Senate Foreign Relations Committee on September 18, 2018. Both Under Secretary of State Andrea Thompson and Deputy Under Secretary of Defense David Trachtenberg emphasized how Russia's violation of the INF Treaty and its more general approach to arms control undermined U.S. confidence in the arms control process. Under Secretary Thomson noted that \"the value of any arms control agreement is derived from our treaty partners maintaining compliance with their obligations and avoiding actions that result in mistrust and the potential for miscalculation.\" She also said that Russia's noncompliance \"has created a trust deficit that leads the United States to question Russia's commitment to arms control as a way to manage and stabilize our strategic relationship and promote greater transparency and predictability.\" Deputy Under Secretary Trachtenberg also emphasized that \"arms control with Russia is troubled because the Russian Federation apparently believes it need only abide by the agreements that suit it. As a result, the credibility of all international agreements with Russia is at risk.\" He went on to state that \"It is that overall kind of behavior that I think from a national security perspective we at least need to consider.\"\nSeveral Senators questioned whether the Administration's review would include a broader assessment of whether the provisions in New START contributed to U.S. national security. They focused on both the benefits of the limits on U.S. and Russian nuclear forces and the value of the transparency provided by the monitoring and verification regime. Deputy Under Secretary Trachtenberg acknowledged that \"the verification and monitoring and on-site inspection provisions provide a level of openness and transparency that is useful and beneficial not just to the United States but to our allies as well.\" But he reiterated that \"any decision on extending the treaty will, and should be, based on a realistic assessment of whether the New START treaty remains in our national security interests in light of overall Russian arms control behavior.\"\nSenators held a similar conversation with Under Secretary Thompson and Deputy Under Secretary Trachtenberg during a hearing before the Senate Foreign Relations Committee on May 15, 2019. While the two witnesses repeated many of the same concerns about Russian compliance with its arms control obligations and the need for an atmosphere of trust between the treaty parties, they also addressed concerns about Russia's development of new kinds of strategic offensive arms that would fall outside the New START limits, Russia's nonstrategic nuclear weapons that are not covered by the Treaty, and China's nuclear modernization programs. They were unwilling to offer insights into the progress of the review\u2014Under Secretary Thompson refused to speculate about possible changes in Russian forces if the treaty were to expire, and Deputy Under Secretary Trachtenberg declined to offer insights into how the United States might alter its nuclear forces or how it might recover the data and information provided by New START's verification regime if the treaty were to expire.\nAnalysts outside government have offered several reasons why the United States should support the extension of New START. They note that extension would not only maintain limits on the number of deployed strategic nuclear weapons in Russia, but would also retain the predictability offered by the treaty's limits, maintain the monitoring and verification regime that provides the United States with insights into Russian nuclear forces and nuclear modernization programs, and avoid misperceptions that could upset strategic stability, exacerbate a crisis, or lead to a costly arms race. They also note that such an extension would provide the United States and Russia with an additional five years to resume negotiations and possibly reach new agreements on further reductions or transparency measures. \nOthers, however, believe the United States and Russia should allow the New START Treaty to lapse, both to relieve the United States of its obligations and because they believe that Russia's interest in retaining limits on U.S. forces would provide the United States with leverage when negotiating a treaty to replace New START. Some also argue that the treaty better serves Russian than U.S. interests because, as was noted above, Russia is pursuing the development of weapons that may not be captured by the treaty limits.\nSome have questioned whether the treaty's extension will eventually constrain the ongoing U.S. nuclear modernization program. While the United States plans to recapitalize all three legs of its nuclear triad, each program is sized to fit within the limits of New START. But, with growing concerns about the challenges the United States might face from Russia and China, along with growing concerns about the scope of their nuclear modernization programs, the United States might eventually seek to expand its forces beyond the limits in New START. The 2018 Nuclear Posture Review hints at this possibility by noting that the plan for rebuilding the sea-based leg of the nuclear triad will include at least 12 Columbia-class submarines, thus leaving open the possibility of a larger program.\nNevertheless, based on the pace of modernization, New START may not interfere with the U.S. modernization program, even if the treaty were extended for five years. Most of the new U.S. systems are not scheduled to enter the force until the late 2020s, after New START's 2026 expiration. Moreover, the new systems are to replace existing, older systems, which would keep the U.S. force within the New START limits for many years. Any expansion beyond those limits would not occur until later in the 2030s. On the other hand, if New START were to expire in 2021, the United States might feel compelled to both accelerate and expand its modernization programs if Russia were to expand its nuclear programs when released from the constraints of the treaty.\nPresident Trump's National Security Advisor, Ambassador John Bolton, addressed the question of New START extension in a press conference following his meeting with President Putin's National Security Advisor, Nikolai Patrushev, in August 2018. He noted that, instead of simply extending New START, the United States and Russia could either renegotiate the treaty or replace it with something more like the 2002 Moscow Treaty signed during the George W. Bush Administration. President Trump has also proposed that the United States and Russia replace New START with a new, broader treaty that would capture all types of nuclear weapons and include China's forces under the limits.\nThose who favor renegotiating New START believe it would provide the United States with the opportunity to press Russia to include limits on its new types of long-range nuclear delivery systems and to accept limits on shorter-range, nonstrategic delivery vehicles. But this approach envisions a more complicated treaty and could take years to complete the negotiations. A return to the Moscow Treaty envisions a more simple approach. The Moscow Treaty did not contain any detailed definitions or restrictions on deployed forces, and, instead, included a simple pledge by each side to reduce the number of deployed warheads within a 10-year period. Bolton both supported this approach and participated in the negotiations when he served as an Under Secretary of State in the Bush Administration.\nThese options, however, may not provide a capable or timely response to the impending expiration of New START. As noted above, Russia has been unwilling to accept limits on its nonstrategic nuclear delivery vehicles in the past, and any attempt to convince them to do so in the future may require the United States to agree to the elimination of its nuclear weapons deployed in Europe. Moreover, while limits on nonstrategic nuclear weapons have long been a U.S. priority for the next arms control agreement, Russia has stated that the next agreement should include limits on U.S. ballistic missile defense programs, limits on nonnuclear strategic-range delivery systems (specifically, U.S. sea-launched cruise missiles), and limits on other nations' (specifically British and French) nuclear forces. Because neither side is likely to accept the demands of the other, an effort to renegotiate or replace New START would almost certainly fail to produce a new treaty before its 2021 expiration or a replacement treaty after its expiration.\nRussia has not rejected U.S. proposals to address its new kinds of long-range delivery systems, but it has refused to count them under New START. Instead, it has suggested that the two sides discuss these weapons in a separate forum that addresses concerns about strategic stability. It has indicated that this forum could meet in the years after the parties extend New START. Russia has not yet produced any of these weapons, and may produce only a small number between 2021 and 2026. So, even if these weapons were not captured by New START, such discussions could occur before the weapons posed a significant threat to the United States or its allies. \nThe Trump Administration has not offered any details about how China could participate in the arms control process. Specifically, it has not indicated whether it would seek limits in a new treaty closer to the size of the Chinese arsenal, or whether it would invite China to expand its forces to levels closer to the New START limits of 1,550 warheads on 700 deployed missiles and bombers. While China has not offered any details about the size of is nuclear force, the 2019 version of the Pentagon's Annual Report to Congress on Military and Security Developments Involving the People's Republic of China notes that China's force missiles with a range greater than 5,500 kilometers (the range of missiles that count under New START) \"currently consists of approximately 90 ICBMs\" deployed on land and 48 missiles deployed four ballistic missile submarines. The Pentagon report does not include an estimate of the number of warheads carried by these missiles. Unclassified estimates, however, indicate that the submarine-launched ballistic missiles and most of the land-based missiles carry a single warhead, while some of the land-band based missiles may carry three warheads per missile. As a result, the Chinese missiles that would count under New START likely carry around 130 warheads. This is within a total estimated arsenal of around 280 nuclear warheads.\nChina, in the past, has firmly rejected suggestions that it join in the nuclear arms control process. Chinese officials have noted that they deploy far fewer nuclear forces than the United States and Russia, that they do not engage in arms races with other nations, and that they support eventual nuclear disarmament. A spokesman for the Chinese Foreign Ministry reiterated its objections in May 2019, after the Trump Administration suggested that China join the arms control process. According to press reports, Geng Shuang said that the country's nuclear forces were at the \"lowest level\" of its national security needs, and that they could not be compared to the United States and Russia. He noted that \"China believes that countries with the largest nuclear arsenals have a special responsibility when it comes to nuclear disarmament and should continue to further reduce nuclear weapons in a verifiable and irreversible manner, creating conditions for other countries to participate.\"\nA return to the 2002 Moscow Treaty raises different issues. Ambassador Bolton and others who support this approach to arms control note that this treaty provided the United States with the maximum amount of flexibility in sizing and structuring its nuclear forces. The limits in the treaty were consistent with the force levels the United States had already decided to pursue, and did not require that the United States match its force levels to those acceptable to Russia. It also was set to expire, on December 31, 2012, at the same time as both sides were required to reach the limits in the treaty, thereby imposing no real restrictions on U.S. force levels over the course of its implementation. Moreover, the treaty contained no specific definitions of forces covered by the limits, so each side could count and declare its force levels according to its own interpretation of the limits. \nBut the absence of agreed definitions and counting rules, along with the absence of any specific provisions that would allow each side to monitor the other's forces, meant that neither side could verify that the other was complying with the limits in the treaty. While this issue was mitigated because the 1994 START Treaty, with its complex verification regime, remained in force through December 2009 and was soon after replaced by New START, such a solution would not be possible if a treaty of this type were to replace New START after its expiration. The monitoring regime under New START would also expire, leaving the United States and Russia with no data exchanges, declarations, or inspections that provide transparency into each other's forces and operations.","output":null}
{"id":"crs_R46117","pid":"crs_R46117_0","input":"\tIntroduction\n\nThe Teacher Education Assistance for College and Higher Education (TEACH) Grant program provides grants to students who are completing or plan to complete the coursework required to begin a career in teaching. As a condition for receiving a TEACH Grant, a recipient must teach for at least four years in a high-need field at an elementary or secondary school or in an educational service agency that serves students from low-income families within eight years of completing his or her program of study. If a recipient does not fulfill the service obligation, his or her TEACH Grants are converted to Direct Unsubsidized Loans. A recipient must repay these loans in full, including interest charged from the date of each TEACH Grant disbursement. Since the inception of the program in 2008, over 300,000 TEACH Grants have been disbursed, totaling nearly $938 million.\nIn recent years, the TEACH Grant program has received significant attention due to challenges associated with administering it. One of the more prominently cited challenges pertains to loan conversions of TEACH Grants when recipients fail to submit annual certification paperwork on time even though they have been teaching in a qualifying position. The absence of an appeals or reconsideration process may increase the amount of such grant-to-loan conversions.\nWhile the Department of Education (ED) is working to address some of these administrative challenges, a broader issue still persists with the program: two-thirds of recipients are expected to see their grants converted to loans. This high expected failure rate raises several questions regarding the efficacy of the program. \nSeveral issues related to TEACH Grants may garner congressional attention. The bulk of these issues are related to program design, including the extent to which the program successfully identifies individuals who commit to teaching, the size of the TEACH Grant benefit, challenges associated with finding and sustaining a qualifying teaching placement, teacher preparation program quality at institutions that disburse TEACH Grants, and the continued application of the \"highly qualified teacher\" definition to the TEACH Grant program. Other issues are related to program implementation, such as challenges associated with certification of teaching service and the absence of an appeals process. Lawmakers may also wish to consider other changes that have been proposed since the TEACH Grant program was authorized.\nThis report begins with a brief legislative history of the TEACH Grant program. This is followed by a brief description of how the program is structured and administered, as well as its budgeting approach and participation data. The report concludes with a discussion of issues related to the TEACH Grant program that might garner attention in the 116 th Congress. \n\n\tLegislative History\n\nThe TEACH Grant program was first authorized in 2007 under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84 ). However, as early as 2005, bills were introduced in both the House and the Senate that included an authorization for TEACH Grants, such as H.R. 2835 and its companion bill, S. 1218 . H.R. 2835 presented findings suggesting that there was a shortage of qualified teachers in public schools, and in light of the significant number of teacher retirements expected over the next few years, the country would need to field 2 million new teachers over the next decade. \nCongress authorized the TEACH Grant program in response to concerns about growing demand for high-quality teachers in low-income schools. This demand was identified as being driven by several factors, including (1) the expected surge of retirements over the next five years and (2) a newly established set of minimum standards for teacher quality as enacted through the No Child Left Behind Act (NCLB; P.L. 107-110 ). Other concerns the TEACH Grant program aimed to address were related to low-income schools, where students were identified as being disproportionately taught by teachers who were inexperienced, unqualified, and out-of-field; and which were struggling to retain teachers for as long as three to five years.\nThe committee report accompanying H.R. 2669 , the College Cost Reduction Act of 2007, stated that the TEACH Grant program was created to attract high-achieving individuals into the teaching profession to meet the demand in low-income schools. Given that, on average, teacher salaries tended to be lower than other entry-level jobs out of college, providing a financial incentive to help subsidize the cost of college was viewed as an important tool in offsetting the opportunity cost of entering into teaching. There was also a distinction made in providing financial assistance on the front-end in the form of a grant when an individual started undergraduate or graduate studies versus providing assistance once the individual had been teaching for some time, as with already existing teacher loan forgiveness programs. The idea was that earlier intervention might influence a student's career path and, thus, major, which could potentially incentivize many more individuals to pursue teaching as a career who would have not chosen it otherwise. \nThe program was also focused on incentivizing high-quality individuals to teach in both schools and subject areas for which it is typically harder to attract and retain staff. This was intended to help address some of the recurring issues faced by low-income schools, in particular.\nOpponents of the program believed that this new entitlement was poorly targeted, unproven, and would place a significant financial burden on taxpayers. Further, it was argued that the program was not focused on the goals of increasing access to and persistence in higher education for students with the greatest need. Given that the program was authorized with mandatory funds, it was also contended that there was no mechanism for congressional accountability.\n\n\t\tChanges Since Enactment\n\nSince its enactment, there have been some changes to the statutory provisions of the TEACH Grant program. The most substantive changes were made under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ), which added a provision that required ED to develop a \"plain-language\" disclosure form to accompany each recipient's Agreement to Serve that clearly described the nature of TEACH Grants, the service requirement, and the consequences of not fulfilling this requirement (see \" Service-Related Requirements \" for a description of the Agreement to Serve). The HEOA also included a provision that permitted grant recipients who obtained degrees in fields that were designated as \"high need\" at the time they applied for the grant but were no longer designated as such to still be able to complete their service requirement by teaching in that field. It also required ED to establish regulations describing the extenuating circumstances in which all or part of the service requirement could be waived. Finally, it required ED to prepare and submit to Congress a report every two years on TEACH Grant recipients and the schools and students served by those recipients. \n\n\t\t\"Service Payback\" Programs\n\nAt the time of the TEACH Grant program's authorization, the idea of awarding grants or scholarships to subsidize the cost of undergraduate or graduate education in exchange for service (i.e., \"service payback\" programs) was not a new one. Prior to TEACH Grants, the Paul Douglas Teacher Scholarships program was first authorized under the Higher Education Amendments of 1986 ( P.L. 99-498 ) as a discretionary program to provide financial assistance to college students preparing to be elementary and secondary school teachers. Eligible students, who must have graduated in the top 10% of their high school class, could receive a scholarship in the amount of $5,000 per year for a maximum amount of up to $20,000. In exchange, scholarship recipients were required to teach one to two years for every year of scholarship receipt in a preschool or elementary or secondary school, depending on where and what subjects they taught. The program was administered as a formula grant to states, which were responsible for selecting scholarship recipients, verifying that each recipient was meeting service requirements, and submitting performance reports to ED. The program was repealed by the Higher Education Amendments of 1998 ( P.L. 105-244 ), though it was defunded in FY1996 appropriations ( P.L. 104-134 ). In eliminating funding for the program, the committee report that accompanied H.R. 2127 stated that the program was duplicative of other teacher training and student aid programs. It was also characterized as costly to administer and difficult to implement, monitor, and enforce.\nAnother example of a teaching service payback program, authorized prior to the TEACH Grant program's inception, is the National Science Foundation's (NSF's) Robert Noyce Teacher Scholarship program, which was enacted under the National Science Foundation Authorization Act of 2002 ( P.L. 107-368 ). It makes awards to institutions of higher education (IHEs) to provide scholarships of $10,000 per year to undergraduate science, technology, engineering, and math (STEM) majors, starting in their junior year, and graduate STEM students. In exchange for this assistance, recipients are expected to obtain teaching certification in a STEM subject and serve as a teacher in a high-need local educational agency (LEA) for at least two years for each year of scholarship receipt. Similar to TEACH Grants, if recipients do not complete their required service, then they must pay all or a portion of their scholarships back in the form of a loan, including interest accrued since disbursement.\nOther examples of existing service payback programs include scholarships at each of the U.S. Service Academies and Reserve Officers' Training Corps (ROTC) Scholarships, which provide tuition assistance in exchange for military service. Boren Scholarships and Fellowships provide financial assistance to undergraduate and graduate students to study less commonly taught languages in international regions critical to U.S. interests in exchange for working in the federal government for at least one year upon graduation. The National Institutes of Health Ruth L. Kirschstein National Research Service Awards provide financial support for training to pre- and postdoctoral students in biomedical, behavioral, and clinical research in exchange for engaging in health-related biomedical, behavioral, and\/or clinical research, research training, or health-related teaching for one year upon completion of their program.\n\n\tProgram Structure\n\nThis section describes how the program is structured, including TEACH Grant recipient eligibility, award amounts, service-related requirements, conditions under which TEACH Grants convert to loans, institutional eligibility to disburse TEACH Grants, and program administration.\n\n\t\tTEACH Grant Recipient Eligibility\n\nTo be eligible to receive a TEACH Grant, a student must meet the basic eligibility criteria for the HEA Title IV federal student aid programs. Among the requirements generally applicable to the HEA Title IV student aid programs for award year (AY) 2018-2019 are the following:\nA student must be accepted for enrollment or enrolled in an eligible program at an eligible institution for the purpose of earning a certificate or degree. A student must not be enrolled in an elementary or secondary school and must have a high school diploma (or equivalent). A student must meet citizenship requirements. A male student must have registered with the selective service system when 18-25 years of age. A student must maintain satisfactory academic progress while enrolled. Satisfactory academic progress requires a minimum grade point average (GPA) or its equivalent and passing a minimum percentage of attempted credits or hours. A student must not be in default on a Title IV student loan, or have failed to repay or make an arrangement to repay an overpayment on a Title IV grant or loan, or be subject to a judgment lien for a debt owed to the United States. A student must have repaid any Title IV funds obtained fraudulently. A student may be disqualified for an unusual enrollment history\u00e2\u0080\u0094receiving HEA Title IV aid at multiple schools in the same semester, or receiving aid and withdrawing before earning any credit. A student may be disqualified for a period of time for a federal or state conviction for possession or sale of drugs while receiving HEA Title IV student aid.\nSpecific eligibility requirements for the TEACH Grant program include the following:\nA student must also be enrolled as an undergraduate, post-baccalaureate, or graduate student at an IHE that participates in the TEACH Grant program, and in a TEACH Grant-eligible program of study within the IHE. A post-baccalaureate program is a program of instruction for individuals who have completed a bachelor's degree that (1) does not lead to a graduate degree and (2) consists of courses required by a state in order for a student to receive a professional certification or licensing credential that is required for employment as a teacher in an elementary or secondary school in that state. A student must meet certain academic achievement requirements, generally, scoring above the 75 th percentile on one or more portions of an undergraduate, post-baccalaureate, or graduate school admissions test or having a cumulative GPA of at least 3.25 on a 4.0 scale or the numeric equivalent. The TEACH Grant program is currently the only HEA Title IV program with an academic merit requirement. If a student is a current or prospective teacher applying for the TEACH Grant program to obtain a graduate degree, then the student must be a teacher or retiree from another occupation with expertise in a field in which there is a shortage of teachers or a teacher who is using a high-quality alternative certification route.\n\n\t\tAward Amounts\n\nA student enrolled full-time in a qualifying program may receive four annual TEACH Grant awards of up to $4,000 each for his or her first bachelor's degree and first post-baccalaureate program of study combined. The aggregate award amount, or the total cumulative award amount , that a student may receive for a bachelor's degree and a post-baccalaureate program of study combined is $16,000. \nA graduate student enrolled full-time in a qualifying program may also receive two annual TEACH Grant awards of up to $4,000 each for a Master's degree . The aggregate award amount that a student may receive for a graduate degree is $8,000.\nStudents enrolled in a qualifying program less - than - full - time are eligible to receive a prorated TEACH Grant award based on their attendance intensity (i.e. , half-time, three-quarter-time, or less-than-half-time) . For example, a student enrolled in a Master's degree program on a half -time basis may receive an annual award of up to $2,000. \nA TEACH Grant in combination with other student financial assistance canno t exceed the cost of attendance; thus, in some instances, an annual TEACH Grant award may be reduced. \n\n\t\tService-Related Requirements\n\nWhen receiving a TEACH Grant, recipients must participate in TEACH Grant counseling that explains the terms and conditions of the TEACH Grant service obligation. They must receive entrance counseling with each TEACH Grant disbursement and exit counseling once they cease or complete their program of study. They must also sign a TEACH Grant Agreement to Serve, which specifies the terms and conditions for receiving a TEACH Grant, including the consequences for not fulfilling the service obligation.\nUpon completion or cessation of their respective program of study, recipients must serve as full-time teachers for at least four academic years within an eight-year period. They must also meet the requirements of a \"highly qualified teacher\" (HQT) as defined in the Elementary and Secondary Education Act (ESEA).\nRecipients must teach at a public or nonprofit private elementary or secondary school that serves low-income students, which is defined as a school: (1) that is in a school district of an LEA that is eligible for assistance under Title I-A of the ESEA and (2) in which more than 30% of the children enrolled in the school meet a measure of poverty identified in statute. A recipient may also teach in an educational service agency (ESA) in which more than 30% of the children meet a measure of poverty identified in statute. Additionally, ED includes in the definition of a school that serves low-income students, schools operated by the Bureau of Indian Education (BIE) or operated on Indian reservations by Indian tribal groups under contract or grant with BIE. ED identifies all qualifying schools in the annual Teacher Cancellation Low-Income Directory (TCLD). \nOnce a recipient locates a vacancy in a high-need field in a qualifying school, he or she must apply for the job and be offered (and accept) a qualifying position at the school. If the school in which a recipient teaches in a qualifying position is designated as a school serving low-income students in his or her first year, and subsequently is no longer designated as such, a grant recipient may still fulfill his or her service obligation by continuing to teach in that school.\nAs mentioned above, a recipient must also teach in high-need fields, which are defined as bilingual education and English language acquisition, foreign language, mathematics, reading specialist, science, and special education. High-need fields also include any other field that has been identified as high-need by the federal government, a state government, or an LEA, and approved by ED. ED documents fields that are identified as high-need by the federal government, a state government, or an LEA in the annual Teacher Shortage Area Nationwide Listing (\"Nationwide List\"), following ED approval. \nQualifying fields on the Nationwide List must be designated as high-need at the time a TEACH Grant was received or when the individual begins teaching. Depending on their program of study, recipients may be required to declare a major and take coursework in a high-need field in order to be eligible for teacher certification in their state. If recipients choose a field that is on the Nationwide List when they first received the grant but is no longer designated as high-need by the time they start teaching, they may still perform qualifying service by teaching in that field. Further, if recipients are teaching in a field on the Nationwide List that in subsequent years is no longer designated as high-need, they may still teach in that field to fulfill their service obligation. \nFollowing completion of or ceasing enrollment in their program of study, recipients must provide two types of certification to the ED-contracted TEACH Grant loan servicer. The first is an initial certification within 120 days of completing or ceasing enrollment in their program. The recipient must verify either (1) employment as a full-time teacher in a qualifying position or (2) intention to be employed in a qualifying position. The loan servicer notifies recipients of when this initial certification is due. The second is annual certification to the loan servicer following each year of teaching service completion. The loan servicer notifies recipients of their annual certification requirement, including how to submit documentation of progress towards completing their service obligation and when that documentation is due. Specifically, by the annual certification date, recipients must provide documentation demonstrating that either (1) they have completed a full year of qualifying teaching service, verified by the chief administrative officer of their school or ESA, or (2) they intend to satisfy the terms and conditions of their TEACH Grant service obligation. Previously, the annual certification date was based on the date the recipient had completed or ceased enrollment in the TEACH Grant-eligible program of study; therefore, annual certification dates varied among recipients. However, on November 1, 2018, ED adopted a standardized annual certification date of October 31 for all recipients. \n\n\t\tGrant-to-Loan Conversion\n\nIn general, TEACH Grants convert to an Unsubsidized Direct Loan, with interest accrued as of the date of disbursement of each grant, under the following conditions: \nGrant recipients voluntarily request that their TEACH Grants be converted to a loan because they decide not to teach or not to teach in a qualifying school or field. Grant recipients do not submit appropriate documentation by the initial or annual certification date or respond to reminder notices from the ED-contracted loan servicer. Grant recipients fail to complete the required four years of service within the eight-year period. This applies regardless of whether the recipient completed any portion of the service obligation. If grant recipients cease enrollment in their eligible program of study prior to completing it, their grant converts to a loan within one year unless they are eligible for a suspension (see below), they re-enroll in an eligible program, or they have begun qualifying teaching. \nThe eight-year period in which a recipient must complete his or her four-year teaching service obligation begins once the recipient's enrollment in the eligible program of study ends. However, a recipient may be eligible to request a suspension of the eight-year period under various circumstances, including the following: \nenrollment in another TEACH Grant-eligible program (such as a Master's degree program if the recipient received TEACH Grants for a bachelor's degree program), enrollment in a program of study that is required by a state to receive certification or licensure to teach within the state, a condition qualifying for leave under the Family and Medical Leave Act, or a call or order to active duty status for more than 30 days as a member of the Armed Forces reserves or service as a member of the National Guard.\nSuspensions are granted in one-year increments, not to exceed a combined total of three years for the first three reasons or a total of three years for the last reason.\nTEACH Grant service obligations can be canceled if the recipient dies or becomes totally and permanently disabled. Additionally, a recipient may be discharged for all or some of their service obligation if they are called or ordered to active military duty for more than three years. \nAn individual could receive TEACH Grants for more than one program of study. For example, a student could be awarded TEACH Grants for a bachelor's degree and then later awarded TEACH Grants for a Master's degree. In such cases, recipients must complete four years of teaching service for each program of study for which they received TEACH Grants. However, creditable teaching service, approved suspensions, and a service discharge resulting from a call to active military duty may apply to more than one service obligation. \n\n\t\tInstitutional Eligibility\n\nTo be eligible to disburse TEACH Grants, an IHE must meet general Title IV institutional eligibility requirements specified in statute and regulation. Additionally, IHEs must meet program-specific eligibility requirements. The HEA requires that an IHE (by determination of the Secretary of Education)\nprovide high-quality teacher preparation and professional development services, including extensive clinical experience as a part of pre-service preparation; be financially responsible; provide pedagogical coursework, or assistance in the provision of such coursework, and formal instruction related to the theory and practices of teaching; and provide supervision and support services to teachers, or assistance in the provision of such services.\nED further clarifies in regulation that to be a TEACH Grant-eligible institution , an IHE must\nmeet financial responsibility standards or qualify under an alternative standard established in regulation; provide a high-quality teacher preparation program at the bachelor's or Master's degree level that is either accredited by an ED-recognized accrediting agency of teacher education programs; or is approved by a state, includes a minimum of 10 weeks of full-time pre-service clinical experience, or its equivalent, and provides either pedagogical coursework or assistance in the provision of such coursework; and provides supervision and support services to teachers, or assists in the provision of services to teachers, such as identifying and making available information on effective teaching skills or strategies, identifying and making available information on effective practices in the supervision and coaching of novice teachers, and mentoring focused on developing effective teaching skills and strategies; provide a two-year program of study that is acceptable for full credit for either a bachelor's teacher preparation degree or a bachelor's degree program in a high-need field at another TEACH Grant-eligible IHE with which it has an agreement ; offer a bachelor's degree that, in combination with other training or experience, will prepare a student to teach in a high-need field, and have an agreement with another IHE that offers a teacher preparation program or a post-baccalaureate program that prepares students to teach; or offer a post-baccalaureate program of study that is designed to prepare an individual to teach in a high-need field. A post-baccalaureate program is not TEACH Grant-eligible if it is offered by an IHE that also offers a bachelor's degree in education. \nED defines a TEACH Grant-eligible program as an eligible program of study, as defined in regulation, that is designed to prepare an individual to teach as a HQT in a high-need field and leads to a bachelor's or Master's degree, or is a post-baccalaureate program of study. A two-year program of study that is acceptable for full credit toward a bachelor's degree is considered to be a program of study that leads to a bachelor's degree. \nA student who first received a TEACH Grant for enrolling in an eligible program of study is entitled to receive subsequent TEACH Grants to complete that program, even if it is no longer TEACH Grant-eligible. \n\n\t\tAdministration\n\nTEACH Grant program administration responsibilities are divided among IHEs, the ED-contracted loan servicer, and ED. IHEs are generally responsible for determining program eligibility and awarding and disbursing grants to recipients. The ED-contracted loan servicer manages the day-to-day program administration tasks such as tracking whether recipients are fulfilling their required service obligation, sending recipients reminders of when annual certification is due, and managing loan repayment if a recipient's grant were to convert to a loan. ED assumes the broader role of setting program policy, providing guidance to the loan servicer and IHEs on how to administer the program, providing oversight of program recipients and the loan servicer, and monitoring for program compliance.\n\n\t\t\tInstitutions of Higher Education (IHE)\n\nThe IHE is responsible for determining whether to participate in the TEACH Grant program. It also selects the specific programs of study within the IHE to designate as TEACH Grant-eligible and, thus, decides whether to make TEACH Grants available to students enrolled in those programs. TEACH Grant administration is primarily overseen by the IHE's student financial aid office, sometimes in partnership with teacher preparation program departments. The financial aid office's responsibilities generally consist of evaluating initial and ongoing student eligibility, providing required TEACH Grant counseling to students who elect to participate in the program, disseminating information and materials about TEACH Grants to students and teacher preparation program staff, and packaging and disbursing TEACH Grants to recipients. Teacher preparation program staff's responsibilities could include supporting the financial aid office in evaluating student eligibility, creating awareness about TEACH Grants amongst students, and aiding students in identifying and securing qualifying job placements upon program completion. Additionally, IHEs have some latitude in determining how TEACH Grants are administered. For example, IHEs can choose to make TEACH Grants available only to upperclassmen at the undergraduate level, only to students who have been admitted into a teacher preparation program, or only to students who have declared a major or minor in a high-need field. \n\n\t\t\tLoan Servicer\n\nED contracts with a private entity to support TEACH Grant administration at the federal level. Unlike other HEA Title IV grant programs, which are primari ly administered by ED following disbursement, many aspects of the TEACH Grant program are administered by the ED-contracted loan servicer post-disbursement. This is due to the program's service payback structure, which is unique among HEA Title IV aid programs. \nFollowing disbursement, the ED-contracted loan servicer is tasked with tracking whether recipients are fulfilling their required service obligation, rather than undertaking administrative tasks typically associated with federal student loans such as collecting and applying loan payments to borrower accounts. The loan servicer does this by accepting and processing recipients' annual certification paperwork. Its responsibilities also include reminding grant recipients of when their employment certification paperwork is due and sending quarterly notices informing recipients of the amount they would owe including interest if their grants were to convert to a loan. If a recipient's grants are converted to a loan, the loan servicer also carries out the more traditional loan servicer responsibilities of tracking loan repayment, providing billing and repayment services, and informing borrowers about their repayment options. The loan servicer also initially responds to customer service inquiries.\n\n\t\t\tDepartment of Education (ED)\n\nWhile the ED-contracted loan servicer manages the day-to-day administration of TEACH Grants, ED plays a broader role of setting program policy, providing guidance to the loan servicer and IHEs on how to administer the program, providing oversight of program recipients and the loan servicer, and monitoring for program compliance. This includes monitoring the loan servicer to ensure that it delivers on its responsibilities such as regularly communicating with recipients, adequately tracking recipients' progress toward satisfying grant requirements, and accurately converting TEACH Grants to loans if recipients do not meet grant requirements. It also broadly monitors compliance by participants, including IHEs and students, through monthly reports from the loan servicer and program reviews of IHEs that participate in Title IV programs, among other methods. Additionally, ED seeks to address recipient complaints and settles disputes that include incorrect grant-to-loan conversions. ED is also responsible for broad outreach on how to apply for and receive student aid such as TEACH Grants and developing student borrower guidance, which it maintains centrally on a federal student aid website ( https:\/\/studentaid.ed.gov ). \n\n\tBudgeting Approach\n\nGiven that a TEACH Grant may be converted to a Direct Loan in certain circumstances, the TEACH Grant program is treated as a federal credit program . Thus, as with all other federal credit programs, the costs to the government, or subsidies , for the TEACH Grant program are estimated in accordance with the requirements of the Federal Credit Reform Act of 1990 (FCRA; Title V of P.L. 101-508 ). These subsidies are reestimated on an annual basis. \nAccording to FCRA, the budgetary cost of direct loans and loan guarantees must be measured on the basis of their estimated long-term cost to the government on a present-value basis. For each cohort year of TEACH Grants, the loan subsidy cost is the estimated long-term cost of those TEACH Grants to the government, given underlying assumptions about grant-to-direct loan conversion, loan repayment, and interest rates, and excludes administrative costs. It represents the estimated present value of the cash flows from the government (e.g., grant disbursement), less the estimated present value of the cash flows to the government (e.g., payments made by recipients whose grants convert to loans), discounted to the time when the grants are disbursed. Loan terms and conditions such as interest subsidies, deferments, loan forgiveness, defaults, and discharges are accounted for in these estimates. \nA positive loan subsidy cost for a cohort of TEACH Grants means that those grants are estimated to result collectively in a cost to the government, whereas a negative loan subsidy cost means that the cohort of grants will collectively achieve budgetary savings for the government (through repayment, with interest, of TEACH Grants that have been converted to loans). Subsidy costs are large and positive for TEACH Grants that have been made since the inception of the program. Subsidy costs are funded through permanent, indefinite budget authority. Administrative costs are funded separately through annual discretionary appropriations. \nSince FY2013, nonexempt mandatory spending programs have been subject each year to sequestration, a process of automatic \"across-the-board\" reductions in federal spending to reduce the federal budget deficit. This process was triggered by provisions in the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The TEACH Grant program account is not exempt from sequestration. In May 2013, ED implemented the first BCA-required sequester by reducing each recipient's TEACH Grant award by a specified percentage, starting with awards disbursed after March 1, 2013. A sequester has since been applied annually to the TEACH Grant program, resulting in a reduction in the annual award amount in each subsequent fiscal year. Under current law, the annual sequestration of nonexempt mandatory spending programs is scheduled to continue through FY2029. \n\n\tParticipation\n\nSince the inception of the TEACH Grant program, ED has disbursed over 300,000 grants totaling nearly $938 million. Table 2 presents, by award year since program inception, the number of TEACH Grant awards disbursed, the number of IHEs that disbursed awards, the total amount disbursed, and the average award disbursed. The program saw a significant uptick in awards disbursed in AY2010-2011 and AY2011-2012.\nIn recent years, analyses of the program have shed some light on benefit take-up rates and on the extent to which grants are being converted to loans. The Government Accountability Office (GAO), for instance, estimated that in the 2013-2014 academic year, 19% of individuals potentially eligible for TEACH Grants received grants under the program. \nWith regard to loan conversions, an American Institutes for Research (AIR) study found that among TEACH Grant recipients who began their eight-year service period prior to July 2014, 63% had their grants converted to a Direct Unsubsidized Loan as of July 2016. Separately, in its FY2020 Congressional Budget Justification, ED estimates, based on administrative program data, that 66% of students who receive a TEACH Grant will fail to complete their service obligation and will see their grants converted to loans.\n\n\tSelected Issues\n\nMany issues that span aspects of the TEACH Grant program have arisen and garnered congressional interest. In general, these issues fall into two categories: (1) facets of program design and (2) program implementation. In recent years, legislative proposals have been introduced that would address some of the issues.\n\n\t\tProgram Design\n\nIssues that have arisen related to facets of program design focus on whether the way in which the TEACH Grant program is structured contributes to its intended goal of recruiting and retaining high-quality teachers in low-income classrooms. They include whether the program identifies individuals with a commitment to teaching, the size of the benefit, challenges with finding and sustaining a qualifying teaching position, program quality at institutions that are eligible to disburse TEACH Grants, and the continued application of the \"highly qualified teacher\" definition.\n\n\t\t\tCommitment to Teaching\n\nOne issue of interest pertains to whether the TEACH Grant program is effective at identifying individuals committed to teaching and teaching in high-need classrooms. Some data suggest that this may be a programmatic challenge. GAO reported that from August 2013 through September 2014, 14% of TEACH Grant recipients had voluntarily requested that their grants be converted to loans, and of those, 38% reported that the reason for the voluntary conversion was because they no longer intended to teach. \nOne explanation may be that TEACH Grants can be made available to students as early as freshman year in their undergraduate education. Earlier intervention may have the effect of recruiting more individuals to enter into teaching who might not have considered it otherwise. However, those individuals who may not have chosen teaching otherwise might also lack a strong commitment to the endeavor of teaching or teaching in a high-need school. Further, underclassmen are making the choice to accept a potentially high-stakes grant at a point when they may be less likely to have a full understanding of where their career interests lie. These factors may impact the likelihood of a TEACH Grant recipient's successful completion of his or her required service obligation and whether his or her grant converts to a loan. \nEvidence of the effects of restricting TEACH Grants to students who might be more committed to teaching is inconclusive. Data from a 2018 AIR study suggest that institutions that restrict TEACH Grant availability to juniors and seniors, points at which a student may be more fully committed to a career in teaching, are more likely to have lower grant-to-loan conversion rates. Anecdotal data from the AIR and GAO studies suggest that some institutions restrict TEACH Grants to upperclassmen and graduate students because underclassmen \"tend to change majors more frequently\" and encounter challenges with maintaining the 3.25 GPA required for TEACH Grant eligibility. At the same time, the AIR study also suggests that there is no difference in grant-to-loan conversion rates by undergraduate class and graduate school year, with the only exceptions occurring for juniors and first-year graduate students (who had lower conversion rates). Further, there is no difference in loan conversion rates between recipients who were accepted into a teacher preparation program prior to receiving their first TEACH Grant versus after receiving their first TEACH Grant. \nData from a study of the Robert Noyce Teacher Scholarship (\"Noyce Scholarship\"), which is only available to students during the last two years of their undergraduate program or during their graduate program, suggest that the scholarship self-selects candidates who are already committed to teaching given that it is available later in an individual's education trajectory. However, this same study also suggests that the Noyce Scholarship is less useful as a recruitment tool into teaching because it is less likely to influence a recipient's decision to enter into the profession; rather, studies suggest that the Noyce Scholarship is more likely to influence an individual's decision to teach in a high-need school. Even with TEACH Grants potentially available to individuals at any class level, the AIR study findings seem to corroborate this idea that teaching service payback programs may have a greater influence on a recipient's decision to teach in a high-need school versus his or her decision to enter into the teaching profession more generally. The AIR study findings show that 44% of recipients indicated that the grant was somewhat or very influential in their decision to teach, while 58% of recipients indicated that the grant was somewhat or very influential in their decision to teach in a high-need school.\nTo address some of these concerns, one legislative proposal would amend TEACH Grants to limit eligibility to upperclassmen and graduate students. Limiting eligibility to upperclassmen may help to ensure that grants are not being awarded to individuals who may not demonstrate a strong commitment to teaching and, thus, are more likely to remain in a high-need classroom and complete their service obligation. At the same time, restricting TEACH Grants may limit the program's ability to recruit individuals who may not have otherwise considered teaching as a career.\nAdditionally, there is some evidence from the AIR study that suggest that IHEs market TEACH Grants to students as a means to fund their education, more so than as a means to enter into teaching. Anecdotal evidence from IHEs also suggests that some students accept a TEACH Grant to access additional education funding, with no intention of fulfilling the required teaching service. Additionally, the AIR study found that in academic year 2013-2014, 42% of grant recipients would have been borrowing over their federal annual loan limit if their grants were considered loans from the outset. While these data do not shed light on the share of recipients who took a TEACH Grant only to fund their education and with no intention of teaching, they illustrate the prospect that this source of aid may be playing a role not encompassed in original program aims. \n\n\t\t\tSize of the Benefit\n\nUnder the TEACH Grant program, a qualifying student is eligible for up to $4,000 per year to cover the cost of attendance at an eligible IHE for an eligible program of study. At the undergraduate and post-baccalaureate levels, the maximum cumulative amount a student could receive is $16,000, and at the graduate level, the maximum cumulative amount a student could receive is $8,000. At the time the program was authorized, it was thought that the award amount would help to offset the opportunity cost of entering into teaching, given the below-average compensation teachers receive.\nThe estimated low take-up rate of TEACH Grants may be an indicator of several things. It may suggest that some students consider the program but cannot meet the academic requirement, or decide not to take the risk of accepting a grant that could convert to a loan if they are unable to meet program requirements. The low take-up rate could also indicate that the financial benefit may not be large enough to incentivize students to accept a TEACH Grant when they would have otherwise not considered teaching. Some research suggests that teacher scholarship programs can be effective at both recruiting and retaining teachers in high-need schools when the financial incentive \"meaningfully offsets the cost of a teacher's professional preparation.\" One such study cited TEACH Grants as an example of a teacher scholarship program that did not provide a large enough financial benefit. In contrast, the Noyce Scholarship provides $10,000 per year to undergraduate students in their junior or senior year or the same amount per year for graduate studies. In 2013, an independent evaluator found that among Noyce Scholarship recipients who had had at least two years to find a teaching position after obtaining certification, 90% were teaching in high-need school districts. \nOne legislative proposal would triple the annual TEACH Grant award, increasing it from $4,000 to $12,000; however, the proposal would also double the length of service requirement from four years to eight years and require it to be completed within 10 years of program completion. Any increase in the TEACH Grant award amount may have the effect of attracting more individuals to participate in the program. However, if a recipient fails to complete his or her service obligation, it could mean that recipients are left with a larger amount to pay back in loans. The impact on the cost to the government is unclear given that the change may increase the number of individuals who participate in the program and, thus, the cost, but if the rate at which grants convert to loans does not change, then it can be expected that a significant number of individuals' grants would continue to convert to loans, and they will be repaying the government in larger amounts. \n\n\t\t\tFinding and Sustaining a Qualifying Teaching Position\n\nFor a TEACH Grant recipient to fulfill his or her service obligation, he or she is required to teach at a school or in an ESA that serves low-income students and in a high-need field. This is intended to focus federal dollars on helping to produce teachers in schools and fields that historically face teacher shortages.\nData from the 2017-2018 school year suggest that over 70% of all operational public schools may have met the TEACH Grant definition of a school that serves low-income students. However, despite the seeming prevalence of schools where recipients could fulfill their service obligation, they may still face challenges in locating and maintaining qualifying employment, especially since those schools still may not have vacancies in fields that qualify as high-need. For example, elementary school teachers may not be considered as teaching in a high-need field\u00e2\u0080\u0094where the majority of their time must be spent teaching math or science\u00e2\u0080\u0094because many of them may teach all subjects an equal amount of time. \nThe AIR study found that 39% of TEACH Grant recipients whose grants were converted to loans reported that they did not fulfill their service requirement because they were teaching in positions that did not qualify for TEACH Grant service. Of those recipients, 15% reported that they could not find a job in a high-need field and school, 15% decided they did not want to teach in a high-need field and school, 14% applied to one or more qualifying positions but were not offered the job, and 13% found a higher-paying teaching position at a non-qualifying school. Additionally, 43% of those recipients reported other reasons for not teaching in a qualifying position, such as their school losing its Title I designation, a previously qualifying position being eliminated, confusion about whether the position qualified, teaching students from low-income families in a non-qualifying school, or not being certified in a high-need field. Similarly, the GAO study found that finding and keeping an eligible teaching position can be a challenge for recipients in satisfying grant requirements. Some of the reported reasons include limited hiring by school districts and the length of time it can take to find a qualifying position. Another factor is that promotions to non-teaching administrative positions in eligible schools do not qualify as positions fulfilling TEACH Grant service requirements. \nSome legislative proposals would expand the fields that would qualify as high-need, adding areas such as early childhood education, technology, engineering, career and technical education, and writing specialist. This change could help to attract individuals to teach in fields that may be considered as high-priority and, thus, provide more options for securing a position in a qualifying school. However, some of these additional fields may not face true shortages in low-income schools. Further, while low-income communities may face a shortage of early childhood educators, it could be challenging for states to identify all qualifying early childhood programs. The HEA defines an early childhood education program as a Head Start or Early Head Start program; a state licensed or regulated child care program; or a program that addresses the cognitive, social, emotional, and physical development of children from birth through age six, and is a state prekindergarten program, a preschool or infant\/toddler program authorized under the Individuals with Disabilities Education Act (IDEA), or a program operated by an LEA. \nNot all recipients receive support from their institutions to find and secure qualifying teaching placements. The AIR study found that 70% of IHEs in its sample provided students with some placement service for identifying qualifying TEACH Grant service positions: 58% provided guidance on how to identify TEACH Grant-qualifying positions, 48% provided an updated list of available positions, and 46% established relationships with schools that have eligible positions. However, none of these practices were correlated with lower grant-to-loan conversion rates. In addition, while the TCLI and Nationwide List help recipients identify TEACH Grant-qualifying schools and fields, respectively, there is no central job search tool that identifies existing TEACH Grant-qualifying vacancies or job announcements.\nIt is possible that expanding the types of schools that would qualify as eligible teaching placements could lead to longer retention rates in the classroom, and thus improve grant-to-loan conversion rates. Under the Paul Douglas Teacher Scholarships Program, which preceded TEACH Grants, there was no statutory requirement that the schools in which recipients taught be high-need; although, recipients could reduce the length of their required teaching service if they taught in a geographic area with teacher shortages. The ED Biennial Evaluation Report of the Paul Douglas Teacher Scholarship program from FY1995 and FY1996 showed that through FY1992, 63% of scholarship recipients had completed their teacher certification course of study. Of those, 67% had taught in the past or were teaching as of the 1992-1993 school year. Additionally, 6% of scholarship recipients were repaying or had repaid some part or all of their scholarship as loans. The North Carolina Teaching Fellows Program, which is similar in structure to TEACH Grants, requires that its fellows only teach in North Carolina public schools. One study found that the program is more likely to produce teachers who stay in public classrooms for five years or more. However, that same study also found that fellows tended more than other novice teachers to teach students who are more advantaged. As such, expanding the types of schools in which recipients could complete their service obligation could run counter to the original intent of the program to support low-income schools with recruitment of high-quality teachers.\n\n\t\t\tProgram Quality at Institutions Eligible to Disburse TEACH Grants\n\nTo be eligible to disburse TEACH Grants, an IHE must provide a high-quality teacher preparation program. Such teacher preparation program must be accredited by an ED-recognized accrediting agency of teacher education programs; or is approved by a state, provides a minimum of 10 weeks of full-time pre-service clinical experience, or its equivalent, and provides or assists in the provision of pedagogical coursework. The program must also provide or assist in the provision of supervision and support services to teachers. \nThe HEA and accompanying regulations do not define what it means for a teacher preparation program to be \"high-quality.\" Title II of the HEA requires states and IHEs to publish report cards on the quality of teacher preparation. States must also report to ED on the quality of teacher preparation programs. Title II of the HEA further requires states to develop criteria to assess program quality, identify programs that are low-performing or at risk of being low-performing based on those criteria, and report this information to ED. \nIn 2014, 12 states identified a total of 45 programs as low-performing or at risk of being low-performing\u00e2\u0080\u0094nearly evenly split between the two designations. Of those 45 programs, 28 were based in IHEs that disburse TEACH Grants. Twenty-two states have never identified a program as low-performing or at risk of being low-performing. \nIn 2016, ED published regulations that would have linked the definition of \"high-quality teacher preparation program\" in \u00c2\u00a7420L(1)(A) of the HEA to teacher preparation program ratings under the HEA Title II state reporting requirements; although, these regulations were subsequently overturned under P.L. 115-14 , pursuant to the Congressional Review Act. Not only did the regulations require that states identify programs that are \"effective,\" but among other things they required states to develop and report on specific indicators for assessing teacher preparation program performance, including the learning outcomes of students taught by program graduates. Further, under these regulations, IHEs operating a program that a state identified as low-performing or at risk of being low-performing for two out of three years would have lost their eligibility to participate in the TEACH Grant program. One argument made for limiting TEACH Grant eligibility to those programs that states identified as \"effective\" was that TEACH Grant recipients might be more likely to fulfill their service obligation if prepared by strong teacher preparation programs. In contrast, some arguments against limiting TEACH Grant eligibility included concerns about the decrease in the number of IHEs that would be eligible to provide TEACH Grants, which may result in fewer students pursuing teaching in high-need fields and low-income schools. It was also stated that such a change could disproportionately impact the entry of low-income students into the teaching profession. \nTo address some of these issues, one legislative proposal would require that a qualifying teacher preparation program be one that is not identified by the state as low-performing or at risk of being low-performing. Given that under current law, states identify few teacher preparation programs as low-performing or at risk of being low-performing, this change could create a minimum standard that is tied to existing statute without implicating a significant number of programs. However, as with ED's 2016 regulations, it may be possible that such a change could limit the number of IHEs that qualify for the TEACH Grant program and, thus, disproportionately impact the entry of low-income students into the profession. \n\n\t\t\tContinued Application of the Highly Qualified Teacher (HQT) Definition\n\nTo meet program service requirements, among other criteria, a TEACH Grant recipient must comply with the requirements for being a HQT, as defined under the ESEA. Prior to December 2015, the ESEA specified minimum standards for teacher quality by defining a HQT, requiring that all teachers of core subjects within any state receiving funds under Title I-A of ESEA meet these standards. \nIn December 2015, the Every Student Succeeds Act (ESSA; P.L. 114-95 ) reauthorized the ESEA and repealed the HQT definition. Now, the ESEA, as amended by the ESSA, does not contain requirements pertaining to minimum standards for teacher quality like those formerly applicable to states receiving ESEA grant funds under NCLB-enacted HQT provisions. However, the ESSA amendments still made the pre-December 2015 HQT requirements applicable to the TEACH Grant program. Depending on whether states implement new minimum standards that veer from the previous HQT standards, TEACH Grant recipients may be required to meet both sets of requirements: meeting state requirements to teach within the state and federal requirements to fulfill TEACH Grant service requirements. It is unclear how the definition of HQT would apply to recipients who fulfill their service obligation in qualifying private schools.\nA recently concluded negotiated rulemaking resulted in draft consensus language that included a definition of HQT. While the new definition is nearly identical to the HQT definition in the NCLB, it also contains new requirements for private school teachers such as passing competency tests that are recognized by five or more states.\n\n\t\tImplementation Issues\n\nImplementation issues relate to whether the way in which the TEACH Grant program is administered by ED may have impacted the program's success. They include challenges associated with certification of teaching service and the absence of a formal appeals process.\n\n\t\t\tChallenges with Certification of Teaching Service\n\nWithin 120 days of completing or ceasing enrollment in the relevant program of study, TEACH Grant recipients must provide an initial certification of their employment as a teacher in a qualifying teaching position or of their intention to obtain employment in a qualifying teaching position. Thereafter, a recipient must provide an annual certification of having completed or intending to complete (if the time in which it is possible to complete the required teaching service has not lapsed) qualifying teaching service. If certifying completed teaching service, the recipient must provide documentation that demonstrates that he or she (1) is teaching in a low-income school, (2) has taught a majority of classes during the year in a high-need field, and (3) meets HQT requirements. \nThere are a number of issues that have stemmed from the requirement for annual certification, the administrative process by which recipients maintain their grant status. In its review of complaint data from ED's Federal Student Aid Ombudsman, GAO found that 64% of TEACH Grant recipients cited problems with submitting annual certification paperwork. The AIR study also found that 41% of TEACH Grant recipients whose grants have been converted to loans did not fulfill their service requirements due to factors related to annual certification. In particular, 19% did not certify because they did not know about the annual certification process and 13% did not certify because of challenges related to this process. \nThe GAO study documented anecdotal evidence suggesting that students may not fully comprehend the paperwork requirements, despite the requirement that recipients undergo TEACH Grant counseling when each grant is disbursed and once recipients complete their program of study. Further, GAO found evidence suggesting that the ED-contracted loan servicer converted 2,252 grants in good standing to loans in error between August 2013 and September 2014. Of those erroneous conversions, 19% were converted because a recipient did not understand the terms of the grant and certification requirements, including paperwork needed to document teaching service, or the servicer provided \"inaccurate, unclear, confusing, or misleading\" information about program or certification requirements to the recipient.\nThis lack of understanding and information about certification requirements may have significant consequences\u00e2\u0080\u0094the AIR study found that recipients whose grants had been converted to loans were half as likely as recipients whose grants were still in good standing to report that they were well-informed about the annual certification requirements.\nRecent news coverage has given attention to the TEACH Grant recipients whose grants were converted to loans due to a failure to certify on time, despite the fact that they had been performing qualified teaching. The failure to certify may occur for a number of reasons, from submitting the certification late to forgetting to submit the certification altogether. Certification documentation must be mailed or faxed, forms of communication for which it is difficult to verify whether the paperwork was received and on time. Additionally, the annual certification date often occurred over the summer when recipients or certifying school personnel are away on vacation. \nIf recipients fail to certify on time, then all of their grants are converted into an Unsubsidized Direct Loan (which includes interest accrued since disbursement of each grant) regardless of whether they are performing qualified teaching service. However, until recently there had not been a formal process for a recipient to appeal such a decision (see \" Lack of a Formal Appeals Process \" below). \nTo help address issues with certification, ED recently established a standardized annual certification date of October 31 of each year. Additionally, through negotiated rulemaking that concluded earlier this year, draft consensus language would require ED to provide additional notifications to recipients about when required certification documentation is due. \nSome legislative proposals would simplify the certification process by requiring that recipients only certify that they have completed qualified teaching for (1) at least one year by no later than five years after completion of their program of study; (2) at least two years by no later than six years after completion; (3) at least three years by no later than seven years after completion; and (4) at least four years by no later than eight years after completion. Otherwise, recipients would be considered in compliance with program rules unless they proactively request that their grants be converted to loans. Other bills require that ED work with states to simplify the certification process. One bill would establish the annual certification date as October 31 in law.\n\n\t\t\tLack of a Formal Appeals Process\n\nThe consequences of an erroneous or premature grant-to-loan conversion can be disruptive for recipients, including new and unexpected debt and a negative effect on their credit history. Some documentation also suggests that some recipients whose grants were converted into loans were unable to stay in their qualifying teaching positions, and instead had to change to a more lucrative position or other employment in order to make their new loan payments. \nErroneous or premature grant-to-loan conversions have largely occurred in two types of circumstances. The first is when grants in good standing are converted to loans due to an administrative error. As mentioned above, GAO reported that from August 2013 through September 2014, ED discovered that 2,252 recipients had their grants converted to loans in error. Fifty-six percent of the errors occurred because the servicer did not give recipients the full 30 days from final notification to submit their certification. Another 15% of the erroneous conversions occurred because recipients were not given the full year from graduation to submit their certification. ED and the ED-contracted loan servicer have implemented changes to combat these erroneous grant-to-loan conversions resulting from administrative error. The loan servicer now conducts system checks and manually reviews all accounts flagged for conversion to determine if the recipient met certification requirements in accordance with regulation. ED also expanded the loan servicer's authority to reconvert loans to grants in certain circumstances without having to elevate disputes to ED.\nThe second circumstance is when grants are converted to loans for recipients who are performing qualified teaching but fail to submit their certification paperwork on time, as discussed above. The extent of this problem is not known. Starting in January 2019, ED established a reconsideration process for anyone whose grant had been converted to a loan and who met or was on track to meet the TEACH Grant service requirements within the eight-year window. In February, ED emailed TEACH Grant recipients who were eligible for a TEACH Grant reconsideration. If a qualifying recipient did not receive an email from ED, he or she could still request a reconsideration by calling or emailing the ED-contracted loan servicer. The loan servicer makes a determination of whether a reconsideration request is accepted and to reconvert loans back to grants; however, it is unclear whether any other actions are taken such as helping to repair any damage to the recipient's credit as a result of the grant-to-loan conversion. As of May 2019, of the nearly 6,000 recipients who applied for reconsideration, about 38% had been approved for a reconversion and less than 0.3% had been denied.\nOther changes were proposed in negotiated rulemaking that concluded earlier this year. The resulting draft consensus language would not only establish a reconsideration process in regulation but would also require three other actions by ED as a result of an erroneous grant-to-loan conversion: (1) crediting any qualifying teaching service performed while the grant was wrongly in loan status toward the recipient's service requirement; (2) granting a suspension of the eight-year service obligation period equal to the amount of time that the grant was wrongly in loan status; and (3) providing support to help recipients repair any damage to their credit that resulted from the grant-to-loan conversion.\nSeveral bills propose to codify a formal appeals process in circumstances in which TEACH Grants were wrongfully converted to loans, and allow grants to be reinstated if an error was made. Additionally, one such bill proposes that, for grants that are found to have been erroneously converted into loans, ED would be required to extend the recipient's eight-year service obligation period by the amount of time his or her grants were wrongly in loan status.\n\n\t\tLegislative Proposals to Reform TEACH Grants\n\nApart from the legislative changes mentioned in the preceding sections, there have been a number of additional proposals concerning the TEACH Grant program. Most bills propose to keep but amend the program, while others would replace or repeal it. \nSome legislative proposals that would retain but amend the TEACH Grant program seek to allow partial payback of the award on a prorated basis based on the length of service completed for recipients who do not complete their full service requirement. The Noyce Scholarship currently implements this practice, and the Paul Douglas Teacher Scholarship program used it as well. This might lessen the risk to recipients of accepting the grant and, therefore, encourage more students to participate in the program and enter into teaching. It may also reduce the financial burden on those who had fulfilled some part of their service in a high-need classroom and field. However, one concern may be that this concession could detract from the program's overall goal to retain teachers in low-income classrooms and high-need fields, as there may be an incentive not to complete all four years of required service.\nIn the 115 th Congress, one amendment proposed would have allowed teachers whose roles or duties change to continue to fulfill their required teaching service with such new roles or duties. This could include recipients who are promoted to leadership roles in which they might be spending more time supporting other teachers instead of in the classroom instructing. Under current regulations, a teacher must teach a majority of classes in a high-need field \u00e2\u0080\u0094new roles or duties may not meet service requirements and a recipient may not be able to accept a new position or may have to find another qualifying position that meets service requirements. As research suggests, allowing opportunities for advancement may lead to greater retention rates amongst TEACH Grant recipients, potentially beyond the required four years. However, permitting other positions beyond teaching to qualify could detract from the overarching goal of recruiting and retaining high-quality individuals in the teaching profession. \nAlternatively, there have also been proposals to replace TEACH Grants and other student financial assistance programs for teachers with a new program altogether. One such proposal would have provided to teachers in qualifying positions a larger maximum loan repayment amount than is available under currently authorized federal teacher loan forgiveness programs, and in graduated amounts beginning with their first year and increasing the longer they stay in a qualifying position. One argument for such a proposal is that the current combination of approaches to student financial assistance programs for teachers\u00e2\u0080\u0094either fully back-loading benefits (as with current teacher loan forgiveness) or fully front-loading benefits (as with TEACH Grants)\u00e2\u0080\u0094has not been sufficient in incentivizing high-quality candidates to join and remain in the teaching profession. However, one consideration is that such a new program would likely result in an increased cost to the federal government. \nSeveral bills have proposed to eliminate the TEACH Grant program without creating a new program in its place. As justification for elimination, proponents have stated that because ED projects that the majority of TEACH Grant recipients will not be able to fulfill their service requirements, the program ultimately becomes a \"risky gamble\" for students, as they are more likely than not to incur a significant amount of debt as a result.","output":null}
{"id":"crs_R46365","pid":"crs_R46365_0","input":"\tBackground\n\nThis report discusses issues related to providing employment services targeted at noncustodial parents (NCPs) within the context of the Child Support Enforcement (CSE) program. The CSE program is a federal-state partnership that currently operates in all 50 states; the District of Columbia (DC); the territories of Guam, Puerto Rico, and the U.S. Virgin Islands; and 60 tribal nations. The program seeks to promote parental responsibility and ensure children receive support from both parents, notably through financial income transferred from an NCP to a child's primary caretaker (usually a custodial parent). In FY2018, the CSE program provided services on behalf of 14.7 million children, about 20% of children in the United States. One analysis estimated that nearly two-thirds of families receiving CSE services in 2015 had income below 200% of the poverty threshold. The CSE program collected 66% of the current support that was due in FY2018, continuing the program's record of slow but steady improvement in recent years. However, $11.5 billion in current support that was due went uncollected, becoming arrears (i.e., past due support).\nA number of observers have concluded that some NCPs have a currently limited ability to pay that restricts how much support is collected, and that those NCPs would benefit from employment services being offered in the context of the CSE program. NCP employment and earnings, particularly through stable, formal employment, are positively linked to child support payment compliance. This association is likely because NCPs with higher earnings have a better ability to pay, but also because formal employment facilitates the use of income withholding, a particularly effective CSE tool. Also, many low-income NCPs face one or more significant barriers to having consistent employment and sufficient income to pay child support, including low wages and benefits, irregular and unsteady jobs, limited education or marketable skills, health conditions (e.g., substance use), lack of transportation or housing, discrimination, and history with the criminal justice system. Proponents of CSE employment programs argue that they respond to the concern that NCPs need help securing employment, but might be less likely than other populations to access employment services through the workforce development system or public benefit programs. In addition, they posit that the CSE program is a unique platform for providing employment services in that it already reaches NCPs in practice, has a strong interest in improving NCPs' earnings and child support payments, and can leverage CSE policies so that they act as employment incentives and not barriers for NCPs. \nAlthough CSE employment programs are fairly widespread, they are not found everywhere and appear to serve a relatively small proportion of NCPs who struggle to secure adequate employment and regularly pay their obligations in full. To explain why CSE employment programs operate on a limited scale, CSE officials and observers have primarily cited a lack of sufficient and sustainable funding. (The federal government normally reimburses each state for 66% of all allowable expenditures on CSE activities, but employment services are currently not an allowable activity and funding through other mechanisms within the program is limited. ) Many of those same observers have proposed that legislation be enacted to address this issue.\nThis report first reviews how CSE-led employment programs may be designed with regard to NCP eligibility and recruitment, as well as services provided. This is followed by an explanation of the current federal funding options for these programs. The next section reviews the available evidence on the effectiveness of employment programs that have been led by or conducted in cooperation with CSE. The report concludes by highlighting recent proposals to dedicate federal funding for CSE employment programs.\n\n\tProgram Eligibility and Recruitment\n\nCSE employment programs must establish criteria to determine eligibility for services. Unemployed, or underemployed, low-income NCPs who are struggling to meet their obligations are the population that most frequently qualifies for services. Programs may also serve additional types of NCPs, like those who are in the process of paternity or order establishment, to facilitate recruitment or expand their reach. Alternatively, CSE employment programs may narrowly target services to conserve resources and prioritize certain cases (e.g., those owing current support versus those owing arrears only). Eligibility criteria can also help limit duplication with other public programs or risks of supplanting their funding.\nAnother important decision CSE employment programs make is whether to rely on mandatory or voluntary recruitment policies, or both. Courts can issue mandatory orders for NCPs to participate in a work program. When NCPs fail to pay child support, states may issue contempt citations or file criminal nonsupport charges that bring parents before a court. (The required administrative and court processes can be expensive for the CSE program and state. ) At this point, the court may give NCPs the choice to seek work as an alternative to incarceration, or order them to do so. Depending on the jurisdiction and court, NCPs may be left to their own discretion for how to secure employment, or they may be firmly connected to or ordered into an employment program that can provide relevant services and assistance. As a result, among the population presented with the choice of participating in a mandatory work program versus incarceration, enrollment and engagement rates are usually fairly high. \nAlternatively, or additionally, CSE employment programs can focus on voluntary recruitment. This approach allows programs to serve more NCPs than just those who have been brought into court. Program referrals can be made by staff from CSE agencies, courts, community organizations, and probation or parole offices. Even when programs are voluntary, court referrals and the consequences of nonpayment (e.g., license suspensions, interest charged on debt, the risk of eventually being incarcerated) give NCPs strong incentives to participate. Still, several voluntary programs report that recruitment and retention is challenging in that many NCPs referred to or made aware of the programs decline to participate voluntarily or stay engaged. In response, programs have developed several strategies for boosting recruitment and retention, including expansive program eligibility rules, incentives (e.g., removal of CSE-initiated driver's license suspensions, forgiveness of state-owed arrears), intensive case management, co-locating services, and aggressive and multifaceted outreach. \n\n\tProgram Services\n\nCSE employment programs typically provide a wide range of services, which can require the involvement of many partner organizations. Intensive case management is generally considered critical for engaging NCPs, assessing their needs holistically, coordinating service receipt, and monitoring participant progress. CSE agencies may handle this general case management or make arrangements (e.g., contract) with other organizations to do so. Case managers and other program staff may refer NCPs to external resources for issues such as housing, mental health, substance use, legal aid, and financial education, although services may be limited in many communities. CSE employment programs may also provide NCPs with access to parenting and fatherhood services, including classes and referrals to resources for addressing parenting time (child access and visitation), co-parent mediation, and other legal concerns related to parenthood.\nProviding employment services is often contracted or delegated to partnering government workforce agencies or community organizations with relevant expertise. These entities typically provide NCPs with traditional services such as employment-focused case management, job search assistance, employment assessments, job readiness, basic or remedial education, short-term job skills training, job development and placement, and job retention. These services may be provided in both individual and group settings. Employment programs may also provide work supports including transportation assistance, small incentives to promote program engagement, and specialized services for those with criminal records such as records expungement or voluntary drug testing. Less commonly, NCPs may participate in subsidized employment, on-the-job training, vocational training and education, and other, more intensive employment services. \n\n\tFederal Funding\n\nUnder current law, federal funds that can be used by CSE programs to fund employment services are fairly limited. The funding streams that are available may be uncertain from year-to-year, of short duration, or limited in amount relative to the potential demand for these services. \nThe largest source of federal funding for state CSE administration is the previously mentioned 66% reimbursement rate for state and local expenditures on allowable CSE activities, with no ceiling on the total amount of federal reimbursement. Federal matching payments on net totaled more than $3.5 billion in FY2018, and accounted for approximately 90% of federal CSE funding for states in recent years. However, spending on work activities has not been allowed as a federally reimbursable cost. Alternatively, states can apply for a waiver under Section 1115 of the Social Security Act to receive federal matching payments for the purposes of a demonstration project designed to promote program objectives. With respect to waiver projects, states have to invest new funds (not redirect funding), they are time limited (typically two to five years) and must be evaluated, and total federal reimbursement must not exceed $2 million. \nThe second largest CSE funding stream is incentive payments, which are designed to reward states for strong program performance and were estimated to exceed $510 million in FY2018. Incentive payments must be reinvested back into the program on activities that are eligible for reimbursement. However, states can request authorization to use incentive payments for activities that are not eligible for federal reimbursement but may contribute to improving the effectiveness or efficiency of child support, such as employment programs. Incentive spending must supplement and not supplant other state CSE funding, states can determine how much of their incentive payment to allocate toward an approved activity, and the program does not have to be formally evaluated. \nThere are also non-CSE federal funding streams that can support NCP employment activities, although they may not be directly under the control of the program or available on a consistent basis. For example, Temporary Assistance for Needy Families (TANF) funding can support employment programs for NCPs. States can include NCPs as members of TANF-eligible family units and provide assistance and other services funded by TANF or separate state maintenance-of-effort (MOE) programs, even when no other family member is receiving assistance. States can also use TANF or state MOE funding to provide non-assistance services and benefits, such as employment services, to needy individuals such as NCPs when doing so is consistent with TANF goals. The TANF block grant provides states with considerable flexibility in the use of its funds, so NCP employment programs have to compete with many other potential expenditure options.\nSimilarly, funding for the Workforce Innovation and Opportunity Act's adult and dislocated worker programs and the Supplemental Nutrition Assistance Program's Employment & Training programs can be used to provide employment services to NCPs who meet these programs' respective eligibility criteria. In addition, the Wagner-Peyser Act Employment Service (ES) makes labor exchange services (e.g., counseling, job search and placement assistance) universally available to all individuals. States and localities have also used a variety of other public and private funding to support CSE employment pilots, including competitive grants from the Department of Health and Human Services' (HHS') Office of Child Support Enforcement (OCSE) and Office of Family Assistance (OFA). \n\n\tResearch Evidence on Program Effectiveness\n\nThe effectiveness of CSE-led or CSE-supported employment programs has been analyzed by a few rigorous evaluations. While many agencies and partner organizations providing employment services note that NCPs who participate in employment programs show improvement when measured on the basis of comparing pre- and post-participation outcomes such as earnings and child support payments, this kind of analysis cannot address what would have occurred if NCPs had not participated in those particular services. For example, NCPs might have secured employment without assistance, received employment services through another program, or benefited from changes in the economy over time. Rigorous research designs such as random assignment use valid comparison groups to isolate impacts , which are the changes in outcomes causally attributable to a program or policy. This report focuses on statistically significant employment, earnings, and child support payment findings from random assignment experiments and other research designs that can plausibly identify program impacts. In social policy, new or alternative interventions are often compared to a services-as-usual condition developed through many years of trial and error, sometimes including previous rounds of rigorous evaluation. Research in disciplines as varied as social policy, education, medicine, and business has found that the most common pattern of results when interventions undergo rigorous evaluation is \"weak\" or \"no effects.\" A similar pattern of results has been observed for employment and training programs serving low-income populations other than NCPs. Studies that do not find large positive impacts may still identify potentially promising changes for intervention implementation, design, or strategy. \nEmployment programs for NCPs have not shown consistent impacts on employment, earnings, and child support compliance when subjected to rigorous evaluation. Cross-site variation from two rigorous evaluations suggests that robust involvement from CSE in employment programs might be beneficial for generating impacts, relative to less CSE involvement. However, there is no rigorous evidence on the relative effectiveness of spending on employment programs versus alternative CSE program activities. The combination of these points also means there is no rigorous evidence that spending on employment services is less effective than alternative collection strategies, and many CSE practitioners believe from experience that these programs are a more effective tool for NCPs with a limited ability to pay. \nRigorous evidence with NCPs is available for two employment program models: traditional employment services and transitional jobs. Alternative employment services that are more common with other low-income populations (e.g., substantive occupational skills training) have typically not been rigorously evaluated with NCPs and therefore are not discussed in this report. Earnings supplements such as the Earned Income Tax Credit, which provide monetary payments to individuals who work in an effort to increase employment and promote other policy objectives, are not regularly included as a service by CSE employment programs and are also not covered here.\n\n\t\tTraditional Employment Services\n\nEvidence on the effectiveness of providing traditional employment services to NCPs is mixed. Commonly provided employment services include job search assistance, job readiness training, employment-related assessments, job development services, job retention services, rapid re-employment, employment planning, and work supports. The National Child Support Noncustodial Parent Employment Demonstration (CSPED) was a large-scale random assignment study that enrolled more than 10,000 NCPs across sites in eight states between October 2013 and September 2016. Participants were randomly assigned to either a group eligible for CSPED services, or a group receiving CSE agencies' regular services. CSPED increased the receipt of a combination of case management, employment, parenting, and enhanced child support services, although the level of additional service receipt has been characterized as a \"fairly light-touch\" for such a hard-to-employ population. More intensive services such as subsidized employment or on-the-job training were rarely accessed. Overall, CSPED did not consistently increase employment, earnings, or child support compliance relative to CSE agencies' usual services. While context, population served, program features, and service receipt varied somewhat in the participating states, there were few differences in impacts by state. \nSeveral earlier, single-state evaluations of CSE-employment programs providing similar employment or more comprehensive services reported more promising impacts, although these studies used research designs that make their results subject to greater uncertainty. An older, multi-state random assignment demonstration also found that an employment program (predominantly providing traditional employment services, peer support groups, and enhanced child support services) did not increase NCPs' employment or earnings, although it did increase the likelihood of formal child support payments, and there was some evidence suggesting impacts for earnings and employment among harder-to-employ subgroups. \nThe evaluated demonstrations varied somewhat in their target populations, although all served highly disadvantaged populations. They also varied in whether they evaluated programs using mandatory, voluntary, or mixed-recruitment strategies, and the research designs and pattern of results do not provide clear evidence as to whether any approach is more likely to produce stronger impacts. The programs provided typical or even fairly robust levels of service, relative to the field of CSE-led employment programs. Rigorous evaluations of programs providing analogous services to fatherhood and prisoner reentry populations with large proportions of NCPs have also infrequently reported impacts on employment, earnings, or child support outcomes.\n\n\t\tTransitional Jobs\n\nAnother strategy that has been tested with NCPs, and shown more promising medium and longer-term effects, is transitional jobs, which are short-term subsidized public, nonprofit, or private employment opportunities designed to increase participants' income while helping them to \"learn to work by working.\" The end goal is to increase NCPs' ability to secure and retain unsubsidized employment. A large-scale random assignment study found that a recent collection of programs generated substantial increases in employment, earnings, and the likelihood of child support payment while NCPs were in subsidized employment. These short-term employment impacts demonstrate that such programs can successfully target individuals who want to work but would otherwise struggle to secure consistent employment. The subsidized employment provides these individuals with meaningful work and income. For the period immediately after the transitional jobs ended, participants had modestly higher earnings and employment. However, for most programs the earnings and employment impacts faded away over time, although the increased likelihood of child support payment more often persisted. These findings are similar to those from transitional jobs programs serving other low-income populations (e.g., formerly incarcerated individuals, TANF recipients). Transitional jobs programs are more expensive and challenging to implement than traditional employment services, as programs need to secure work opportunities for participants and pay a portion of their wages for a period of time.\n\n\tRecent Policy Proposals\n\nTwo notable, recent executive branch proposals have recommended increasing federal funding for CSE employment programs, though neither has been adopted. The Obama Administration proposed allowing federal reimbursement of state CSE program expenditures to fund certain job services offered to eligible NCPs (Notice of Proposed Rulemaking, November 17, 2014). The Trump Administration, in its FY2021 budget submission, proposed allowing federal reimbursement of state CSE program expenditures for mandatory work activities, capped at 2% of the total federal reimbursement of that state's CSE expenditures. \nLegislation related to employment services for NCPs has also been introduced in the 116 th Congress. The Julia Carson Responsible Fatherhood and Healthy Families Act of 2019 ( H.R. 3507 ) proposes allowing federal reimbursement of state CSE program expenditures to fund certain job services (a more expansive set of services than in the Obama Administration proposal) offered to eligible NCPs. Other legislation would try to encourage states to focus more TANF funding on employment services, which might benefit some NCPs (typically, a parent of a child receiving TANF assistance). The Jobs and Opportunity with Benefits and Services for Success Act ( H.R. 1753 \/ S. 802 ) would require that state TANF plans detail how low-income NCPs will be able to access employment services through TANF. The Accelerating Individuals into the Workforce Act ( H.R. 4571 ) would redirect funding from the TANF contingency fund to support subsidized employment opportunities for eligible individuals, including NCPs of minor children receiving TANF assistance. Policymakers have also proposed funding new programs, separate from CSE and TANF, for providing employment services. The ELEVATE Act of 2019 ( H.R. 556 \/ S. 136 ) would provide funding for public and private subsidized employment programs that could serve NCPs and other populations. The Pandemic TANF Assistance Act ( S. 3672 ) also would provide funding that could be used for, among other purposes, certain subsidized employment opportunities for low-income populations (which could include NCPs).","output":null}
{"id":"crs_R46326","pid":"crs_R46326_0","input":"\tIntroduction\n\nOn March 13, 2020, President Donald J. Trump declared an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; 42 U.S.C. \u00c2\u00a75191(b)) in response to coronavirus disease 2019 (COVID-19). The President's emergency declaration authorized assistance for COVID-19 response efforts for all U.S. states, territories, tribes, and the District of Columbia in accordance with Stafford Act Section 502. The emergency declaration authorized the Federal Emergency Management Agency's (FEMA's) Public Assistance (PA) program, which provides direct and financial assistance for emergency protective measures.\nThe President's March 13, 2020 emergency declaration letter to the Acting Secretary of the Department of Homeland Security, the Secretary of the Department of Treasury, the Secretary of the Department of Health and Human Services, and the Administrator of the Federal Emergency Management Agency, stated that the President \"believe[s] that the disaster is of such severity and magnitude nationwide that requests for a declaration of a major disaster ... may be appropriate.\" As of March 20, 2020, the President began approving major disaster declaration requests under the Stafford Act. As of April 22, 2020, the President had approved major disaster declaration requests for all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.\nThis report provides answers to frequently asked questions (FAQs) regarding:\nStafford Act declarations, including legal authorities, limitations on assistance, and other information related to the declaration request process; types of assistance available to state, territorial, and tribal governments, private nonprofit organizations, private entities, and individuals and households pursuant to the Stafford Act emergency and major disaster declarations for COVID-19; the Disaster Relief Fund (DRF), the source of funding for the Stafford Act emergency and major disaster declarations; and additional references.\nThe scope of this report is limited to assistance authorized under the Stafford Act. There are, however, other types of assistance extrinsic to the Stafford Act that are activated by a Stafford declaration. This report does not address these other forms of assistance.\n\n\tStafford Act Declarations\n\nThe Stafford Act authorizes the President to issue two types of declarations that could provide federal assistance to states and localities in response to a public health incident, such as an infectious disease outbreak: (1) an \"emergency declaration\" (authorized under Stafford Act Section 501), or (2) a \"major disaster declaration\" (authorized under Stafford Act Section 401). The following questions relate to the Stafford Act declarations for COVID-19. \n\n\t\tThe President declared an emergency for COVID-19. Do states, territories, and tribes still need to request a COVID-19 emergency declaration?\n\nThe President's emergency declaration authorized assistance for COVID-19 response efforts for all U.S. states, territories, tribes, and the District of Columbia; specifically, it authorized FEMA Public Assistance (PA) emergency protective measures. Thus, states, territories, and tribes do not need to request separate emergency declarations in addition to the President's emergency declaration. If, however, a state, territory, or tribe needs supplementary federal assistance, the governor or chief executive may request that the declaration be amended to include additional areas or types of assistance. FEMA can approve a request for additional areas or forms of assistance after a presidential emergency declaration. \nThe assistance provided pursuant to an emergency declaration is limited (see Table 1 , which lists the forms of assistance available pursuant to each type of declaration). If a state, territory, or tribe needs assistance that is only available pursuant to a major disaster declaration, they may submit a major disaster declaration request to the President (through FEMA). Although the President can declare an emergency unilaterally in certain circumstances, a major disaster declaration would need to be requested by state, territory, or tribal governments (see \" Why didn't the President declare a national major disaster for COVID-19? \").\n\n\t\tDoes the President have the authority to unilaterally declare an emergency under the Stafford Act?\n\nSection 501(b) of the Stafford Act allows the President to unilaterally declare an emergency for certain emergencies involving federal primary responsibility. The President's nationwide emergency declaration for COVID-19 was made under Stafford Act Section 501(b) on the grounds that \nthe entire country is now facing a significant public health emergency ... [and] [o]nly the Federal Government can provide the necessary coordination to address a pandemic of this national size and scope.... It is the preeminent responsibility of the Federal Government to take action to stem a nationwide pandemic that has its origins abroad, which implicates its authority to regulate matters related to interstate matters and foreign commerce and to conduct the foreign relations of the United States. \nThis is the first time a President has unilaterally declared a Stafford Act emergency for a public health incident\u00e2\u0080\u0094specifically, an infectious disease outbreak. Unilateral presidential declarations, however, have been made for incidents on a limited scale.\n\n\t\tIs there a cap on the amount of funding FEMA can spend under an emergency declaration?\n\nAlthough Stafford Act Section 503 sets a statutory \"cap\" of $5 million on spending for a single emergency, there is an exception. The $5 million limit may be exceeded when the President determines that:\n(A) continued emergency assistance is immediately required;\n(B) there is a continuing and immediate risk to lives, property, public health or safety; and\n(C) necessary assistance will not otherwise be provided on a timely basis.\nIf the $5 million \"cap\" is exceeded, the President must report to Congress on the \"nature and extent of emergency assistance requirements and shall propose additional legislation if necessary.\"\nAlthough the President's emergency declaration for COVID-19 covers the entire nation, each disaster-affected state and the District of Columbia, as well as some tribal governments, received a distinct emergency declaration (i.e., 57 separate emergency declarations). Therefore, it appears that each distinct emergency declaration may count as a \"single emergency\" for purposes of Stafford Act Section 503 and that the $5 million \"cap\" is not the nationwide limit on the amount of emergency assistance that FEMA can provide (see Appendix B for an example of a time when different states, territories, and tribes received presidential emergency declarations under the Stafford Act for the same incident). \nMajor disaster declarations do not have a statutory or regulatory spending cap. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19. For more information on the funding available for the emergencies and major disasters declared for COVID-19, see the \" Funding for Stafford Act Declarations \" section.\n\n\t\tIs the COVID-19 emergency assistance time limited?\n\nThe federal assistance provided must respond to the effects of the incident warranting an emergency or major disaster declaration \"which took place during the incident period or was in anticipation of that incident.\" The emergency and major disaster declarations for COVID-19 currently list the incident period as \"January 20, 2020 and continuing.\" In previous ongoing disasters, the \"continuing\" incident period has changed to a set date marking the end of the emergency or major disaster. In the case of COVID-19, the incident period may vary for each state, territorial, and tribal government as the threat of COVID-19 abates. According to federal regulations, FEMA determines the incident period in the FEMA-State Agreement. In May 2016, the agency released a fact sheet on responding to an infectious disease event, which states, \"[i]n the event of an emergency declaration, FEMA would determine the incident period in coordination with HHS.\" The governor of each declared state or territory, or the chief executive for each declared Indian tribal government, must execute a FEMA-State Agreement in order to receive assistance pursuant to their COVID-19 emergency declaration.\nIt is also possible to extend the incident period. Extensions of the incident period, and program extensions and end dates may be announced via news releases on FEMA's website.\n\n\t\tWhy didn't the President declare a national major disaster for COVID-19?\n\nStafford Act Section 401 states \"[a]ll requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State\" or \"[t]he Chief Executive of an affected Indian tribal government may submit a request for a declaration by the President that a major disaster exists.... \" Although the President is not authorized by the Stafford Act to unilaterally declare a major disaster on behalf of a state, territory, or tribe, the President stated in his emergency declaration letter to the Acting Secretary of the Department of Homeland Security, the Secretary of the Department of Treasury, the Secretary of the Department of Health and Human Services, and the Administrator of the Federal Emergency Management Agency that he \"believe[s] that the disaster is of such severity and magnitude nationwide that requests for a declaration of a major disaster ... may be appropriate.\" \nAs of March 20, 2020, the President began approving major disaster declaration requests under the Stafford Act. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19.\n\n\t\tHave states, territories, and tribes ever received a major disaster declaration for an outbreak of an infectious disease, such as COVID-19?\n\nThe President started approving major disaster declaration requests for COVID-19 as of March 20, 2020. These declarations are the first major disaster declarations issued under the Stafford Act for an infectious disease outbreak.\n\n\t\tDoes it take a long time to approve a request for a major disaster declaration?\n\nThe State of New York was the first state to receive a major disaster declaration for COVID-19. According to FEMA's \"Daily Operations Briefing for Wednesday, March 18, 2020,\" New York requested a major disaster declaration on March 17, 2020. The President authorized New York's request on March 20, 2020. Other state requests for a major disaster for COVID-19 have also been processed within days of their submission. FEMA lists the approved presidential major disaster declarations for COVID-19 on the agency's \"COVID-19 Disaster Declarations\" and \"Disasters\" webpages. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19.\n\n\tTypes of Stafford Act Assistance\n\nDifferent types of federal assistance are available pursuant to each type of declaration, with emergency declarations providing more limited forms of assistance than major disaster declarations. Federal assistance made available pursuant to Stafford Act declarations is intended to supplement local efforts to respond to and recover from emergencies and major disasters. Federal assistance may support state, territorial, tribal, and local governments, certain nonprofit organizations, and individuals and households. Table 1 lists the forms of assistance available pursuant to each type of declaration. The following questions relate to the federal response efforts for COVID-19, including assistance available to state, territorial, tribal, and local governments, private nonprofit organizations, private entities, and individuals and households.\n\n\t\tWhat is Emergency Declaration Assistance?\n\nEmergency declarations authorize some forms of Public Assistance (PA) and Individual Assistance (IA) but the assistance is generally more limited than assistance that is made available under a major disaster declaration. Table 1 lists the forms of assistance available pursuant to an emergency declaration.\nEmergency declarations often authorize certain forms of PA, which supplement the ability of a state, territory, or tribe to respond to an incident. Emergency declarations may authorize PA \"emergency work\" undertaken \"to save lives, protect property and public health and safety, and lessen or avert the threat of a catastrophe, including precautionary evacuations,\" per Section 502 of the Stafford Act. FEMA's two categories of PA \"emergency work\" are debris removal (Category A) and emergency protective measures (Category B). Stafford Act emergency declarations for public health incidents have previously authorized emergency protective measures undertaken to reduce an immediate threat to life, public health, or safety, including emergency shelter and medicine, hazard communication, and provision and distribution of necessities. \nIndividual Assistance, which helps individuals and households respond to post-disaster needs, can also be made available through an emergency declaration. One form of IA\u00e2\u0080\u0094the Individuals and Households Program (IHP) (authorized under Stafford Act Section 408) may be authorized pursuant to an emergency declaration. \n\n\t\t\tWhat assistance is available for states, territories, and tribes under the emergency declaration for COVID-19?\n\nThe emergency declarations issued for COVID-19 on March 13, 2020 authorized Public Assistance (PA) in accordance with Section 502 of the Stafford Act. Under this declaration, FEMA may reimburse states, tribes, and territories for costs incurred while performing emergency protective measures. \nSpecifically, the COVID-19 emergency declarations authorized PA Category B\u00e2\u0080\u0094Emergency Protective Measures. States, territories, or tribes will be the PA grant Recipients and administer PA awards. State, territorial, and tribal governments that have received emergency or major disaster declarations may apply to FEMA for funds as PA grant Recipients. Local governments and certain nonprofit entities may apply for funds through the PA grant Recipient. \nEligible applicants are to be reimbursed for 75% of eligible costs incurred while performing emergency protective measures. FEMA cannot provide financial assistance for activities that are covered by insurance, or any other source, including activities eligible for financial assistance from the Department of Health and Human Services (HHS). For example, PA applicants cannot receive reimbursement for COVID-19 public health surveillance work or other activities already funded by the HHS Public Health Emergency Preparedness Cooperation Agreement Program. \nEmergency protective measures encompass a wide range of activities. According to a FEMA news release on the COVID-19 emergency declaration , reimbursable activities may include \"activation of State Emergency Operations Centers, National Guard costs, law enforcement and other measures necessary to protect public health and safety.\" On March 19, 2020, FEMA released a non-exclusive list of eligible emergency protective measures that was later supplemented with a non-exclusive list of eligible emergency medical care.\n\n\t\t\tWhat assistance is available for private nonprofit organizations and businesses under the emergency declaration for COVID-19?\n\nUnder the Stafford Act, eligible private nonprofit organizations may receive reimbursement for costs incurred while performing eligible emergency protective measures through the PA program. For-profit entities are not eligible applicants for PA.\nPresident Trump's emergency declaration for COVID-19 authorized FEMA to reimburse state, territorial, tribal, and local government entities and certain nonprofit organizations (PNPs) for eligible costs incurred while performing emergency protective measures. Under the Stafford Act, certain PNPs may be eligible for PA if they provide \"critical services\" or non-critical, \"essential\" services available to the general public. PNPs providing critical services include educational, utility, irrigation, emergency, medical, rehabilitational, and temporary or permanent custodial care facilities. PNPs providing non-critical but essential services include, but are not limited to, community centers, libraries, homeless shelters, food banks, broadcasting facilities, houses of worship, senior citizen centers, rehabilitation facilities, and shelter workshops. Religiously affiliated PNPs must meet the same eligibility criteria as other PNPs. \nFor-profit entities are not eligible to apply for reimbursement through the PA program. For-profit entities, however, may be eligible for COVID-19 assistance through the Small Business Administration (SBA).\nEligible PA applicants and PA grant Recipients may also contract for-profit entities to perform emergency work. For example, FEMA specified that eligible governments \"may contract with medical providers, including private for-profit hospitals, to carry out any eligible activity described in the Eligible Emergency Medical Care Activities\u00e2\u0080\u00a6.\" FEMA may then reimburse PA grant Recipients for the federal share of eligible costs incurred during the execution of the work. PA grant Recipients may then reimburse PA Applicants for eligible associated costs.\n\n\t\t\tWhat assistance is available for individuals under the emergency declaration for COVID-19?\n\nIndividual Assistance (IA) was not authorized by the President's initial emergency declaration for COVID-19. However, IA\u00e2\u0080\u0094Crisis Counseling has been authorized for 10 states pursuant to their major disaster declarations for COVID-19 (for more information, see \" What assistance is available to individuals under a major disaster declaration? \"). Table A-1 includes a list of the categories of FEMA assistance\u00e2\u0080\u0094including Crisis Counseling\u00e2\u0080\u0094authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory.\n\n\t\t\tWhat types of assistance for medical care will FEMA reimburse under the Stafford Act declarations for COVID-19?\n\nAs of March 30, 2020, Stafford Act declarations for COVID-19 authorized FEMA to reimburse only state, territorial, tribal, and local governments and eligible nonprofits for the cost of uninsured emergency medical care. No assistance for individuals' medical costs has been authorized.\nAll major disaster and emergency declarations issued under the Stafford Act as of March 30, 2020, authorized PA Category B\u00e2\u0080\u0094Emergency Protective Measures, through which FEMA may reimburse eligible state, territorial, tribal, and local governmental entities and eligible private nonprofit entities for the cost of uninsured emergency medical care directly related to COVID-19. Per Stafford Act Section 312, FEMA may not duplicate assistance provided by other entities, including the Department of Health and Human Services (HHS) or private medical insurers.\nFEMA may only reimburse medical care that is required as a result of COVID-19, and that eliminates or lessens immediate threats to life, public health, or safety. Typically, emergency medical care costs are eligible for up to 30 days from the date of an emergency or major disaster declaration. In the case of COVID-19, eligible emergency medical care costs are \"eligible for the duration of the Public Health Emergency, as determined by HHS.\" However, the cost of long-term medical treatment is not eligible for reimbursement through PA, including the costs of medical care for COVID-19 patients admitted to a medical facility on an inpatient basis. Also not eligible are the costs of treatment for COVID-19 patients beyond the duration of the Public Health Emergency, and administrative costs associated with the treatment of COVID-19 patients. \nThe HHS Secretary has invoked several public health emergency authorities for the COVID-19 response. Although FEMA's list of authorized medical care does not specify which public health emergency authority is meant in referring to the duration of eligibility, it probably refers to the declaration authority pursuant to Section 319 of the Public Health Service Act. The \"Section 319\" authority allows the HHS Secretary to carry out a specified set of actions to address public health emergencies, such as expediting or waiving certain administrative requirements that would otherwise apply to federal activities or federally administered grants. The declaration of a Public Health Emergency for COVID-19 was made on January 31, 2020. It is in effect for 90 days, and is expected by many to be renewed and remain in effect for the duration of the response.\n Table 3 includes the types of emergency medical care necessary to saves lives or protect public health and safety that are listed by FEMA as eligible for PA for COVID-19, as of March 31, 2020.\nFEMA may determine that other activities undertaken to reduce the threats to life, public health, or safety by COVID-19 are eligible emergency protective measures. To determine eligibility, FEMA's Regional Administrators may require that local, state, or federal officials certify that the work performed was necessary to cope with such threats. \n\n\t\t\tWhat measures must states, tribes, and territories take before FEMA may provide assistance for COVID-19 within their jurisdictions?\n\nAccording to FEMA, all U.S. states, territories, and the District of Columbia, as well as tribes that have received independent emergency declarations for COVID-19, must execute a FEMA-State\/Tribal\/Territory Agreement (hereinafter FEMA-State Agreement), as appropriate, and execute an applicable emergency plan in order to receive FEMA assistance. FEMA-State Agreements state the understandings, terms, and commitments under which FEMA disaster assistance is to be provided. FEMA-State Agreements describe the emergency or disaster (incident), the incident period, the type and extent of assistance to be made available, the federal and nonfederal cost share, and other terms and conditions of the declaration and provision of assistance. The state, territory, or tribe with an emergency or major disaster declaration becomes the PA grant Recipient and administers PA awards within its jurisdiction.\nFEMA also requires an Application for Federal Assistance and an update of a Public Assistance Plan before it will provide assistance through the PA program. Recipients may register accounts for all PA Applicants on the PA Grants portal, a FEMA maintained database. Eligible PA Applicants within the jurisdiction may then apply for PA, and awarded projects are tracked in the PA grants database.\n\n\t\t\tCan states\/tribes request to receive certain kinds of emergency protective measures?\n\nFEMA has published guidance \"on the types of emergency protective measures that may be eligible under FEMA's Public Assistance Program in accordance with the COVID-19 Emergency Declaration in order to ensure that resource constraints do not inhibit efforts to respond to this unprecedented disaster.\" The list of eligible emergency protective measures is not exhaustive. Moreover, FEMA stated that\nIn accordance with section 502 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the \"Stafford Act\"), eligible emergency protective measures taken to respond to the COVID-19 emergency at the direction or guidance of public health officials may be reimbursed under Category B of FEMA's Public Assistance program. FEMA will not duplicate assistance provided by the U.S. Department of Health and Human Services (HHS), to include the Centers for Disease Control and Prevention (CDC), or other federal agencies.\nFEMA and PA grant Recipients (i.e., the state, territory, or tribe that administers the PA award) both review applications for Public Assistance to determine whether costs, work, and applicants are eligible to receive PA. FEMA may approve or decline requests for assistance (see Table 2 for a list of eligible emergency protective measures for COVID-19). FEMA regulations provide procedures by which an eligible PA Applicant, Subrecipient, or Recipient \"may appeal any determination previously made related to an application for or the provision of Federal assistance.\"\n\n\t\t\tMay applicants receive PA for management and disposal of medical waste and human remains?\n\nPA for disposal of medical waste and interment of human remains is included in eligible work authorized for all jurisdictions under PA Category B\u00e2\u0080\u0094Emergency Protective Measures. \n\n\t\t\tHow long does it take to receive emergency assistance?\n\nIn the case of COVID-19, FEMA introduced streamlined procedures in an effort to expedite the delivery of PA emergency assistance. According to FEMA, \"[f]unding is immediately available should state, tribal, territorial or local officials request expedited assistance.\" On March 21, 2020, FEMA reported that the agency had obligated over $100 million in 24 hours for awards authorized under the March 13, 2020 emergency declarations for COVID-19 authorized under the Stafford Act. \nGenerally, the time elapsed during delivery of PA emergency assistance will vary by state, incident, applicant, and project. A number of different factors involved in the PA application and reimbursement process affect the delivery of PA. Relevant factors include, but are not limited to, the scope of the project and the time required for the performance of eligible work. \nFEMA may obligate and disburse funds for small projects (those up to $131,100 in FY2020) upon the approval of a project worksheet, the form FEMA uses to document the details of the Applicant's work and costs claimed. For large projects (those equal to or greater than $131,100 in FY2020), FEMA may obligate funds to the PA grant Recipient upon the approval of a project worksheet. Applicants may request reimbursement for work completed from the PA grant Recipient.\n\n\t\t\tCan declarations be amended to provide additional types of assistance?\n\nAfter the President declares an emergency or major disaster, the governor or chief executive may request that the declaration be amended to include additional types of assistance. FEMA can approve such a request. It is not uncommon to authorize additional types of assistance subsequent to a presidential declaration.\nIf FEMA denies a requested amendment, the governor or chief executive may appeal the decision in writing. The request and its justification must be submitted to the Assistant Administrator for the Disaster Assistance Directorate through the appropriate FEMA Regional Administrator for the FEMA region in which the state, territory, or tribe is located. The appeal is a \"one-time request for reconsideration\"\u00e2\u0080\u0094FEMA's determination on the appeal is final.\n\n\t\t\tCan the federal cost share be adjusted?\n\nThe President has the authority to adjust the federal share of Public Assistance programs. The federal cost share may be increased at FEMA's recommendation when requested by a state, territory, or tribe. The federal share is set at 75% for eligible emergency protective measures performed by states pursuant to the Stafford Act declarations for COVID-19 (authorized under Stafford Act Section 502 for the emergency declarations, and Section 403 for the major disaster declarations). \nA state may also receive a loan or advance to cover the nonfederal share (i.e., the portion of the costs not borne by the federal government) in certain extraordinary situations. Specifically, Stafford Act Section 319 authorizes the President to either lend or advance the nonfederal share to an eligible Applicant or a state. This may be done when\u00e2\u0080\u0094\n(1) the State is unable to assume its financial responsibility under such cost-sharing provisions\u00e2\u0080\u0094\n(A) with respect to concurrent, multiple major disasters in a jurisdiction, or\n(B) after incurring extraordinary costs as a result of a particular disaster; and\n(2) the damages caused by such disasters or disaster are so overwhelming and severe that it is not possible for the applicant or the State to assume immediately their financial responsibility under this chapter.\nAny loan or advance must be repaid with interest. FEMA's regulations, as a condition for making such a loan, require that the state or eligible Applicant not be delinquent in payment of any debts to FEMA. If the governor's request for an advance is denied, the governor may appeal the decision in writing. As with other appeals of federal decisions regarding assistance provided pursuant to a disaster declaration, this is a one-time request for reconsideration.\nCongress has, on occasion, adjusted the federal share through legislation. For example, Section 4501 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) authorized 100% federal share for Public Assistance and Individual Assistance for specific states following Hurricanes Katrina, Wilma, Dennis, and Rita.\n\n\t\tWhat is Major Disaster Assistance?\n\nDifferent types of federal assistance are available pursuant to each type of declaration, with major disaster declarations providing more forms of assistance than emergency declarations. As of April 22, 2020, the President had approved major disaster declaration requests for all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands for COVID-19. The specific types of assistance that may be available under a major disaster declaration are listed in Table 1 . Additionally, Table 4 lists the categories of assistance and the Stafford Act section under which they are authorized.\nWhen the President makes a major disaster declaration under the Stafford Act, states, tribes, and local governments, as well as certain private nonprofit organizations, may receive reimbursement through Public Assistance (PA) for \"emergency work\" undertaken to save lives, protect property, public health, and safety, and lessen or avert the threat of a catastrophe, or for \"permanent work\" undertaken to repair, restore, reconstruct, or replace disaster-damaged public and eligible private nonprofit facilities. As noted previously, most assistance under the Stafford Act related to public health incidents has been delivered through PA Category B\u00e2\u0080\u0094Emergency Protective Measures, including emergency shelter and medicine, hazard communication, and provision and distribution of necessities. \nIndividual Assistance (IA) provides aid to affected individuals and households. If a major disaster is declared, the forms of IA that may be authorized include assistance for housing and for other needs assistance through the Individuals and Households Program; crisis counseling; disaster unemployment assistance; disaster legal services; and disaster case management services. \nAdditionally, pursuant to a major disaster declaration the Hazard Mitigation Grant Program (HMGP) may be authorized. The HMGP funds mitigation and resiliency projects, typically across the entire state or territory. State, territorial, tribal, and local governments, as well as certain private nonprofit organizations, may apply for measures that reduce loss of life or property in future disasters or emergencies. As of April 22, 2020, FEMA reported that all requests for Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP) for COVID-19 are under review.\n\n\t\t\tWhat assistance is available for states, territories, and tribes under a major disaster declaration for COVID-19?\n\nMajor disaster declarations issued as of April 22, 2020 for COVID-19 have all authorized Public Assistance (PA) Category B\u00e2\u0080\u0094Emergency Protective Measures. Major disaster declarations issued for some states also authorized Individual Assistance through the Crisis Counseling Program. Table A-1 includes a list of the categories of FEMA assistance authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory. Major disaster declarations may authorize Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP). As of April 22, 2020, FEMA reported that all requests for Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP) for COVID-19 are under review.\nStates, tribes, or territories may request that major disaster declarations be amended to include additional forms of assistance or increase the federal cost-share for PA above 75% (see \" Can declarations be amended to provide additional types of assistance? \" and \" Can the federal cost share be adjusted? \"). \n\n\t\t\tWhat assistance is available for private nonprofit organizations and businesses under a major disaster declaration?\n\nCertain private nonprofit organizations may be eligible for reimbursement for work performed for eligible emergency protective measures. Eligible PNPs may apply for PA as Applicants or may be contracted by other primary PA grant Recipients or Applicants to perform eligible work. \nBusinesses are not eligible for assistance authorized under the Stafford Act. \nPNPs may be eligible for PA if they provide \"critical services\" or non-critical, \"essential\" services available to the general public. PNPs providing critical services include educational, utility, irrigation, emergency, medical, rehabilitational, and temporary or permanent custodial care facilities. PNPs providing non-critical but essential services include, but are not limited to, community centers, libraries, homeless shelters, food banks, broadcasting facilities, houses of worship, senior citizen centers, rehabilitation facilities, facilities that provide health and safety services of a governmental nature, and shelter workshops. Religiously affiliated PNPs are eligible but must meet the same eligibility criteria of other PNPs. \nFor-profit entities are not eligible to apply directly for public assistance as authorized under the Stafford Act. However, eligible PA applicants and PA grant Recipients may contract with for-profit entities to perform emergency work. FEMA may then reimburse PA grant Recipients for the federal share of eligible costs incurred during the execution of the work, and PA grant Recipients may then reimburse PA Applicants for eligible associated costs. For-profit entities may also be eligible for SBA COVID-19 assistance. \n\n\t\t\tWhat assistance is available to individuals under a major disaster declaration?\n\nAs of April 22, 2020, the FEMA Crisis Counseling Assistance and Training Program (CCP) is the only form of Individual Assistance that has been authorized for some states pursuant to their major disaster declarations for COVID-19. IA-CCP was not authorized for every state that received a major disaster declaration; nor were the territories of the Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands, or Guam authorized to receive IA-CCP. Table A-1 includes a list of the categories of FEMA assistance authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory.\nThe CCP provides financial assistance to state, territorial, tribal, and local government agencies through a grant or cooperative agreement, which allows them to either provide or contract for crisis counseling services. The crisis counseling services are intended to assist disaster survivors \"to prevent or mitigate adverse psychological effects caused or aggravated by a major disaster.\" FEMA operates the CCP with the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS).\nAn emergency declaration or a major disaster declaration may be amended to allow for additional types of IA to be authorized (see Table 1 for a list of IA programs). The governor may request that the declaration be amended to include additional types of assistance. FEMA can approve a request for additional forms of assistance after a presidential declaration. If a governor of an affected state requested types of IA be authorized in their major disaster declaration request, and those forms of IA were not authorized, the governor may appeal the decision in writing (if a request to amend a declaration to add types of IA is denied, that decision may also be appealed). \nAlthough the CCP is the only form of IA authorized to date, individual relief has been provided through other sources. For example, the supplemental appropriations acts for COVID-19 address some of the other unmet needs of individuals (e.g., Section 2102 of the CARES Act ( P.L. 116-136 ) provides pandemic unemployment assistance).\n\n\t\t\tHow do applicants receive funds through the Public Assistance program?\n\nFEMA introduced procedures the agency says are designed to simplify the PA application process for COVID-19 response work.\nState, territories, and tribes that have received emergency declarations or major disaster declarations for COVID-19 are PA grant Recipients, which administer PA awards in their jurisdictions. Prior to receiving funding, PA grant Recipients must execute FEMA-State\/Tribal\/Territorial Agreements, submit federal grant applications, and update Recipient Public Assistance Administrative Plans (see \" What measures must states, tribes, and territories take before FEMA may provide assistance for COVID-19 within their jurisdictions? \").\nEligible applicants may apply for funding through the Recipient's PA award. FEMA generally refers to PA Applicants as any entity that is responsible for PA-eligible work. Applicants may be state, tribal, territorial, and local governments, as well as eligible private nonprofits. For example, the Texas Department of State Health Services applied for PA funds for COVID-19 response as a PA Applicant. Those funds were administered by the state of Texas as the PA grant Recipient. As the PA Recipient, the state of Texas also administered funds through its PA award for state and local PA Applicants including the Texas Division of Emergency Management, Harris County, and the Texas Military Department. \nTo receive PA funds, Applicants may submit a request for grant funds, a project worksheet describing the details of the work and costs claimed, and supporting documentation though the PA Grants Portal. FEMA and the PA grant Recipient evaluate these documents for eligibility and reasonableness. Once a project worksheet is approved, Applicants may receive reimbursement for eligible costs incurred while executing eligible emergency protective measures. \nFEMA's fact sheet on PA Simplified Application procedures for COVID-19 notes that expedited assistance may be available in certain cases. When expedited assistance is approved for large projects (in FY2020, projects over $131,100), FEMA obligates 50% of the total expected costs as soon as the project worksheet is approved, and the PA Applicant may be reimbursed at that time. The remaining federal share may be reimbursed once the Applicant submits documentation of actual costs incurred while performing eligible work. FEMA has provided expedited PA for multiple COVID-19 response efforts. \n\n\t\t\tHow do applicants receive financial or direct assistance through the Individual Assistance program?\n\nThe FEMA Crisis Counseling Assistance and Training Program (CCP) is the only form of IA that has been authorized for some states, as of April 22, 2020 (see Table A-1 for the list of states that have been authorized for Crisis Counseling). FEMA operates the CCP with the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS). Local, state, territorial, or tribal governments may apply for a grant to administer the CCP, or may contract with local mental health service providers. The CCP supports crisis counseling services for disaster survivors, and disaster survivors receive the assistance for free. Generally, the CCP is designed to connect individuals with community resources. CCP services may be advertised to disaster survivors through media outlets, websites, community events, etc.\nIf other forms of IA are authorized pursuant to a major disaster declaration for COVID-19, those assistance programs would include different application requirements and processes. For example, if the Individuals and Households Program (IHP) is authorized, applicants in a declared disaster area may register for FEMA IA and Small Business Administration (SBA) disaster loan assistance. Individuals and households can register for assistance online, by telephone, or in-person at a Disaster Recovery Center (DRC). Individuals and households generally have 60 days from the date of a declaration to apply for FEMA IHP assistance.\n\n\tFunding for Stafford Act Declarations\n\nThe following questions relate to the funding sources for the federal assistance under the Stafford Act that may supplement state, tribal, and local response efforts for COVID-19.\n\n\t\tWhere does funding for Stafford Act assistance come from?\n\nMany forms of assistance made available pursuant to a Stafford Act declaration are funded through the Disaster Relief Fund (DRF), which is the primary source of funding for the federal government's domestic general disaster relief programs. \nThe DRF is managed by FEMA, but as a funding structure, it predates both FEMA and the Stafford Act, having first been funded in 1948.\n\n\t\tIs there enough funding in the DRF for COVID-19?\n\nAs a result of prior-year appropriations to fund long-term recovery work from previous disasters, the DRF had about $42.6 billion in unobligated balances as of the beginning of March 2020. Division B of the CARES Act ( P.L. 116-136 ), included $45 billion more for the DRF. This put the balance of funding in the DRF at its highest level in history.\nDRF resources are available for past, current, and future incidents. However, the majority of its funding is specifically set aside for the costs of major disasters. $41.6 billion of what was in the DRF was specifically for the costs of major disasters, and roughly $600 million was potentially available for emergencies. Of the funding provided in the CARES Act for the DRF, $25 billion was for major disasters and $15 billion was for any Stafford Act costs, including both emergency declarations and major disasters.\nIt is not clear what the total draw on the DRF will be, since the pandemic is an evolving situation, there are other federal programs providing resources, and there is no precedent for using the Stafford Act to respond to a public health crisis.\n\n\t\tIs DRF funding set aside for COVID-19?\n\nDRF appropriations are not provided for specific emergencies or disasters; there is no COVID-19 account within the DRF.\nThe most recent iterations of the appropriations bill text for the DRF indicate the funds are provided for the \"necessary expenses in carrying out the Robert T. Stafford Disaster Relief and Emergency Assistance Act,\" thus covering all past and future disaster and emergency declarations. Previous versions of the appropriations language going back to 1950 also referenced the legislation authorizing general disaster relief rather than targeting specific disasters. On a number of occasions, specific disasters have been mentioned in the appropriation, but funding was not specifically directed to one disaster over others.\nWhile many disaster supplemental appropriations bills are associated with a specific incident or incidents\u00e2\u0080\u0094such as P.L. 113-2 , \"the Sandy Supplemental\"\u00e2\u0080\u0094the language in such acts does not limit the use of the supplemental appropriations to specific incidents. It provides funding \"for major disasters declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act.\" This is also the case with the funding provided in Division B of the CARES Act. The DRF supplemental appropriation itself includes no incident-specific direction, or reference to COVID-19. While one of the general provisions of the law states that the funds provided in the act \"may only be used to prevent, prepare for, and respond to coronavirus,\" the last subsection of that general provision indicates that restriction does not apply to the title that included the DRF appropriation. \n\n\tReferences\n\nAdditional sources of assistance may be available to support the nation's response to and recovery from the COVID-19 pandemic. CRS has developed products on various topics related to the COVID-19 pandemic, including global issues, public health, economic impacts on individuals, impacts on business and the U.S. economy, executive branch response, congressional response and legislation, and legal analysis. The CRS COVID-19 resources are available at https:\/\/www.crs.gov\/resources\/coronavirus-disease-2019 . Some select products CRS has developed related to the COVID-19 pandemic and Stafford Act assistance programs are included below.\nFor more information on the President's declarations under the Stafford Act for COVID-19, see CRS Insight IN11264, Presidential Declarations of Emergency for COVID-19: NEA and Stafford Act , by L. Elaine Halchin and Elizabeth M. Webster; CRS Insight IN11251, The Stafford Act Emergency Declaration for COVID-19 , by Erica A. Lee, Bruce R. Lindsay, and Elizabeth M. Webster; and CRS Insight IN11229, Stafford Act Assistance for Public Health Incidents , by Bruce R. Lindsay and Erica A. Lee. Stafford Act major disaster declarations for COVID-19 will automatically authorize Small Business Administration (SBA) Economic Injury Disaster Loans (EIDL) for businesses in declared counties and contiguous counties. For more information, see CRS Report R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options , by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry For additional information about relief and assistance resources for small businesses, see CRS Insight IN11301, Small Businesses and COVID-19: Relief and Assistance Resources , by Maria Kreiser. For additional information about the actions taken by the U.S. federal government to quell the introduction and spread of COVID-19 in the United States, see CRS Report R46219, Overview of U.S. Domestic Response to Coronavirus Disease 2019 (COVID-19) , coordinated by Sarah A. Lister and Kavya Sekar.\nAppendix A. COVID-19 Approved Major Disaster Declarations and Authorized Assistance\nThe following information is current as of April 22, 2020. Public Assistance Category B\u00e2\u0080\u0094Emergency Protective Measures has been authorized for all states and territories. Ten states have been authorized to receive Individual Assistance\u00e2\u0080\u0094Crisis Counseling Assistance and Training Program (CCP) (referred to in Table A-1 as \"Crisis Counseling\").\nAppendix B. Example of Emergency Declarations for the Same Incident\nStafford Act emergencies have been declared for different states, territories, and tribes for the same incident. For example, the states of Florida, Georgia, South Carolina, and North Carolina, the U.S. Virgin Islands, and the Florida Seminole Tribe of Florida all received emergency declarations for Hurricane Dorian in 2019. The incident period and declaration date for the emergency declarations varied by state, territory, and tribe. This information is captured in Table B-1 .","output":null}
{"id":"gao_GAO-20-463T","pid":"gao_GAO-20-463T_0","input":"\tBackground\n\nVA provides or pays for long-term care\u2014ranging from assistance with  dressing and bathing to clinical care for spinal injuries or dementia\u2014 through three institutional and 11 noninstitutional programs. (See fig. 1 for  a list of VA\u2019s institutional and noninstitutional long-term care programs  and app. I for brief descriptions of these programs.)\nVA\u2019s long-term care programs serve over 500,000 veterans with a wide  range of characteristics and needs. Further, certain Community Nursing  Homes, Adult Day Health Care, and Hospice and Respite Care programs  have specially trained staff to serve veterans with dementia, and the  Spinal Cord Injury and Disability Home Care program and certain VA  Community Living Centers are equipped to serve veterans needing  ventilator care.\nAll veterans enrolled in the VA health care system are eligible for VA\u2019s  basic medical benefits package, which includes coverage for certain  institutional and noninstitutional long-term care services. A veteran\u2019s  eligibility for fully or partially covered nursing home care is determined by  the veteran\u2019s priority for care, which is generally based on the veteran\u2019s  service-connected disability status. VA must cover the full cost of nursing  home care for veterans who need this care for a service-connected  disability and for veterans with service-connected disabilities rated at 70  percent or more. Veterans\u2019 placement into particular long-term care  programs may depend on their clinical needs, disability ratings,  preferences, and the availability of VA programs. When funds are limited,  the agency may prioritize program placement based on veterans\u2019 service- connected disability ratings. Decisions about which long-term care  programs may be the best fit are made at the VA medical center (VAMC)  level between VA providers, veterans, and their families.\n\n\tUtilization of and Spending for VA Long-Term Care Have Increased in Recent Years and Are Projected to Increase\n\nAs we reported in February 2020, VA data shows that utilization of and  spending for VA long-term care programs generally increased from fiscal  years 2014 through 2018. Specifically, the number of veterans receiving  care in VA\u2019s long-term care programs increased 14 percent from fiscal  years 2014 through 2018, from 464,071 to 530,327 veterans, while  spending grew 33 percent from $6.8 billion to $9.1 billion. Further, we  found that VA projects utilization and expenditures for long-term care to  increase for most of the programs included in VA\u2019s EHCPM from fiscal  years 2017 through 2037. Specifically, over that time period VA\u2019s model  projects the following:\nUtilization of long-term care\u2014in terms of various VA workload units\u2014 is projected to grow in one of the two institutional programs and nine  of the 10 noninstitutional programs included in the EHCPM from fiscal  years 2017 through 2037.\nSpending, which VA reports as expenditures, is projected to more  than double from fiscal years 2017 through 2037, increasing from $6.9  billion to $14.3 billion. (See fig. 2.) VA also projects that the  proportion of expenditures for institutional long-term care will  decrease from 63 percent to 53 percent while the proportion of  noninstitutional program expenditures is projected to grow from 37  percent to 47 percent in that same time period.\nAccording to VA officials, these projected increases are due to a variety of  factors, including that VA plans to continue expanding the availability of  noninstitutional care, and plans on providing care to an increasing  number of aging veterans and veterans rated in the highest service- connected disability groups. Officials also noted that expanding veterans\u2019  access to noninstitutional care programs is less costly than institutional  care, and veterans prefer to delay or reduce the amount of institutional  care they receive. VA\u2019s strategies to meet the growing demand for long- term care are operationalized by GEC at the program level and  implemented at the regional and VAMC level.\n\n\tVA Has Identified Several Key Challenges to Meeting the Demand for Long-Term Care, but Lacks Measurable Goals for Addressing Them\n\nIn our February 2020 report, we found that VA faces a number of key  challenges in meeting veterans\u2019 growing demand for long-term care:  workforce shortages, geographic alignment of care, and difficulty meeting  veterans\u2019 needs for specialty care.\nWhile GEC recognizes and has taken some steps to address the  challenges it faces, it has not established measurable goals for its efforts  to address these three key challenges:\nGEC has not established measurable goals to address workforce  shortages, such as staffing targets to address the waitlist for the  Home-Based Primary Care program.\nGEC has not established measurable goals for its efforts to address  the geographic alignment of care, such as specific targets for  providing long-term care within the Home Telehealth and Veteran  Directed Care programs.\nGEC has not established measurable goals for its efforts to address  difficulties meeting veterans\u2019 needs for specialty care, such as specific  targets for the number of available ventilators or the number of  caregivers educated to help veterans with dementia.\nAs we noted in our report, without measurable goals, VA is limited in its  ability to better plan for and understand progress towards addressing the  challenges it faces meeting veterans\u2019 long-term care needs. To address  this issue, we recommended that GEC develop measurable goals for its  efforts to address these key long-term care challenges. VA concurred  with this recommendation.\nIn our February 2020 report we also found that VA had identified, but had  not planned to take steps to fully address, challenges at the VAMC level  that affect VA\u2019s ability to meet veterans\u2019 long-term care needs:\nVA identified that VAMCs do not have a consistent approach to  managing VA\u2019s 14 long-term care programs. At VAMCs where there  are not GEC staff, long-term care programs could be run by one or  more departments within the VAMC, for example the Nursing  department or the Social Work department. GEC officials told us that  this fragmentation hinders standardization and the ability to get  veterans the appropriate care.\nVA also identified that VAMCs use different approaches to assess the  amount of noninstitutional long-term care services veterans need.  While GEC has developed a tool to improve the consistency in these  determinations, VA has not required the tool be used in all VAMCs, as  of October 2019. As a result, decisions about the amount of services  veterans receive may vary by VAMC.\nTo address these issues, we recommended that GEC leadership set time  frames for and implement (1) a consistent GEC structure at the VAMC  level and (2) VAMC-wide standardization of the tool for assessing  noninstitutional program needs of veterans. VA concurred with our  recommendations.\nChairwoman Brownley, Ranking Member Dunn, 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.\n\n\tGAO Contacts and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact A. Nicole Clowers, Managing Director, Health Care at (202) 512- 7114 or clowersa@gao.gov or Sharon Silas, Director, Health Care, 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 statement. In addition to the contacts named above, key  contributors to this statement were Karin Wallestad (Assistant Director),  Luke Baron (Analyst-in-Charge), Summar C. Corley, and Laurie Pachter.  Also contributing to the underlying report for this statement were Kye  Briesath, Vikki Porter, Corinne Quinones, and Jennifer Rudisill.\n\nAppendix I: Department of Veterans Affairs\u2019 (VA) Institutional and Noninstitutional Long- Term Care Program Descriptions\n\nAppendix I: Department of Veterans Affairs\u2019  (VA) Institutional and Noninstitutional Long- Term Care Program Descriptions 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.","output":null}
{"id":"gao_GAO-20-317T","pid":"gao_GAO-20-317T_0","input":"\tThe Federal Government Has Invested in Projects That May Convey Some Climate Resilience Benefits but Does Not Have a Strategic Investment Approach\n\nAs we reported in October 2019, the federal government has invested in  projects that may enhance climate resilience but does not have a  strategic approach for investing in high-priority climate resilience projects.  Some federal agencies have made individual efforts to manage climate  change risk within existing programs and operations, and these efforts  may convey climate resilience benefits. For example, the U.S. Army  Corps of Engineers\u2019 civil works program constructs flood control projects,  such as sea walls, that could convey climate resilience benefits by  protecting communities from storms that may be exacerbated by climate  change.\nHowever, even with individual agency efforts, federal investment in  projects specifically designed to enhance climate resilience to date has  been limited. As we stated in our Disaster Resilience Framework, most of  the federal government\u2019s efforts to reduce disaster risk are reactive, and  many revolve around disaster recovery. As a result, we reported in  October 2019 that additional strategic federal investments may be  needed to manage some of the nation\u2019s most significant climate risks  because climate change cuts across agency missions and presents fiscal  exposures larger than any one agency can manage. Our analysis shows  the federal government does not strategically identify and prioritize  projects to ensure they address the nation\u2019s most significant climate risks.\nIn addition, our October 2019 report discusses our past work that shows  an absence of government-wide strategic planning for climate change.  For example, in our March 2019 update to our high-risk list, we reported  that one area of government-wide action needed to reduce federal fiscal  exposure is in the federal government\u2019s role as the leader of a strategic  plan that coordinates federal efforts and informs state, local, and private- sector action. For this 2019 update, we assessed the federal  government\u2019s progress since 2017 related to climate change strategic  planning against five criteria and found that the federal government had  not met any of the criteria for removal from the high-risk list. Specifically,  since our 2017 high-risk update, four ratings regressed to \u201cnot met\u201d and  one remained unchanged as \u201cnot met.\u201d\nAlso, although we have made 17 recommendations that address  improving federal climate change strategic planning, as of August 2019,  no action had been taken toward implementing 14 of those  recommendations\u2014including one dating from 2003. Our enterprise risk  management framework calls for reviewing risks and selecting the most  appropriate strategy to manage them. However, no federal agency,  interagency collaborative effort, or other organizational arrangement has  been established to implement a strategic approach to climate resilience  investment that includes periodically identifying and prioritizing projects.  Such an approach could supplement individual agency climate resilience  efforts and help target federal resources toward high-priority projects.\n\n\tSix Key Steps Provide an Opportunity for the Federal Government to Strategically Identify and Prioritize Climate Resilience Projects\n\nSix key steps provide an opportunity for the federal government to  strategically identify and prioritize climate resilience projects for  investment, based on our review of reports (including a National  Academies report and the U.S. Global Change Research Program\u2019s  Fourth National Climate Assessment) that discuss adaptation as a risk  management process, as well as on international standards, our past  work (including our enterprise risk management criteria), and interviews  with stakeholders. The six key steps are (1) defining the strategic goals  of the climate resilience investment effort and how the effort will be  carried out, (2) identifying and assessing high-risk areas for targeted  resilience investment, (3) identifying potential project ideas, (4) prioritizing  projects, (5) implementing high-priority projects, and (6) monitoring  projects and climate risks. (See fig. 1.)\nIn our October 2019 report, we used one domestic and one international  example to illustrate these key steps: Louisiana\u2019s Coastal Protection and  Restoration Authority (CPRA) coastal master planning effort and  Canada\u2019s Disaster Mitigation and Adaptation Fund (DMAF).\nIn the domestic example, to address the lack of strategic coordination, in  2005 the state of Louisiana consolidated coastal planning efforts  previously carried out by multiple state entities into a single effort, led by  CPRA. CPRA periodically identifies high-priority coastal resilience  projects designed to address two primary risks: flooding and coastal land  loss. To identify potential projects, CPRA sought project proposals from  citizens, nongovernmental organizations, and others. To prioritize  projects, CPRA used quantitative modeling to estimate project outcomes  under multiple future scenarios of varied climate and other conditions and  coordinated with stakeholders to understand potential project impacts.  CPRA has published three coastal master plans in which it identified and  evaluated potential projects. For example, in its 2017 Comprehensive  Master Plan for a Sustainable Coast, CPRA identified $50 billion in high- priority projects to be implemented as funding becomes available.\nIn the international example, in 2018 the Canadian government launched  the DMAF, a financial assistance program, to provide $1.5 billion (in U.S.  dollars) over 10 years for large-scale, nationally significant projects to  manage natural hazard risks, including those triggered by climate change.  Infrastructure Canada, the entity responsible for administering the DMAF,  seeks project ideas from provinces and territories, municipal and regional  governments, indigenous groups, and others. These entities apply directly  to Infrastructure Canada for funding. According to Canadian officials, two  committees of experts\u2014one composed of experts from other federal  departments and the other composed of nonfederal experts (e.g., urban  planners and individuals with regional expertise)\u2014provide feedback on  potential projects. These projects are prioritized based on multiple criteria  such as the extent to which they reduce the impacts of natural disasters.\n\n\tOptions for Focusing Federal Funding on High-Priority Climate Resilience Projects Have Strengths and Limitations, and Opportunities Exist to Increase Funding Impact\n\nAs we reported in October 2019, on the basis of our review of relevant  reports and our past work, interviews with stakeholders, and illustrative  examples, we identified two options\u2014each with strengths and  limitations\u2014for focusing federal funding on high-priority climate resilience  projects. The options are (1) coordinating funding provided through  multiple existing programs with varied purposes and (2) creating a new  federal funding source specifically for investment in climate resilience. In  addition, our analysis of these sources identified opportunities to increase  the climate resilience impact of these two funding options.\nA strength of coordinating funding from existing sources is access to  multiple funding sources for a project. For example, one stakeholder we  interviewed whose community used federal funding to implement large- scale resilience projects said that having multiple programs is  advantageous because when funding from one program is not available\u2014 such as when the project does not match that program\u2019s purpose or when  there are insufficient funds\u2014funds could be sought from another  program. The state of Louisiana\u2019s coastal master planning effort also  uses multi-program coordination to fund projects. Specifically, funding for  high-priority resilience projects identified in the master plan is provided via  several federal and nonfederal programs designed for wetlands  restoration, hurricane risk reduction, oil spill recovery, and community  development, among other purposes. A limitation of that option, according  to CPRA officials, is that coordinating funding from multiple sources could  be administratively challenging and could require dedicated staff to  identify programs, assess whether projects meet program funding criteria,  apply for funds, and ensure program requirements are met.\nAlternatively, one strength of creating a new federal funding source, such  as a federal financial assistance program that could provide loans or  grants or a climate infrastructure bank, is that it could encourage cross- sector projects designed to achieve benefits in multiple sectors. For  example, according to one stakeholder, such a funding source could  allow experts from multiple sectors\u2014such as infrastructure, housing,  transportation, and health\u2014to collaborate on projects, leading to more  creative, comprehensive approaches to enhance community resilience.  However, such a new funding source would have to be created, which  would require congressional authorization.\nIn addition, we identified opportunities to increase the climate resilience  impact of federal funding options based on our review of our past work,  related reports, an international standard, and the Louisiana and  Canadian examples, as well as interviews with stakeholders:\nUsing both existing and new funding options. Several  stakeholders told us that using both funding options\u2014multiple,  existing federal programs with varied purposes and a new funding  source for high-priority climate resilience projects\u2014in a strategic,  coordinated way could help increase the impact of federal investment.  Two stakeholders told us that in practice, multiple, existing federal  funding sources that are not specific to climate resilience could be  coordinated to fund projects when their purposes and rules align and  adequate funding is available. A funding source specifically for climate  resilience could be used to fund proposed projects when no related  program exists or when existing programs do not have sufficient  funding available, according to these and other stakeholders.\nHelping ensure adequate and consistent funding. Several  stakeholders we interviewed identified the need for adequate and  consistent funding to implement high-priority climate resilience  projects. For example, according to one stakeholder we interviewed,  inconsistent, inadequate funding makes it difficult to complete large- scale projects and can lead to additional costs if significant delays  occur during which existing work deteriorates. In addition to adequate  and consistent funding, funding options should be designed to  accommodate long-term projects since high-priority climate resilience  projects can take multiple years to design and implement, according  to two stakeholders we interviewed.\nEncouraging nonfederal investment. Several stakeholders we  interviewed told us that the federal government could use a federal  climate resilience investment effort to encourage nonfederal  investment in high-priority climate resilience projects, thereby  increasing the impact of federal investment. For example, several  stakeholders identified the importance of a cost-share component so  that funding recipients are invested in a project\u2019s success. Canada\u2019s  DMAF encourages nonfederal investment by partially funding projects  of national significance and requiring different levels of cost-share  from funding recipients, ranging from 25 percent for indigenous  recipients to 75 percent for private-sector and other for-profit  recipients. Several stakeholders also identified potential funding  mechanisms\u2014for example, public-private partnerships and loan  guarantees\u2014that could leverage federal dollars to encourage  additional investment in climate resilience projects by nonfederal  entities, including the private sector.\nEncouraging complementary resilience activities. To increase the  impact of federal investment in climate resilience, a federal investment  effort presents an opportunity to encourage complementary resilience  activities by nonfederal actors such as states, localities, and private- sector partners, based on interviews with several stakeholders, the  Canadian example, and reports we reviewed. For example, this could  include establishing conditions that funding recipients must meet in  exchange for receiving federal funding. Alternatively, the federal  government could use incentives (e.g., providing greater federal cost- share or giving additional preference in the project prioritization  process) to encourage complementary resilience activities by  nonfederal actors. Our Disaster Resilience Framework states that  incentives can make long-term, forward-looking risk reduction  investments more viable and attractive among competing priorities.  The federal government could use these conditions and incentives to  encourage several types of complementary resilience activities by  nonfederal actors. For example, the federal government could  encourage the use and enforcement of building codes that require  stronger risk-reduction measures. In addition, a federal investment  effort could provide an opportunity to encourage communities to limit  or prohibit development in high-risk areas to minimize risks to people  and assets exposed to future climate hazards. One example of this  would be through zoning regulations. Another stakeholder suggested  that communities receiving federal funding for resilience projects  should be adequately insured against future climate risks so they  have a potential source of funding for rebuilding in the event of a  disaster.\nAllowing funds to be used at various stages of project  development. Several stakeholders suggested that federal funds be  used for multiple stages of project development\u2014such as project  design, implementation, or monitoring\u2014to increase the impact of  federal funds. For example, two stakeholders we interviewed told us  that resilience projects can require significant amounts of design work  to develop an implementable and effective project concept and that  making funds available for project design could improve the quality of  project proposals, thereby maximizing the impact of federal funds. In  addition to providing federal funds for project design, one stakeholder  suggested making federal funding available to measure project  outcomes (e.g., how effectively projects increased resilience) to  improve future decisions by both the federal government and others  making resilience investments.\nBased on the findings of our October 2019 report, we recommended that  Congress consider establishing a federal organizational arrangement to  periodically identify and prioritize climate resilience projects for federal  investment. Such an arrangement could be designed using the six key  steps for prioritizing climate resilience investments and the opportunities  to increase the climate resilience impact of federal funding options that  we identified in our report.\nChairwoman Castor, Ranking Member Graves, and Members of the  Select Committee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact Mark Gaffigan at (202) 512-3841 or gaffiganm@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement.\nGAO staff members who made key contributions to this testimony and the  underlying report are Joseph \u201cJoe\u201d Thompson (Assistant Director), Celia  R. Mendive (Analyst in Charge),Taiyshawna Battle and Paige Gilbreath.  Also contributing to this report were Alicia Puente Cackley, Colleen M.  Candrl, Kendall Childers, Steven Cohen, Christopher Curry, Cindy  Gilbert, Kathryn Godfrey, Holly Halifax, Carol Henn, Susan Irving, Richard  Johnson, Gwendolyn Kirby, Joe Maher, Gregory Marchand, Diana  Maurer, Kirk Menard, Tim Persons, Caroline N. Prado, William Reinsberg,  Oliver Richard, Danny Royer, Jeanette Soares, Kiki Theodoropoulos,  Sarah Veale, Patrick Ward, Jarrod West, Kristy Williams, Eugene  Wisnoski, and Melissa Wolf.\nThis 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.","output":null}
{"id":"gao_GAO-19-347","pid":"gao_GAO-19-347_0","input":"\tBackground\n\n\t\tDirect Loan Program and Repayment Plans\n\nThe Direct Loan program provides financial assistance to students and  their parents to help pay for postsecondary education. Under the Direct  Loan program, Education issues several types of student loans (see  sidebar).\nCurrent William D. Ford Federal Direct  Loan Types  Subsidized Stafford Loans: Available to  undergraduate students with financial need  (generally the difference between their cost of  attendance and a measure of their ability to  pay, known as expected family contribution).  Borrowers are not responsible for paying  interest on these loans while in school and  during certain periods of deferment, an option  that allows eligible borrowers to temporarily  postpone loan payments.   Unsubsidized Stafford Loans: Available to  undergraduate and graduate school students  irrespective of financial need. Borrowers must  pay all interest on these loans.  PLUS Loans: Available to graduate student  borrowers and parents of dependent  undergraduates. Borrowers must pay all  interest on these loans.  Consolidation Loans: Available to eligible  borrowers wanting to combine multiple federal  student loans (including those listed above)  into one loan. Repayment periods are  extended up to a maximum of 30 years,  thereby lowering monthly payments.   Interest rates for these loans are tied to the  Department of the Treasury\u2019s 10-year note  rate and can vary by loan type. In addition,  there are limits on the annual and aggregate  amounts that can be borrowed for certain loan  types.\nAfter a prospective borrower applies for and is awarded a Direct Loan,  Education disburses it through the borrower\u2019s school. Once the loan is  disbursed, it is assigned to one of nine loan servicers under contract with  Education. These loan servicers are responsible for such activities as  communicating with borrowers about the status of their loans, providing  information about and enrolling borrowers in repayment plans, and  processing payments. Once borrowers leave school, they are responsible  for making payments directly to their assigned loan servicer.\nA variety of repayment plans are available to eligible Direct Loan  borrowers, including Standard, Graduated, Extended, and several IDR  plans. Borrowers are automatically enrolled in the Standard plan if they  do not choose another option, and generally make fixed monthly  payments over a period of 10 years. IDR plans can ease repayment  burden by setting monthly loan payments based on a borrower\u2019s income  and family size and extending the repayment period up to 20 or 25 years,  depending on the plan. Unlike Standard, Graduated, and Extended  repayment plans, IDR plans offer loan forgiveness at the end of the  repayment period and monthly payments may be as low as $0 for some  borrowers.\nThere are a variety of IDR plans, and these plans have differences in  eligibility requirements, how monthly payment amounts are calculated,  and repayment periods before potential loan forgiveness (see table 1).\n\n\t\tApplication Process for Income-Driven Repayment Plans\n\nTo participate in an IDR plan, borrowers must submit an application to  their loan servicer that, among other things, includes information about  their income, marital status, and family size (see table 2).\nAccording to Education, Education\u2019s loan servicers review the information  borrowers submit on their IDR applications to determine if borrowers are  eligible for IDR plans. If the servicer determines that a borrower is eligible,  it enrolls the borrower in an IDR plan and calculates the borrower\u2019s  monthly payment amount. To continue making monthly payment  amounts based on income and family size, IDR borrowers must annually  submit the IDR application form certifying their income and family size,  which servicers then use to update monthly payment amounts. If a  borrower\u2019s income changes significantly prior to the borrower\u2019s annual  recertification date, the borrower can use the same application form to  request a recalculation of the monthly payment amount (see fig. 1).  However, borrowers are not required to report any such changes before  their annual recertification date.\nIf IDR borrowers do not have any discretionary income, their scheduled  monthly payment amount is zero dollars (meaning they will not have to  make a monthly loan payment until their discretionary income is high  enough to warrant one). Scheduled monthly payments of zero dollars  count as qualifying payments towards eventual loan forgiveness at the  end of the 20- to 25-year repayment period. Borrowers who make  monthly payments on IDR plans that are much lower than they would be  under the Standard 10-year repayment plan for a long period of time may  end up paying less than their original loan amount because their  remaining loan balances may be forgiven. However, some borrowers on  IDR plans will fully repay their loans before qualifying for forgiveness.  Extending the repayment period may also result in some borrowers  paying more interest over the life of the loan than they would under the  10-year Standard repayment plan.\n\n\t\tStandards and Guidance for Managing Risk of Fraud and Errors in Federal Programs\n\nFraud in federal programs occurs when individuals or entities intentionally  misrepresent themselves in order to benefit from the programs. Fraud  poses a significant threat to the integrity of federal programs and erodes  public trust in government. Federal programs are at risk for fraud when  individuals have both the opportunity and incentive to commit fraud.  Although the occurrence of one or more cases of fraud indicates there is  a fraud risk, a fraud risk can exist even if fraud has not yet been identified  or occurred.\nProactive 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. In July 2015, GAO  issued the Fraud Risk Framework, which provides a comprehensive set  of 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 Framework recommends that to effectively manage  fraud risks, managers should design and implement specific control  activities to prevent and detect potential fraud, such as data analytics.  After issuance of the Fraud Risk Framework, the Fraud Reduction and  Data Analytics Act of 2015 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. The act requires  agencies to establish financial and administrative controls that incorporate  the Fraud Risk Framework\u2019s leading practices. We previously reported  that Education identified itself as subject to the act.\nError also poses a risk to the integrity of federal programs. According to  federal internal control standards, to maintain an effective internal control  system, managers should use quality information to achieve agency  objectives. This includes obtaining information from reliable sources that  is reasonably free from errors and communicating it externally to achieve  objectives.\n\n\tIndicators of Potential Fraud or Error in Income and Family Size Information Pose Risks to IDR Plans\n\n\t\tOver 95,000 IDR Plans Were Held by Borrowers Reporting No Income, but Data Suggests They May Have Had Enough Wages to Make Student Loan Payments\n\nOur analysis of Education\u2019s IDR plan data and HHS\u2019s NDNH wage data  for borrowers who reported zero income found that about 95,100  approved IDR plans (11 percent of all IDR plans we analyzed) were held  by borrowers who may have had sufficient wages to warrant a monthly  student loan payment. These plans were held by about 76,200 unique  borrowers who owed nearly $4 billion in outstanding Direct Loans as of  September 2017. According to our analysis, 34 percent of these plans  were held by borrowers who had estimated annual wages of $45,000 or  more, including some with estimated annual wages of $100,000 or more  (see fig. 2).\nOur results from matching the Education and HHS data indicate the  possibility that some borrowers misrepresented or erroneously reported  their income, highlighting the risk of potential fraud and errors in IDR  plans. Borrowers may have a financial incentive to commit fraud to  reduce their monthly payment amount and, by extension, possibly  increase the amount of loan debt forgiven at the end of their repayment  periods. However, we cannot determine whether fraud occurred through  data matching alone. Where appropriate, we are referring these results to  Education for further investigation. Among the 76,200 borrowers in our  data matching results, it is possible that some accurately reported zero  income even though they had wages reported in NDNH in the same  quarter in which their IDR application was approved. For example, a  borrower may have earned wages at the start or end of a quarter, but was  not earning wages at the time of submitting the IDR application.  Conversely, our analysis cannot identify borrowers who may have earned  additional taxable income that is not part of NDNH data, but should be  included on IDR applications, such as income for individuals who are self- employed or receiving alimony. Regarding the potential for error,  officials from Education and all four loan servicers we spoke with stated  that it is possible that borrowers could incorrectly report that they had no  taxable income. Officials from Education said, for example, that borrowers  may misunderstand the question about taxable income on the IDR  application, and one loan servicer, echoing this perspective, stated that  some borrowers may mistakenly think that some of their income is  nontaxable when it is in fact taxable.\nTo examine how borrowers\u2019 failure to report their income could affect the  amount repaid to Education over the course of a year, we used  Education\u2019s online repayment estimator to illustrate how much  hypothetical borrowers with different annual adjusted gross incomes  would expect to pay under each IDR plan (see fig. 3). If a borrower at  one of these income levels instead reported zero income on the IDR  application, Education could lose thousands of dollars per borrower each  year in student loan payments. Such a situation could also potentially  increase the ultimate cost to the federal government and taxpayers for  loan forgiveness because scheduled monthly payments of zero dollars  count toward the borrower\u2019s 20- or 25-year repayment period.\n\n\t\tEducation May Miss Indicators of Potential Fraud or Error in Borrowers\u2019 Family Sizes\n\nTo examine the extent to which Education\u2019s IDR plan data on family size  may indicate potential fraud or error, we analyzed the family sizes for  about 5 million IDR plans approved between January 1, 2016 and  September 30, 2017. Of these plans, over 2.1 million (43 percent) were  approved with a family size of one, meaning only the borrower was  included (see fig. 4). In addition, over 2.6 million plans (52 percent) were  approved with family sizes of two to five.\nAt the high end of the spectrum, about 40,900 of the plans we analyzed  (about 1 percent) were approved with family sizes of nine or more (see  fig. 5). We consider IDR plans with family sizes of nine or more atypical  or outliers because they comprise the top 1 percent of all family sizes in  Education\u2019s data. Of these plans, almost 1,200 had family sizes of 16 or  more, including two plans held by different borrowers that were approved  with a family size of 93. In total, the 40,900 plans approved with family  sizes of nine or more corresponded to about 35,200 unique borrowers  who owed almost $2.1 billion in outstanding Direct Loan debt as of  September 2017.\nWhile IDR plans with family sizes of nine or more were atypical in our  data and could indicate fraud or error, IDR plans with smaller or more  typical family sizes could also pose problems. Borrowers may have a  financial incentive to commit fraud because larger family sizes reported  on the IDR application can reduce borrowers\u2019 discretionary income and,  by extension, their monthly payment amounts.\nRegarding the potential for error, officials from Education and all four loan  servicers we spoke with said borrowers or loan servicers may  inadvertently make mistakes related to family size. For example, officials  from Education and one loan servicer said borrowers sometimes report  inaccurate family sizes if they are confused about who to count as a  member of their family. Officials from this loan servicer told us that a  borrower initially applied for an IDR plan claiming a family size of five\u2014 himself and four other family members who were not his spouse or  children. They said that during a subsequent phone call with loan servicer  staff about the borrower\u2019s loan, the borrower volunteered that the other  members of his family did not live with him, meaning that for IDR  purposes, he had a family size of one. It is unclear whether this  borrower may have misrepresented his family size to receive a lower  monthly payment or did not understand the definition and reported it in  error. In regards to loan servicer error, Education officials said that  servicers may make mistakes when entering family sizes from paper  applications into their computer systems or when determining the total  family size because borrowers provide information on family members in  up to three places on the application.\nTo examine the effect of family size on monthly payment amounts in IDR  plans, we used Education\u2019s online repayment estimator to illustrate how  much hypothetical borrowers with the same income but different family  sizes would be expected to pay each month under certain IDR plans. We  found that a hypothetical borrower with a family size of one and an  adjusted gross income of $40,000 who enrolls in one of three IDR plans  that base monthly payment amounts on 10 percent of discretionary  income would have a monthly payment amount of $182 (see fig. 6). If  this borrower instead reported a family size of two people, the monthly  payment amount would decrease by $54, to $128. For each additional  person, the monthly payment would decrease by $54. At a family size of  five people, the borrower would have no monthly payment.\n\n\tWeaknesses in Education\u2019s Procedures to Verify Income-Driven Repayment Plan Information Reduce Its Ability to Detect Potential Fraud or Error, but Approaches Exist to Address Risks\n\n\t\tEducation Does Not Verify Borrower Reports of Zero Income and Has Limited Protocols for Verifying Borrower Family Size\n\nEducation does not have procedures to verify borrower reports of zero  income nor, for the most part, procedures to verify borrower reports of  family size; although there are approaches it could use to do so.  Because income and family size are the basis for calculating borrowers\u2019  monthly payment amounts for IDR plans, it is important that this  information is accurate on IDR applications.\nWhile Education instructs loan servicers to review tax returns and other  documentation of taxable income that borrowers are required to provide,  as previously discussed, borrowers are not required to provide  documentation to support self-attestations of zero income or their family  size on IDR applications. Officials from Education and all four loan  servicers we spoke with said that servicers are generally instructed to  take these self-attestations at face value. However, Education has limited,  voluntary procedures for reviewing family size information submitted by  borrowers.\nIn 2016, Education implemented a voluntary procedure for loan  servicers to contact borrowers who report changes in family size of  four or more from one year to the next in order to verify the accuracy  of the most recently reported family size. Education officials told us  that servicers are not contractually required to follow this procedure.  In addition, this procedure is not applicable to student loan borrowers  when they initially apply for IDR plans.\nIn October 2018, Education officials told us they began to follow up  with loan servicers about family sizes of 20 or more in IDR program  data to ensure these data match the family size information in the loan  servicer systems from which they originated. Officials said that this  process is to ensure that family size data were accurately transferred  from servicers to Education. Borrowers are not contacted for  verification of the information itself.\nOfficials from Education and three of the four loan servicers we spoke  with acknowledged that IDR plans are at risk for fraud or error because  verification is generally not performed on borrower reports of zero income  and borrower reports of family size. Officials from Education and two of  the loan servicers also said that certain program requirements discourage  borrowers from providing false information. For example, borrowers are  required to sign the IDR form to certify that all provided information is  true, complete, and correct, and the form warns borrowers that false  statements or misrepresentations are subject to penalties including fines,  imprisonment, or both. However, the extent to which this requirement  may serve as a deterrent is unknown because Education has not  assessed the risk of fraudulent reports on IDR applications. Moreover,  Education officials told us that they were not aware of any IDR borrowers  being investigated or facing penalties for providing false information on  the IDR application. Officials from one loan servicer also said that  borrowers may be deterred from falsely claiming zero income or  misrepresenting their family size because they assume that servicers,  acting on behalf of the government, can check the information on IDR  applications. However, it is also possible that borrowers would assume  that this self-reported information would not be routinely verified because  the only documentation requirements discussed on the application relate  to verifying taxable income.\nEducation officials also said that the risk of borrowers providing  inaccurate information on IDR applications must be balanced against the  impact of adding verification procedures. They said additional procedures  could make the already complex IDR application process more  burdensome for borrowers to navigate and result in longer application  processing times. While it is important to make IDR plans accessible to  borrowers who could benefit from them, it is also important that Education  design internal control activities to achieve program objectives and  respond to risks, including addressing the risk of fraud and error in  borrower self-reported information.\nGAO\u2019s Fraud Risk Framework describes the importance of developing  procedures for preventing, detecting, and responding to the risk of fraud  in government programs.  The risk of fraud exists when there is  opportunity and incentive to commit it. The lack of verification of borrower  reports of zero income and limited verification of borrower reports of  family size on IDR applications creates the opportunity for borrowers to  commit fraud. Because lower income and larger family sizes can reduce  borrowers\u2019 monthly payment amounts and, by extension, possibly  increase the amount of loan debt forgiven at the end of their repayment  periods, there is also an incentive for some borrowers to commit fraud. In  regard to error, federal internal control standards state that agencies  should obtain information from reliable sources that are reasonably free  from error. Education officials and all four loan servicers told us that  borrower-reports of family size or zero income can be susceptible to error  if, for example, borrowers misunderstand the definitions of these items on  IDR applications.\nAddressing the risk of fraud and error would also help to minimize the  costs associated with IDR plans that are passed on to the government  and taxpayers. As more borrowers enter IDR plans, the costs of these  plans\u2014including loan forgiveness\u2014increase for the government and  taxpayers. Using data underlying the President\u2019s fiscal year 2017 budget  request, GAO previously reported that Education estimated Direct Loans  repaid with IDR plans would cost the federal government about $74 billon  over their repayment periods. In its fiscal year 2015-2019 strategic plan  for Federal Student Aid, Education acknowledged that as IDR plans  continue to grow in popularity, the cost of loan forgiveness could be a  major issue for the federal government. Education can minimize the  costs associated with IDR plans by ensuring payment amounts are based  on accurate income and family size information.\n\n\t\tApproaches Exist That Could Help Education Identify and Address Potential Fraud or Error in IDR Plans\n\nEducation has not fully leveraged available approaches to help detect and  prevent fraud or error in IDR plans. Federal internal control standards call  for agency management officials to identify, analyze, and respond to risks  related to achieving program objectives, such as the risk of using  potentially fraudulent or erroneous information about borrowers to  calculate monthly payment amounts for student loans. Approaches,  such as using data analytic practices and follow-up procedures, can help  identify and address these risks. Two data analytic practices that can help  identify such risks with respect to IDR plans are (1) anomaly detection to  identify atypical or unusual information about borrowers and (2) data  matching with outside data sources to verify information that borrowers  provide. These practices, which can be used on their own or together,  can help prevent fraud from occurring and detect potential fraud or error  that may have occurred. Because data analytics alone may not be  sufficient to determine whether fraud or error has occurred, follow-up  procedures can then be used in the investigation and verification to make  such determinations.\nA leading practice in data analytics in GAO\u2019s Fraud Risk Framework is  conducting data mining to identify suspicious activity or transactions,  including anomalies, outliers, and other red flags in the data. Similar to  our family size analysis, borrower-reported family sizes above a certain  threshold on IDR applications could be flagged in loan servicers\u2019 and  Education\u2019s data systems for further verification. Anomaly detection is  used to a limited extent to identify errors in family size on IDR plans by  one loan servicer and by Education. According to officials at Education  and all four loan servicers we spoke with, anomaly detection is not used  to systematically identify potentially fraudulent reports of family size.\nAnomaly detection can also identify deviations from expected patterns in  data over time. Because IDR borrowers are required to fill out  applications annually, it would be possible to develop automated queries  to look for unusual patterns in borrower-reported income and family size  from one year to the next. Officials from Education and servicers  described several patterns across applications that could indicate  potential fraud, specifically large swings in income from one year to the  next, reporting zero income for multiple years, and having a large family  size, but relatively low income.\nAnother leading practice for data analytics in GAO\u2019s Fraud Risk  Framework is conducting data matching to verify key information,  including self-reported data and information necessary to determine  eligibility. The results of our analysis illustrate the usefulness of this  technique to identify potential inconsistencies in the income information  on IDR plans. Education does not have authority to access wage data  from HHS\u2019s NDNH or income data from the Internal Revenue Service  (IRS) for the purpose of verifying IDR borrowers\u2019 income information  through data matching. However, private data sources are also available  for data matching. We reported in 2016 on the benefits of government  agencies using private data to address the risk of fraud. Moreover,  some state agencies (such as those administering the Supplemental  Nutrition Assistance Programs) use a private, commercial verification  service known as The Work Number\u00ae to help determine eligibility for  government assistance. We reported in 2016 that 45 states used  income information from The Work Number to help determine eligibility for  food assistance benefits under the Supplemental Nutrition Assistance  Program.\nEducation may also be able to draw on follow-up procedures it has in  place for verifying information submitted by students and their families  when applying for federal student aid using the Free Application for  Federal Student Aid (FAFSA). Education uses a process called  \u201cverification\u201d to help identify and correct erroneous or missing information  on the application to aid the department\u2019s efforts to reduce improper  payments of federal student aid. Each award year, a portion of FAFSA  applications are selected for verification, and schools are required to work  with the selected applicants to obtain documentation and confirm the  accuracy of information provided on these applications. When selecting  FAFSAs for verification, Education aims to select those applications with  the highest statistical probability of error and the greatest impact of such  error on award amounts. FAFSA applicants who are selected to verify their income for the 2018-2019 or 2019-2020 award years may provide a  signed copy of their prior years\u2019 tax returns. FAFSA applicants may also  obtain documentation from the IRS through the IRS Data Retrieval Tool,  an IRS tax return transcript, or an IRS Verification of Non-filing Letter.  FAFSA applicants selected to verify their household size must provide a  signed statement that provides the name, age, and relationship to the  student of each person in the household.\nFor IDR plans, Education could implement follow-up procedures for IDR  applications it identifies as at risk for fraud or error and seek additional  documentation from borrowers. For example, to verify reports of no  income, borrowers could be asked to provide an IRS Verification of Non- filing Letter, documentation that the borrower recently lost a job, or  documentation that shows income the borrower receives is nontaxable,  such as public assistance benefits. To verify family size, as is the case  with FAFSA verification, borrowers could be asked to provide a signed  statement with the names, ages, and relationship to the borrower of each  family member. Another option might be to request that borrowers  provide documentation showing that family members (other than the  borrower\u2019s spouse and children) receive mail at the borrower\u2019s address  as well as documentation of the financial support provided by the  borrower. Such follow-up procedures would be consistent with federal  internal control standards advising managers to design control activities  to achieve program objectives and respond to risks.\n\n\tConclusions\n\nWhile Income-Driven Repayment plans can help borrowers with limited  incomes afford their monthly student loan payments, these plans can also  result in high costs to the federal government and taxpayers. To minimize  these costs, it is important that Education accurately determine monthly  payment amounts under its IDR plans. Because these determinations are  based on income and family size information that borrowers self-report,  there is risk for potential fraud or error. Our data matching analysis  showed, for example, that tens of thousands of borrowers who were not  making monthly loan payments because they reported zero income on  IDR applications may have had enough income to do so. Where  appropriate, we are referring these borrowers to Education for further  investigation. In addition, an increase in family size can cause a  borrower\u2019s payments to decrease, creating a potential incentive for fraud,  and our analysis found atypically large family sizes that are generally not  verified by Education. The results of our analyses highlight the risk for  fraud or error, as well as weaknesses in Education\u2019s procedures. In turn,  the weaknesses we identified raise questions about the strength of  Education\u2019s institutional oversight of a major program involving hundreds  of billions of dollars. The fact that, cumulatively, the borrowers and their  plans we reviewed owed over $6 billion in loans helps illustrate the risk of  potential financial loss for the government from fraud or error absent  comprehensive oversight.\nIt is important for Education to take steps to obtain data to verify borrower  reports of zero income and to implement other data analytic practices and  follow-up procedures for verifying borrower-reported information. Such  actions would help ensure that (1) IDR payment amounts are based on  information that accurately represents a borrower\u2019s situation and is free  from fraud and error; and (2) the federal government\u2019s fiscal exposure to  IDR loans is safeguarded from the risk of loss. Implementing data analytic  practices and follow-up procedures to review and verify borrower reports  of zero income could help deter borrowers from inaccurately reporting  zero income and detect those who have done so, either fraudulently or in  error. Similarly, implementing practices and procedures to review and  verify reported family sizes could further stem potential fraud or error.  Without such changes, IDR plans will remain vulnerable to fraud and  error, potentially raising program costs for the federal government and  taxpayers.\n\n\tRecommendations for Executive Action\n\nWe are making the following three recommendations to Education\u2019s  Federal Student Aid office:  The Chief Operating Officer of Federal Student Aid should obtain data in  order to verify income information for borrowers reporting zero income on  IDR applications. For example, Education could pursue access to federal  data sources or obtain access to an appropriate private data source.  (Recommendation 1)\nThe Chief Operating Officer of Federal Student Aid should implement  data analytic practices, such as data matching, and follow-up procedures  to review and verify that borrowers reporting zero income on IDR  applications do not have sources of taxable income at the time of their  application. (Recommendation 2)\nThe Chief Operating Officer of Federal Student Aid should implement  data analytic practices, such as data mining, and follow-up procedures to  review and verify family size entries in IDR borrower applications. For  example, Education could review and verify all borrower reports of family  size or a subset identified as being most susceptible to fraud or error.  (Recommendation 3)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this report to the Departments of Education  (Education) and Health and Human Services (HHS) for review and  comment. HHS provided technical comments, which we incorporated as  appropriate. We also provided relevant report sections to the Social  Security Administration and the four loan servicers included in our review  for technical comments. Loan servicers provided technical comments,  which we addressed as appropriate.\nEducation generally agreed with our recommendations, stating that it  plans to implement significant additional verification policies to ensure  that borrowers who participate in IDR plans do not misrepresent their  income or family size to the department.\nWhile Education agreed with our recommendation to obtain data in order  to verify income for borrowers reporting zero income, it suggested that  GAO may wish to convert this recommendation to a Matter for  Congressional Consideration to provide Education with access to IRS  data. In its response, Education stated that the President\u2019s fiscal year  2020 budget request includes a proposal that Congress pass legislation  allowing the IRS to disclose tax return information directly to the  department for the purpose of administering certain federal student  financial aid programs. According to Education, such legislation, if  enacted, would allow borrowers to more easily certify their income on an  annual basis to maintain enrollment in IDR plans, and allow the  department to use the information to mitigate improper payments to  borrowers as a result of misreported income data. Education also stated  that in the meantime, it would explore whether commercially available  data are sufficient in terms of scope, reliability, and cost effectiveness.  Given that there are existing actions Education can take to implement our  recommendation, we believe our recommendation is appropriate.  Moreover, we believe that Education is best positioned to determine  whether the proposal, if enacted, would address our recommendation, or  if it would need to be expanded or modified in order to do so.\nRegarding our second recommendation, Education stated that it would  develop data analytic practices to verify borrower reports of zero income  contingent upon the enactment of legislation providing the department  with access to federal income data. However, implementing our  recommendation does not necessarily require Education to wait for such  legislation. Our draft report describes data analytic practices, such as  anomaly detection, which Education could implement using its own data  to identify deviations from expected patterns in data over time. Education  also stated that it plans to develop additional follow-up procedures to  verify borrower reports of zero income, such as requiring borrowers to  substantiate reports of zero income with appropriate documentation. In  addition, Education described plans to formalize procedures to make  referrals to Education\u2019s Office of Inspector General or the Department of  Justice for suspected cases of IDR fraud.  We encourage Education to  combine its follow-up procedures with data analytic practices to satisfy  the recommendation.\nEducation agreed with our third recommendation to implement data  analytic practices and follow-up procedures to verify family size, noting  that this information could be subject to misrepresentation or erroneous  reporting by borrowers. Education stated that it would review various data  points that can be used to select IDR applications and certifications for  additional review prior to approval, such as providing more scrutiny when  borrowers report unusual increases in family size from one year to the  next. Education also stated that it plans to formalize additional procedures  to require certain borrowers to substantiate their family size. For example,  Education will consider requiring IDR applicants to provide statements  listing each household member and how they are related to the borrower.\nAs 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 Education, the Chief Operating Officer of  Federal Student Aid, and other relevant parties. In addition, the report will  be available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  us at (617) 788-0534 or emreyarrasm@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  III.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report examines (1) whether there are indicators of potential fraud or  error in income and family size information provided by borrowers seeking  to repay their loans with Income-Driven Repayment (IDR) plans and (2)  the extent to which the Department of Education (Education) verifies this  information.\nTo address these questions, we reviewed relevant IDR policies and  procedures from Education and its four largest loan servicers\u2014Navient,  Nelnet, Great Lakes Educational Loan Services, Inc., and the  Pennsylvania Higher Education Assistance Agency. We selected these  loan servicers because, at the time of our analysis, together they serviced  96 percent of the outstanding balance of loans being repaid with IDR  plans as of September 2017. We also interviewed Education officials  from Federal Student Aid, the office responsible for developing policies  and procedures for administering IDR plans and overseeing how loan  servicers carry them out, as well as the officials from the selected loan  servicers. Additionally, we reviewed relevant federal laws and regulations  and Education\u2019s procedures for verifying information on the Free  Application for Federal Student Aid. We assessed Education\u2019s  procedures against federal standards for internal control for developing  sufficient control activities, risk assessment, and information and  communication. We also assessed Education\u2019s procedures against the  leading practices for data analytics activities in GAO\u2019s Framework for  Managing Fraud Risks in Federal Programs.\nTo determine whether there were indicators of potential fraud or error in  borrowers\u2019 income and family size information on IDR plans, we obtained  data from Education\u2019s Enterprise Data Warehouse and Analytics (EDWA)  database on borrowers with William D. Ford Federal Direct Loans (Direct  Loans) and IDR plans approved between January 1, 2016 and  September 30, 2017, the most recent data available at the time of our analysis. EDWA is a centralized data warehouse that contains  administrative data reported by loan servicers on IDR borrowers and their  loans. Some borrowers had multiple approved IDR plans in the data we  analyzed. We also obtained national quarterly wage data from the U.S.  Department of Health and Human Services\u2019 (HHS) National Directory of  New Hires (NDNH) for the same time period. NDNH is a national  repository of information reported by employers, states, and federal  agencies. The NDNH is maintained and used by HHS for the federal child  support enforcement program, which assists states in locating parents  and enforcing child support orders. In addition to information on newly  hired employees, NDNH contains (1) data on quarterly wages for existing  employees, collected and reported by state workforce agencies and  federal agencies; and (2) data on all individuals who apply for or received  unemployment compensation, as maintained and reported by state  workforce agencies.\nFor our analysis of borrower-reported incomes, we matched  approximately 656,600 Education borrowers to NDNH quarterly wage  data to determine if any borrowers who reported zero income on their IDR  applications had wages reported in the same quarter in which their IDR  plans were approved. We took additional steps to further review and  refine these matches and provide reasonable assurance that the NDNH  wage data were associated with the correct borrower by comparing (1)  the borrower\u2019s state of residence as reported in the Education data to the  state agency submitting the NDNH wage data and (2) the borrower\u2019s  name as reported in the Education data to the employee name reported  in the NDNH data. For the refined matches, we then estimated whether  the borrowers may have had sufficient annual wages based on wages  reported in NDNH to potentially warrant monthly student loan payments  greater than zero dollars on their associated IDR plan. Specifically, we  aggregated all NDNH wages reported for the borrower in the quarter in  which their IDR plan was approved to determine a total quarterly wage  amount. We then multiplied the total quarterly wage amount by four\u2014the  number of quarters in a calendar year\u2014to generate an estimate of annual  wages for the borrower. Our approach was based on the methodology  Education instructs loan servicers to use to calculate annual wages when  borrowers provide an alternative to a tax return to document their income  on IDR applications. This methodology may understate or overstate  income given that borrowers may not have earned the same amount in  each of the four quarters. Our estimates of annual wages are based on  the wages reported in NDNH for each borrower and do not take into  account any pre-tax deductions that may apply when determining IDR  payments. Our estimates of annual wages also do not include borrowers\u2019  spousal income or any other taxable income for the borrower that is not  included in the NDNH quarterly wage data\u2014such as unemployment  compensation received or unearned income such as alimony. We did not  independently verify the wages reported in NDNH or the actual total  annual income earned by borrowers identified in our match, as this was  outside the scope of our review.\nUsing the estimated annual wage, we then determined whether a  borrower would have had a monthly payment greater than zero by using  Education\u2019s IDR plan repayment calculations for each IDR plan. To  calculate the monthly payment, we used (1) the estimated annual wage  from our NDNH data analysis; (2) the family size reported on the  borrower\u2019s approved IDR plan; (3) the borrower\u2019s approved IDR plan  type; and (4) the relevant percentage of the HHS poverty guideline  amount for the borrower\u2019s family size, state of residence, IDR plan  approval year, and IDR plan type. For borrowers on Income-Based  Repayment, New Income-Based Repayment, Pay As You Earn, and  Revised Pay As You Earn plans, we rounded all calculated monthly  payments that were less than $5 down to zero, in accordance with  Education\u2019s repayment calculations. We then identified which borrowers  had calculated payments that were greater than zero. We did not  determine the actual repayment amount borrowers may have had, as this  was outside the scope of our review. Finally, for borrowers for whom we  had calculated a payment greater than zero, we determined the total  outstanding Direct Loan balance (principal and accrued interest) as of  September 2017, based on EDWA data.\nFor our analysis of borrower-reported family sizes, we analyzed the  overall distribution of family sizes reported on approximately 5 million  approved IDR plans. We reviewed the percentile distribution for family  size on all IDR plans in our analysis and identified those in the top 1  percent of the data\u2014in this case, IDR plans that had a reported family  size of nine or more. We defined these IDR plans as having atypical  family sizes for the Education data. We did not independently verify the  family size reported on the IDR plans. For the borrowers with family sizes  of nine or more, we determined the total outstanding Direct Loan balance  (principal and accrued interest) as of September 2017.\nTo examine the effects of borrowers inaccurately reporting income and  family size on loan payment amounts, we analyzed the estimated monthly  loan payment amounts for various hypothetical repayment scenarios from  Education\u2019s online repayment estimator as of January 2019, which used  the 2018 HHS poverty guidelines. To examine the effect of various family  sizes on loan payment amounts, we assumed a hypothetical borrower  lived in the continental United States; had an adjusted gross income of  $40,000; an outstanding Direct Loan balance of $30,000 (close to the  average outstanding Direct Loan balance of $33,600 as of September  2018); and an interest rate of 5.1 percent (the Direct Loan 2018-2019  interest rate for an undergraduate borrower). To examine the effect of  various incomes on monthly payment amounts, we assumed hypothetical  borrowers had adjusted gross incomes based on estimated annual wages  common in our data matching analysis ($30,000, $45,000, and $60,000),  a family size of one (meaning just the borrower), and lived in the  continental United States. For this analysis, we also assumed  hypothetical borrowers had an interest rate of 5.1 percent and an  outstanding Direct Loan balance of $50,000, which we selected to be high  enough to qualify these hypothetical borrowers for all IDR plans at each  of the selected income levels.\nTo assess the reliability of the EDWA data, we reviewed documents  related to the database and Education loan data generally; interviewed  knowledgeable Education officials; performed electronic testing to  determine the validity of specific data elements that we used to perform  our work; compared the data we received to published Education data on  the number of IDR borrowers and amount of their outstanding loans; and  compared borrowers\u2019 personal information to the Social Security  Administration\u2019s Enumeration Verification System to identify borrowers  whose information may not have been accurate. As part of our reliability  assessment of the EDWA data, we selected a nongeneralizable sample  of 16 borrowers and their IDR plan and loan information from the EDWA  data to compare against four selected loan servicers\u2019 records.  Specifically, we stratified borrowers into two groups based on common  and potentially outlying incomes and family sizes in the EDWA data. We  then randomly selected two borrowers from each stratum for each of the  four selected loan servicers (a total of four borrowers per loan servicer).  We reviewed all IDR plan data in our scope for each selected borrower,  including the plan type, family size, income, and total monthly payment.  We did not review original documents, such as the IDR applications or  documentation of income. We discussed the results of our review with  knowledgeable Education and loan servicer officials to gain additional  understanding of each selected borrower\u2019s IDR plan information as well  as any differences between EDWA and loan servicer data.\nWe originally obtained EDWA data on approximately 6.5 million IDR plans  approved between January 1, 2016 and September 30, 2017 that were  held by almost 4.8 million Direct Loan borrowers. Based on data reliability  issues we identified during our review, we had to limit the scope of our  analysis to a subset of EDWA data that we determined were sufficiently  reliable for our purposes. Education officials disclosed issues that  impacted the IDR plan data reported to Education by one of its loan  servicers. Specifically, Education and the loan servicer had identified  instances where the loan servicer\u2019s internal data were changed for valid  reasons but the changes were not reported to Education correctly. As a  result, we excluded data reported by this servicer from all analyses in our  report. We also identified issues with monthly payment amounts for some  borrowers in the EDWA data. Accordingly, we limited our borrower- reported income analysis to borrowers who reported zero income and had  a scheduled monthly payment of zero dollars. Ultimately, we analyzed  about 878,500 IDR plans held by about 656,600 borrowers for our income  analysis and approximately 5 million IDR plans held by 3.5 million  borrowers for our family size analysis. Consequently, our overall income  and family size analyses results may be understated and are not  generalizable to all IDR plans and borrowers.\nConsistent with our report scope, our analyses of borrower-reported  income focused on identifying indications of potential fraud or error;  however, our analyses do not show that fraud or error occurred. It is not  possible to determine whether fraud or error occurred through data  matching alone. As previously discussed, our estimates of annual wages  are based on the NDNH quarterly wage data, and do not take into  account any deductions that may be applicable for determining adjusted  gross income, which is used to determine IDR plan payment amounts. As  a result, our estimates could overstate borrowers\u2019 incomes for IDR plan  purposes. Additionally, wages are reported in NDNH quarterly, so we are  not able to determine when in a quarter a borrower earned wages. For  example, a borrower may have earned wages at the start or end of a  quarter, but was not earning wages at the time of submitting the IDR  application. Because borrowers are only required to certify their income  annually, such a scenario would not constitute fraud or error even though  it would result in a match in our analysis. In addition, our use of  Education\u2019s methodology to annualize wages based on quarterly wages  may understate or overstate income if a borrower did not earn wages at  the same level over the entire year. We are also not able to identify  additional taxable income that is not reported to NDNH but should have  been included on borrowers\u2019 IDR applications, which could understate  borrowers\u2019 incomes. Consequently, our analysis may overstate or  understate the number of borrowers who reported no income on their IDR  application yet may have had sufficient wages to warrant a monthly  student loan payment.\nTo assess the reliability of the NDNH data, we reviewed documents  related to the database, interviewed knowledgeable HHS officials, and  performed electronic testing to determine the validity of specific data  elements in the NDNH data that we used to perform our work. On the  basis of our own reliability assessment results, we determined that the  NDNH data were sufficiently reliable for the purposes of this report.\nWe conducted this performance audit from June 2017 to June 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.\n\nAppendix II: Comments from the U.S. Department of Education\n\nAppendix III: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contacts named above, Debra Prescott and Philip Reiff  (Assistant Directors), Nancy Cosentino and Mariana Calder\u00f3n (Analysts- in-Charge), Sarah Cornetto, Jeffrey G. Miller, and Rachel Stoiko made  key contributions to this report. Additional assistance was provided by  Susan Aschoff, David Ballard, Deborah Bland, Benjamin Bolitzer, Melinda  Cordero, Vijay D\u2019Souza, Kevin Daly, Angie Jacobs, Candace Silva-Martin,  Sheila R. McCoy, Maria McMullen, Kevin Metcalfe, John Mingus, Drew  Nelson, Mimi Nguyen, Matt Valenta, and Ariel Vega.","output":null}
{"id":"gao_GAO-20-269SP","pid":"gao_GAO-20-269SP_0","input":"\tState and Local Governments Will Need to Make Policy Changes to Achieve Fiscal Balance\n\nOur simulations suggest that the sector will likely continue to face a  difference between revenues and expenditures during the next 50 years,  as measured by its operating balance. We simulated the state and local  government sector\u2019s operating balance\u2014a measure of the sector\u2019s ability  to cover its current expenditures out of current revenues\u2014to understand  the sector\u2019s long-term fiscal outlook based on historical revenue patterns  and other assumptions. Because a great majority of states and many  local governments are required to balance or nearly balance their  operating budgets, the operating balance illustrates the magnitude of  fiscal pressures they face. Expenditures and revenues are both  simulated to increase as a percentage of gross domestic product (GDP)   during the simulation period. However, expenditures are generally  expected to grow at a faster rate than revenues, resulting in a declining  operating balance (see figure 1).\nOne 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 annual changes in expenditures  and in revenues our simulations suggest would be needed to maintain the  operating balance equal to zero during the 50-year simulation period. The  sector could close the fiscal gap through an increase in revenues, a  reduction in expenditures, or a combination of the two of sufficient  magnitude. Our simulations suggest that the fiscal gap is about 3.6  percent of GDP over the next 50 years.\nThe sector will need to take actions in annually reducing its expenditures  or raising revenues, to achieve fiscal balance. Assuming no change in  simulated expenditures, the sector would need to take actions equivalent  to increasing its total revenues by 4.2 percent each year to achieve fiscal  balance. Alternatively, assuming no change in its simulated revenues, the  sector would need to take actions equivalent to decreasing its noninterest  expenditures by an amount equal to 3.2 percent of its total expenditures  each year. Total expenditure reductions required by the sector are 20.7  percent each year, which includes interest payments on debt that are  simulated to be 17.4 percent of annual spending. To eliminate the fiscal  gap, the sector would most likely take actions that include a combination  of expenditure reductions and revenue increases.\n\n\tHealth Care Cost Growth and Other Factors Contribute to the State and Local Sector\u2019s Fiscal Imbalance\n\n\t\tStates\u2019 Spending on Medicaid is a Key Driver of Long-Term Expenditures\n\nOur simulations suggest that growth in the sector\u2019s overall expenditures is  largely driven by health care expenditures. Medicaid will likely constitute a  growing expenditure for state and local governments. In 2018, Medicaid  spending was 2.9 percent of GDP compared to 0.85 percent of GDP for  other kinds of health care spending such as non-Medicaid social benefit  payments and employee health benefit contributions. At the end of our  simulations, Medicaid is simulated to be 4.6 percent of GDP and the other  kinds of health care spending are 1.3 percent of GDP. After 2029,  Medicaid spending in our simulations is derived from Centers for  Medicare & Medicaid Services\u2019 (CMS) projections. On average, Medicaid  expenditures are expected to rise by 1 percentage point more than GDP  each year over the simulation period. Breaking this down, Medicaid  expenditures per capita are expected to increase, on average, about 0.6  percent faster than GDP per capita\u2014referred to as excess cost growth.\nExcess Cost Growth   The extent to which health care costs per  capita outpace gross domestic product (GDP)  growth per person.\nAs shown in figure 4, health care expenditures are simulated to increase  from about 3.94 percent of GDP in 2019 to 5.9 percent of GDP in 2068. In  comparison, nonhealth, noninterest expenditures, which include all other  operational expenditures other than debt interest payments, will decrease  as a share of GDP by 2.74 percentage points over the simulation period.  Per capita, national health expenditures, which make up part of the health  care expenditures in the figure below, are expected to grow on average  0.8 percent faster than GDP each year during the simulation period,  according to CMS.\n\n\t\tEmployee Compensation Decreases as a Share of the Sector\u2019s Expenditures during the Simulation Period\n\nEmployee compensation is the largest expenditure for the state and local  government sector. It declines from 6.8 percent of GDP in 2018 to 6.1  percent of GDP in 2068. All spending components, including employee  compensation, are simulated to increase in actual dollar amounts during  our simulation period. Of the spending components included in employee  compensation, only health benefits for employees and retirees increase  as a share of employee compensation. In contrast, wages and salaries,  pension contributions, and other forms of compensation decrease as a  share of employee compensation (see figure 5). These percentages  reflect a simulated decrease in state and local government employees\u2019  compensation as a share of GDP.\nOur simulations suggest that spending on health benefits for state and  local government employees and retirees is likely to rise, on average, by  0.9 percentage points more than GDP each year. Similar to the growth in  Medicaid spending, growth in spending for these health benefits is due to  an increase in the simulated number of employees and retirees enrolled  as well as an increase in the simulated amount of health benefits for each  employee and retiree. According to our simulations, if employee and  retiree health benefits follow trends in overall national health spending,  they will likely make up an increasingly larger share of total employee  compensation going forward.\nOur simulations suggest that annual contributions to state and local  government employee pension plans will need to remain at their historical  10-year average of 12.9 percent of wages and salaries for state and local  governments to meet their long-term pension obligations. Prior to the  last decade, from 1999 to 2008 the state and local government sector  averaged about an 8 percent contribution rate, which was lower than what  our current simulations show is necessary for meeting pension  obligations. State and local government contributions to employee  pension plans are simulated to decline as a share of GDP, as are wages  and salaries of state and local government employees.\n\n\t\tGrowth in Federal Medicaid Grants Drives Revenues\n\nOur simulations suggest that federal grants will increase slightly as a  share of GDP. The largest grant receipts are for Medicaid which will likely  grow more quickly than other types of federal grants making up an  increasing share of revenues in the future (see figure 6). The increase in  Medicaid expenditures simulated during this period will likely put  increasing pressure on both federal and state governments. As a  matching formula grant program, the simulated increase in federal  Medicaid grants implies an expected increase in Medicaid expenditures  that will be shared by state governments. 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  simulated to decline as a share of GDP.\nFurther, 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 8.7  percent of GDP in 2019 to 9.1 percent of GDP by the end of the  simulation period. As shown in figure 7, the different components of total  tax revenues are simulated to remain fairly consistent or slightly increase.  The simulations suggest that personal income tax revenues will increase  as a share of GDP by about 0.5 percentage points during the simulation  period. Sales tax is expected to decrease by approximately 0.2  percentage points and property taxes are simulated to slightly increase as  a share of GDP through 2068 from 2.73 percent to 2.86 percent.\n\n\t\tEconomic Growth and Other Factors Could Affect the Sector\u2019s Fiscal Outlook\n\nSensitivity Analysis   An analysis using alternative assumptions of  one variable to determine the uncertainty, or  sensitivity, of another variable.\nSeveral factors, or key model variables, could affect the state and local  government sector\u2019s long-term fiscal outlook, including economic growth,  health care excess cost growth, and the rate of return on pension assets.  To see how the outlook changes in response to them, we developed  sensitivity analyses\u2014simulations that use alternative assumptions about  their growth. For each of these key variables we use a baseline  assumption, a higher-than-baseline assumption, and a lower-than- baseline assumption. We determined that these alternative assumptions  highlighted the operating balance\u2019s sensitivity to changes, shifting the  future fiscal outcomes for the sector.\n\n\t\t\tEconomic Growth\n\nFuture trends in GDP growth could affect the state and local government  sector\u2019s fiscal outlook. In our simulations, GDP growth is based on the  most recent data from the Congressional Budget Office (CBO) and the  Board of Trustees of the Federal Old-Age and Survivors Insurance and  Federal Disability Insurance Trust Funds (OASDI Trustees) which project  real GDP (adjusted for inflation) to grow by 1.9 percent per year on  average from 2018 through 2029, and by 2 percent per year on average  after 2029. Using these projections, our simulations suggest that  maintaining current policies would cause the sector\u2019s operating balance to  become increasingly negative. Using the OASDI Trustees\u2019 alternative  assumptions of real GDP growth at a faster rate\u20142.7 percent\u2014suggests  that the operating balance, while remaining negative, would have an  improved outlook compared to the baseline.\nWhile growth in revenue and health care spending is largely tied to GDP  in our simulations, spending for other components is tied to inflation and  population growth and grows more slowly than GDP. As such, increases  in GDP growth improve the sector\u2019s outlook. Our simulations, using the  OASDI Trustees\u2019 alternative assumptions also show that if GDP were to  grow at a slower rate\u20141.4 percent\u2014the difference between revenues  and expenditures would expand, resulting in an increasingly negative  operating balance (see figure 8).\nExcess cost growth in health care is another key determinant of the  sector\u2019s fiscal balance. In our simulations Medicaid spending per capita  grows about 1.8 percent faster than GDP per capita on average for the  period from 2020 through 2029. Medicaid spending per capita grows  about 0.6 percent faster on average from the period from 2030 through  2068. Other health expenditures per capita grow about 0.8 percent faster  than GDP per capita for the period from 2019 through 2068. Using these  projections, our simulations suggest that maintaining current policies will  cause the sector\u2019s expenditures to exceed its revenues and this  difference will become increasingly negative during the next several  decades.\nThe simulations developed assuming zero excess cost growth in  Medicaid and national health expenditures suggest that spending would  be lower as a share of GDP. The difference between revenues and  expenditures would be significantly less negative than the baseline  simulations around the middle of the simulation period before stabilizing,  but remain negative over the simulation period. In the scenario using the  alternative projections from CMS where excess cost growth rises faster\u2014 0.6 percent on average for Medicaid for the period from 2030 through  2068 and 0.9 percent for national health expenditures for the period  between 2019 through 2068\u2014our simulations show that the difference  between revenues and expenditures would persist for the remainder of  the simulation period (see figure 9).\nThe 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 would need to make pension contributions  equivalent to about 13 percent of employees\u2019 wages and salaries to meet  their long-term pension obligations. The simulations we developed using  a higher rate of return\u20147.5 percent\u2014suggest that pension contributions  would be about 3 percent of state and local government employees\u2019  wages and salaries to meet pension obligations. Under this scenario,  spending would need to be a lower share of GDP and the sector\u2019s outlook  would improve. The difference between revenues and expenditures would  briefly narrow early on before becoming increasingly negative through the  remainder of the simulation period.\nAlternatively, we estimated that if the rate of return on pension assets is  relatively low\u20142.5 percent\u2014required pension contributions would need to  be about 24 percent of state and local government employees\u2019 wages  and salaries. Under this scenario our simulations show that spending  would be a higher share of GDP and the sector\u2019s outlook would worsen  as the sector\u2019s negative operating balance would continue to grow larger  (see figure 10).\nThis 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 are listed in  appendix II.\n\nAppendix I: Objectives, Scope, and Methodology\n\n\tData\n\nThis update of the state and local government fiscal model used  aggregate data on the state and local government sector and national  data on other variables from the following sources: the Agency for  Healthcare Research and Quality, Bloomberg, the Board of Governors of  the Federal Reserve System, the Board of Trustees of the Federal Old- Age, Survivors, and Disability Insurance Program (OASDI Trustees),  BEA, the Bureau of Labor Statistics, the Census Bureau, the Centers for  Medicare & Medicaid Services (CMS), the Congressional Budget Office  (CBO), and the Social Security Administration. These data sources are  generally the same data sources we used for our prior update. We used  annual observations on historical data through 2018 where available.\n\n\tObjectives and Methodology\n\nThis report updates GAO\u2019s state and local fiscal model to simulate the  fiscal outlook for the state and local government sector. This includes  identifying the factors that are likely to contribute to the state and local  sector\u2019s fiscal imbalance. The level of receipts and expenditures for the  state and local government sector as a whole in future years is based on  current and historical spending and revenue patterns. We used Table 3.3  of the National Income and Product Accounts (NIPA)\u2014State and Local  Government Current Receipts and Expenditures\u2014prepared by BEA as an  organizing framework for developing our model, and we simulated state  and local government receipts and expenditures using methods similar to  those we have used in prior updates. Our simulations of real U.S. gross  domestic product (GDP) were consistent with the growth path developed  by CBO for the period from 2019 through 2029 and by the OASDI  Trustees for the period thereafter. Our simulations of U.S. population was  consistent with the growth path developed by the OASDI Trustees, and  our simulations of excess cost growth for national health expenditures  and for Medicaid were consistent with CMS projections, all for the entire  simulation period. Our simulations of other variables, such as the GDP  price index, personal income, and 3-month U.S. Department of the  Treasury (Treasury) rates, were consistent with the growth paths for  these variables developed by CBO for as much of the simulation period  as possible. Otherwise, we developed our own assumptions about the  likely future growth path of the variables in our model. In general, we  assumed that current policies remain in place and that all levels of  government continue to provide services at current per capita levels. A  detailed description of the model is in appendix I of GAO, State and Local  Governments\u2019 Fiscal Outlook: 2018 Update, GAO-19-208SP  (Washington, D.C.: December 2018). We describe below where we  updated equations or added equations to the model. Otherwise our  approach is the same as the approach we used in that update.\n\n\t\tState and Local Government Sector Receipts\n\nWe simulated the future growth paths of the following types of state and  local government revenues: current tax receipts, contributions to  government social insurance, income on financial assets, current transfer  receipts, the surplus from government enterprises, and capital transfer  receipts. We also simulated the future growth path of state and local  government long-term debt issuance. We updated some of the equations  we used to simulate tax receipts(see table 1). We also added equations  to simulate current transfers from the rest of the world to state and local  governments, disaster-related insurance benefits to state and local  governments, and other capital transfers to state and local governments,  which we had not included in prior updates. The equations we used to  simulate the other types of receipts are the same as the equations we  used in GAO-19-208SP.\nWe simulated the future growth paths of the following types of state and  local government expenditures: consumption expenditures, current  transfer payments, interest paid on outstanding state and local  government debt, subsidies, capital outlays, and consumption of fixed  assets (depreciation). We also simulated the future growth path of the  state and local government sector\u2019s net social insurance fund balance.  We updated some of the equations we used to simulate the interest paid  on outstanding state and local government debt (see table 1 above). We  also added equations to simulate current transfer payments to the rest of  the world, which we had not included in prior updates. Otherwise, the  approach we used to simulate expenditures is the same as the approach  we used in GAO-19-208SP.\n\n\t\tState and Local Government Sector Fiscal Balance\n\nOur 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 receipts. Operating balance is defined as total receipts  minus (1) capital outlays not financed by long-term debt issuance, (2)  current expenditures less depreciation, (3) current surplus of state and  local government enterprises, and (4) net social insurance fund balance.\nWe also estimated the annual changes in spending and in receipts that  our simulations suggest would be needed to maintain the operating  balance equal to zero during the 50-year simulation period, which we  refer to as the \u201cfiscal gap.\u201d As discussed above, our baseline simulations  assume that current policies remain in place and that all levels of  government continue to provide services at current per capita levels. We  then simulated the change in total expenditures needed to maintain the  operating balance equal to zero. To estimate the annual change in  spending needed to maintain balance we calculated the present value of  that change as a percentage of the present value of baseline total  expenditures and as a percentage of the present value of U.S. GDP, all  for a 50-year period. We also calculated the interest and non-interest  expenditure components of the change in total expenditures needed to  maintain balance. We used a similar approach to estimate the annual  change in total receipts needed to maintain balance.\n\n\t\tSensitivity Analysis\n\nWe assessed the sensitivity of our baseline results to alternative  projections of real U.S. GDP growth, health care excess cost growth, and  the real rate of return on state and local government pension fund assets.  Following the same approach we used in GAO-19-208SP, for each of  these variables, we selected an alternative projection associated with  faster growth or rate of return and one associated with slower growth or  rate of return.\nReal U.S. GDP. For our baseline simulations, we used CBO  projections of real GDP for the period from 2019 through 2029 and the  OASDI Trustees\u2019 intermediate projections of real U.S. GDP growth for  the years thereafter. For our sensitivity analysis, we used the OASDI  Trustees\u2019 high-cost and low-cost projections.\nHealth care excess cost growth. For our baseline simulations, we  used CMS\u2019s baseline projection of national health expenditures  excess cost growth and we estimated Medicaid excess cost growth  based on CMS\u2019s baseline projections. For our sensitivity analysis, we  used CMS\u2019s alternative projection of national health expenditures  excess cost growth and we estimated Medicaid excess cost growth  based on CMS\u2019s alternative projections. As another alternative, we  simulated the model assuming both zero excess cost growth for  national health expenditures and Medicaid.  Our simulations used  CBO\u2019s projection of federal spending on Medicaid, CHIP, and  exchange subsidies as a fraction of GDP to simulate certain variables  related to state and local government spending on Medicaid and other  health spending.  This projection incorporates excess cost growth for  the period from 2019 through 2029 but assumes zero excess cost  growth starting in 2030, so we could only vary Medicaid excess cost  growth in the alternative simulations for 2030 and later.\nReal 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. For our sensitivity  analysis, we used 2.5 percent and 7.5 percent.\nTable 2 shows the growth rates or rates of return associated with the  baseline and alternative projections of each variable for the simulation  period.\nWe simulated the model changing either real U.S. GDP growth, health  care excess cost growth, or the real rate of return on pension assets,  leaving the other variables fixed at their baseline values. 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.\n\n\tCaveats and limitations\n\nOur approach has a number of limitations and the results should be  interpreted with caution. First, the state and local 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 in tax laws and expenditures, the  model essentially holds current policies 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.\nIn addition, fiscal outcomes related to the sector\u2019s financial position and  solvency may not reflect all aspects of the sector\u2019s \u201chealth.\u201d 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.\nFinally, 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 and their fiscal  outlooks will likely differ from the sector as a whole. Nevertheless, it is  informative to assess the overall fiscal outlook because doing so reveals  the outlook for state and local governments as a sector. In addition,  aggregate data on the sector is available on a more timely basis than  data for individual state and local governments, allowing 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.\n\nAppendix II: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tAcknowledgments\n\nIn addition to the contact named above, Peter Del Toro, Courtney  LaFountain, Melissa Wolf (Assistant Directors), Silvia Symber (Analyst-in- Charge), Shelby Clark, Amalia Konstas, Dylan Stagner, Frank Todisco,  Walter Vance, and Alicia White made significant contributions to this  report.\n\nRelated GAO Products\n\nState and Local Governments\u2019 Fiscal Outlook: December 2018 Update,  GAO-19-208SP. Washington, D.C.: Dec. 12, 2018.\nState and Local Governments\u2019 Fiscal Outlook: December 2016 Update,  GAO-17-213SP. Washington, D.C.: Dec. 8, 2016.\nState and Local Governments\u2019 Fiscal Outlook: December 2015 Update,  GAO-16-260SP. Washington, D.C.: Dec. 16, 2015.\nState and Local Governments\u2019 Fiscal Outlook: December 2014 Update,  GAO-15-224SP. Washington, D.C.: Dec. 17, 2014.\nState and Local Governments\u2019 Fiscal Outlook: April 2013 Update,   GAO-13-546SP. Washington, D.C.: Apr. 29, 2013.\nState and Local Governments\u2019 Fiscal Outlook: April 2012 Update,   GAO-12-523SP. Washington, D.C.: Apr. 5, 2012.\nState and Local Government Pension Plans: Economic Downturn Spurs  Efforts to Address Costs and Sustainability, GAO-12-322. Washington,  D.C.: Mar. 2, 2012.\nState and Local Governments\u2019 Fiscal Outlook: April 2011 Update,   GAO-11-495SP. Washington, D.C.: Apr. 6, 2011.\nState and Local Governments: Knowledge of Past Recessions Can  Inform Future Federal Fiscal Assistance, GAO-11-401. Washington, D.C.:  Mar. 31, 2011.\nState and Local Governments: Fiscal Pressures Could Have Implications  for Future Delivery of Intergovernmental Programs, GAO-10-899.  Washington, D.C.: July 30, 2010.\nState and Local Governments\u2019 Fiscal Outlook: March 2010 Update,   GAO-10-358. Washington, D.C.: Mar. 2, 2010.\nUpdate of State and Local Government Fiscal Pressures, GAO-09-320R.  Washington, D.C.: Jan. 26, 2009.\nState and Local Fiscal Challenges: Rising Health Care Costs Drive Long- term and Immediate Pressures, GAO-09-210T. Washington, D.C.: Nov.  19, 2008.\nState and Local Governments: Growing Fiscal Challenges Will Emerge  during the Next 10 Years, GAO-08-317. Washington, D.C.: Jan. 22, 2008.\nOur 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.\nState and Local Governments: Persistent Fiscal Challenges Will Likely  Emerge within the Next Decade, GAO-07-1080SP. Washington, D.C.:  July 18, 2007.","output":null}
{"id":"crs_R45813","pid":"crs_R45813_0","input":"\tIntroduction\n\nConsumer finance encompasses the financial lives of individuals and households. Americans aspire for economic advancement and wealth building, a central part of the American dream. Safe and affordable financial services are an important tool for most American households to avoid financial hardship, build assets, and achieve financial security over the course of their lives. Households use three types of financial products regularly: credit, insurance, and financial investments. This report will focus on the first category\u00e2\u0080\u0094credit and deposit-taking financial products for personal, family, or household purposes. \nMost households rely on credit to finance some expenses because they do not have enough assets saved to pay for them. Mortgage debt is by far the largest type of household debt. According to data from the Federal Reserve Bank of New York, as shown in Figure 1 , mortgages account for approximately 67% of household debt. Student loans are the second-largest type of household debt, followed by auto loans and credit cards. \nThese and other major consumer finance markets are discussed in more detail in this report under \" Overview of Major Consumer Finance Markets ,\" which provides a brief overview of each financial product, recent market developments, and related policy issues. Major consumer finance markets examined in this report include mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. In general, this report will focus on the consumer and household perspective, and consumer protection policy issues in each market.\nThis report also discusses two important market structures that allow these consumer financial products to be offered: (1) the consumer credit reporting system and (2) the debt collection market. These aspects of the consumer credit system are important because they facilitate the pricing of credit offers and the resolution of delinquent consumer credit products for most consumer credit markets. \nThe report begins with an overview of U.S. household finances, consumer finance markets, and common policy issues in these markets.\n\n\tConsumer Finance Policy Issues and Regulation\n\nConsumer finance refers to the saving, borrowing, and investment choices that households make over time. These financial decisions can be complex and can affect households' financial well-being both now and in the future. Understanding why and how consumers make financial decisions is important when considering policy issues in consumer financial markets.\nThis section provides an introduction to U.S. households' finances, including a breakdown of a household balance sheet and its components. It then provides background on how consumer financial markets operate and general issues in these markets. The section also describes common policy interventions and considerations when using these policy tools. Lastly, this section provides an overview of the Bureau of Consumer Financial Protection (CFPB)\u00e2\u0080\u0094the main regulator responsible for consumer compliance of financial products and services.\n\n\t\tHousehold Balance Sheet Background\n\nA household's balance sheet is similar to a firm's in that it presents a full financial picture, including the following components of a household's financial position:\nAssets \u00e2\u0080\u0094A point-in-time value of what a household owns; can include liquid wealth , such as a savings account or other financial assets from which the household can easily access funds, and illiquid wealth , such as a car or home that the household owns. Debts \u00e2\u0080\u0094A point-in-time value of what a household owes; can include a home mortgage, a student loan, or other types of consumer loans. Net Worth \u00e2\u0080\u0094Equal to assets minus debts , measures the wealth of a household, including home equity. Income \u00e2\u0080\u0094Wages earned from a job or financial investment returns over a period of time (e.g., a year). Consumption \u00e2\u0080\u0094Household spending over a period of time, such as rent, food, clothing, and entertainment. Savings \u00e2\u0080\u0094The difference between income and consumption over a period of time. When a household's income is greater than its consumption, it can save or invest this unconsumed income, increasing the household's assets or paying off debt owed, reducing the household's total debts . Borrowing \u00e2\u0080\u0094New debts taken out over a period of time. When a household's consumption is greater than its income , it can either spend assets it owns or borrow money, increasing the household's debts .\nIn general, research on household finance suggests that all of the components of a household balance sheet\u00e2\u0080\u0094assets, debts, net worth, income, consumption, savings, and borrowing\u00e2\u0080\u0094are important to understanding a household's financial experience over time. For example, in the event of a financial shock \u00e2\u0080\u0094an unexpected expense such as a car or home repair, a medical expense, or a pay cut\u00e2\u0080\u0094households with a lower income or little liquid savings are much more likely to experience difficulty making ends meet. As this example suggests, all of the balance sheet's components need to be accounted for when considering consumer decisionmaking.\nAs demonstrated in Figure s 2 and 3 , household income and net worth in the United States are both distributed unevenly. According to the Federal Reserve Board's (Fed's) Survey of Consumer Finances, the bottom 20% of U.S. households ranked by income have an income below $25,300, whereas the top 10% have an income above $177,100. Likewise, the bottom 25% of U.S. households ranked by net worth have a net worth below $10,300, whereas the top 10% have a net worth above $1,186,300. These distributions reflect the variation of household balance sheets within the United States and are due to many factors, such as age, size of household, and household decisions about jobs, homeownership, and other factors.\n\n\t\tConsumer Finance Markets and Policy Considerations\n\nThis report examines household borrowing, with a particular focus on consumer financial products, such as mortgages, credit cards, and auto loans, which allow a household to borrow and make payments. As described in the previous section, consumer behavior in these markets may be driven by other parts of the balance sheet, such as the need to build assets or withstand a financial shock. Three common reasons households use credit are as follows:\nAsset Building \u00e2\u0080\u0094Using credit to make investments can allow a household to build wealth over time. For example, a household can use a mortgage to pay for an asset, such as a house, that may appreciate over time. A household also can use student loans to fund education expenses to make a higher income in the future. In both cases, households are using credit to fund household investments that may lead to greater wealth in the future. Consumption Smoothing \u00e2\u0080\u0094Using credit to move income across time periods allows a household to consume future income now. For example, recent college graduates might use credit cards to pay for expenses before their new jobs begin. This money is more valuable to graduates now, before they have wages, than in the future, when they have enough income to meet living expenses. Financial Shocks or Emergencies \u00e2\u0080\u0094Using credit to pay for unexpected expenses allows a household to compensate for an emergency, such as a car or home repair, a medical expense, or a pay cut. For example, a consumer might take out a payday loan to repair a car and continue to go to work. This money is more valuable to the consumer during the financial emergency than in the future.\nEach consumer financial market is unique and governed by various distinct laws and regulations. However, consumer financial markets generally share similar market dynamics. In all of these markets, consumers often act in similar ways when making financial decisions, and firms tend to act in comparable ways across markets to attract consumers and make profits. Therefore, the government tends to consider similar policy interventions and factors when regulating these markets.\nMainstream economic theory asserts that competitive free markets generally lead to efficient distributions of goods and services to maximize value for society. Under this theory, each market moves toward an efficient price, at which the supply of goods produced by firms and the amount of goods demanded by consumers equal one another. If consumers demand credit products, then banks or other lenders should want to provide these products to consumers if they can make a profit. Without major barriers for new lenders to enter the market, more lenders should start providing credit to consumers, until the price is no longer excessively profitable to lenders. At this point, the market is at equilibrium, its efficient outcome for society. If these conditions hold, policy interventions cannot improve on the financial decisions that consumers make based on their unique situations and preferences. For this reason, some policymakers are hesitant to disrupt free markets, on the theory that prices determined by market forces lead to efficient outcomes without intervention.\nThe life-cycle model is a prevalent economic hypothesis that assumes households usually want to keep consumption levels and their lifestyles stable over time. For example, severely reducing a household's consumption one month may be more painful for a household than the pleasure of a much higher household consumption level in another month. Therefore, households save and invest during their careers in order to afford a stable income across their lives, including retirement. This model suggests that wealth increases as households age, which generally fits household data in the United States. However, income and wealth inequality continues to exist after controlling for household age, suggesting that age is not the only important factor.\nThere are also circumstances where the life-cycle model fails to correspond to household behavior in the United States. A recent National Bureau of Economic Research (NBER) working paper on behavioral household finance identifies three facts about U.S. household balance sheets. First, income and consumption move together very closely, unlike the stable consumption that the life-cycle model would predict. Second, U.S. households on average tend to have low levels of liquid wealth, such as money in a savings account, and a high incidence of credit card borrowing. Third, most U.S. households have much of their wealth in illiquid assets, such as home equity. These patterns might fit the life-cycle model if borrowing money is inexpensive and illiquid assets have higher returns than liquid assets. However, these assumptions might not apply to all households and other explanations might fit these patterns better. Generally, these three facts are important background to better understand consumer behavior in financial markets. These facts suggest why many U.S. households depend on access to affordable credit and robust consumer financial markets, both for short-term needs and for building wealth over time.\nIn these theoretical frameworks, m arket failures occur when a free market is inefficient due to departures from the standard economic framework, which includes assumptions about perfect information and perfect competition. Market failures can reduce economic efficiency and consumer welfare. In these cases, government policy can potentially correct market failures to bring the market to a more efficient outcome, maximizing social welfare. Yet, policymakers often find it challenging to determine whether a policy intervention will help or harm a particular market's efficiency.\nThe following sections discuss two specific departures from the conditions associated with economic efficiency\u00e2\u0080\u0094imperfect information and behavioral biases. These market failures are important to understanding consumer credit markets.\n\n\t\t\tImperfect Information\n\nImperfect information, or information asymmetry, is when one party in a transaction (e.g., a firm) has more accurate or more detailed information than the other party (e.g., a consumer). This imbalance can result in inefficient outcomes. For example, ideally consumers in a mortgage market will shop around among lenders for the best interest rate, fees, and other terms for their own personal situations. Yet, acquiring information (e.g., contacting a variety of different lenders to compare loan terms) can be time consuming. Consumers might also be willing to spend more to save time or to have a better experience closing their mortgage. However, if information asymmetry exists\u00e2\u0080\u0094for example, if interest and fee costs are hidden, confusing, or difficult to obtain\u00e2\u0080\u0094some consumers might choose a mortgage loan that is not optimal based on the criteria they deem to be important. In this case, the mortgage market will not lead to efficient societal outcomes, possibly costing some consumers more for a loan than is necessary and dissuading some consumers who otherwise would from entering the market. Information asymmetries occur in the opposite way as well. Often, lenders might not have accurate or detailed information about a consumer, making it hard for them to estimate a consumer's likelihood of default on a loan. The credit reporting industry developed to give lenders more information about a consumer and make the markets for consumer credit more efficient. For more information on the credit reporting industry, see the section of this report titled \" Credit Reporting, Credit Bureaus, and Credit Scoring .\"\n\n\t\t\tBehavioral Biases in Consumer Decisionmaking\n\nBehavioral research suggests that humans tend to have biases in rather predictable patterns. This research suggests that the human brain has evolved to quickly make judgments in bounded, rational ways, using heuristics\u00e2\u0080\u0094or mental shortcuts\u00e2\u0080\u0094to make decisions. These heuristics generally help people make appropriate decisions quickly and easily, but sometimes, they can result in choices that make the decisionmaker worse off financially. Within consumer finance markets, a few of these biases tend to be particularly important:\nChoice Architecture \u00e2\u0080\u0094Research suggests that how financial decisions are framed can affect consumer decisionmaking in many ways. For example, people can be anchored by an initial number, even if it is different from their next choice. In one illustration of this concept, researchers had subjects spin a wheel of fortune with numbers between zero and 100, then asked them the percentage of African countries in the United Nations. The random number generated in the first stage subconsciously affected subjects' guesses in the second stage, even though they were not related. Another example of a decisionmaking bias is defaults . For example, employees are more likely to be enrolled in a 401(K) plan by employer defaults than if they actively need to make a choice. A third example of a framing bias is loss aversion , the idea that people tend to respond more strongly to potential losses than gains. Therefore, when choices are framed as a potential loss, such as \"an opportunity you don't want to miss,\" consumers respond more strongly than they do to potential benefits. Present Bias and Scarcity \u00e2\u0080\u0094When people tend to put more value on having something now, rather than in the future, even when there is a large benefit for waiting, this behavior is called present bias . In addition, even when people decide they should do something difficult, such as saving for the future or choosing a retirement plan, self-control and procrastination may prevent them from following through on their intentions. These human biases might lead consumers to make financial decisions that are not optimal. Furthermore, a scarcity mindset can make optimal decisionmaking more difficult. Difficult decisions, such as managing finances, require cognitive bandwidth. When under extreme stress, such as living in poverty, people may tunnel their vision, focusing on immediate needs (e.g., paying current bills), rather than prioritizing based on the big picture (e.g., increasing future income). Self-control might also be a limited resource for humans, where the more self-control a person needs to exert over a day, the harder it is to maintain. These limitations to human cognitive functioning can sometimes lead consumers to make flawed financial decisions. Budgeting Biases ( Mental accounting ) \u00e2\u0080\u0094Often, households use mental accounts, amounts of money mentally allocated in advance for different purposes, to make consumption decisions. For example, a household may have a monthly budget for food, clothing, and entertainment. Even though money is fungible, many households act as if spending in one category does not affect spending in another category. This categorization is an intuitive and simple way of thinking about a budget. Although this thinking reduces cognitive effort, it can also lead to predictable biases. For example, research suggests that people have trouble forecasting unusual or infrequent expenses. For this reason, these expenses are generally not fully accounted for in the mental budget, leading to overspending. \nAlthough consumers might not be aware of these biases when making financial decisions, they are important because firms can take advantage of them to attract consumers. For example, choice architecture biases might influence how marketing materials are developed, emphasizing certain terms to make a financial product seem more desirable to consumers. In addition, product features may be developed to take advantage of people's present bias, scarcity mindset, or mental accounting mistakes. \n\n\t\tCommon Policy Interventions and Considerations\n\nIn response to market failures, such as information asymmetry and behavioral biases, the government uses policy interventions intended to bring consumer markets to a more efficient market outcome. Three types of policy interventions are common in consumer finance: \nStandardized Consumer Disclosures \u00e2\u0080\u0094Financial products can be complex and difficult for consumers to fully understand. Mandated consumer disclosures are a common policy intervention in consumer financial markets, generally intended to give consumers more information about the costs and terms before they take out a new financial product, thus reducing asymmetric information market failures. Standardized disclosures can also help consumers shop for the best terms, because all financial product terms are required to be disclosed in the same way. Furthermore, because disclosure structure and formatting are often standardized, mandated consumer disclosures can also account for choice architecture biases. Laws that mandate consumer disclosures in financial markets include the Truth in Lending Act (TILA), which requires standardized disclosures for certain consumer credit products, and the Truth in Savings Act, which requires standardized disclosures for certain bank accounts. Unfair, Deceptive, or Abusive Practices or Acts \u00e2\u0080\u0094Consumers seeking loans or financial services could be vulnerable because some consumers may lack financial knowledge or be susceptible to biases described in the above section. For this reason, certain consumer protection laws prohibit unfair, deceptive, or abusive acts or practices in consumer financial markets. These acts and practices can include both individual firm conduct and product features. Fair Lending \u00e2\u0080\u0094Fair lending laws prohibit discrimination in credit transactions based upon certain borrower characteristics, such as sex, race, religion, and age. These laws historically have been interpreted to prohibit both intentional discrimination and disparate impact discrimination, in which a facially neutral business decision has a discriminatory effect on a protected class. Federal fair lending laws in consumer financial markets include the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Home Mortgage Disclosure Act (HMDA).\n\n\t\t\tPolicy Considerations\n\nThe market effects of new laws or regulations are important considerations. Does the policy on average lead the market closer to or farther from its efficient outcome? In consumer financial markets, both households and firms may react to new policy. If all of a policy's potential impacts are not considered, it can have unintended effects and perhaps fail to reach policymakers' objectives. \nFrom a consumer perspective, new policy formulations should consider the policy's effect on consumer decisionmaking, the impact on household well-being over time, and whether these effects might vary across the population. For example, a new disclosure policy might improve consumer comprehension, but not consumer decisionmaking, thus failing to affect the market as intended. In other cases, a subset of consumers may be susceptible to a deceptive practice. If a new policy eliminates that deceptive practice in the market, the policy may only affect that subset of consumers who were susceptible, rather than the whole consumer population.\nFrom a firm's perspective, new policy formulation should consider both the cost for firms to implement the policy as well as its impact on the market's competitiveness, both within and outside of the regulated market. Another important consideration is the policy's impact on consumer prices and financial product availability. For example, complying with a new regulation might require a firm to bear costs. This might force lenders to raise prices, or lenders who cannot bear the additional costs may leave the market. Higher prices and less choice may result in consumers seeking other credit products outside of the market, or reduce consumers' ability to access credit. \n\n\t\tBureau of Consumer Financial Protection Bureau\n\nMost experts agree that an important factor in the 2008 financial crisis was a housing bubble that led lenders to relax their underwriting standards (or the process by which a lender determines whether a borrower is creditworthy), which in some cases led to consumer protection abuses. In response, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established the CFPB to implement and enforce federal consumer financial law while ensuring consumers can access financial products and services. The CFPB's statutory purpose is to enable markets for consumer financial services and products to be fair, transparent, and competitive. Dodd-Frank consolidated certain consumer finance-related responsibilities previously held by other regulators in the CFPB and created new authorities unique to the CFPB. The act also directed the CFPB to develop and implement financial education initiatives, collect consumer complaints, and conduct consumer finance research.\nThe CFPB generally has regulatory authority over providers of an array of consumer financial products and services, including deposit taking, mortgages, credit cards and other extensions of credit, loan servicing, consumer reporting data collection, and debt collection associated with consumer financial products. The CFPB's authorities and the breadth of products, services, and entities that fall within its jurisdiction are considerable, but Dodd-Frank imposes some important exceptions to and limitations on those powers. The CFPB's authorities fall into three broad categories: rulemaking , writing regulations to implement laws under its jurisdiction ; supervision , the power to examine and impose reporting requirements on financial institutions; and enforcement of various consumer protection laws and regulations.\nThe CFPB is authorized to prescribe regulations to implement 19 federal consumer protection laws that largely predated Dodd-Frank. These enumerated consumer laws govern a broad and diverse set of consumer financial services and generally apply to any entity offering those services. Dodd-Frank also provided CFPB new power to issue rules declaring certain acts or practices associated with consumer financial products and services to be unlawful because they are unfair, deceptive, or abusive. Other aspects of the CFPB's regulatory power\u00e2\u0080\u0094particularly the scope of its supervisory and enforcement authority\u00e2\u0080\u0094vary depending on a number of factors, including an institution's size and whether it holds a bank charter.\nThe CFPB is headed by a director appointed by the President with the consent of the Senate for a five-year term. It is located within the Federal Reserve System (Fed), although the Fed does not influence the CFPB's budget or personnel decisions. The Fed also cannot veto a rule issued by the CFPB, but the Financial Stability Oversight Council can overturn a CFPB rule with the vote of two-thirds of its members. The CFPB is funded through the Fed's earnings, rather than through the typical appropriations process. The CFPB requests monetary transfers from the Fed, with a cap on the amount of these transfers based on a formula set in statute. For FY2018, the CFPB's funding cap was $663 million, and the agency's net operating costs were $553 million.\n\n\tOverview of Major Consumer Finance Markets\n\nThe following sections examine specific issues within major consumer debt markets: mortgage lending, student loans, automobile loans, credit cards and payments, payday loans and other credit alternative financial products, and checking accounts and substitutes. The markets discussed are under the CFPB's jurisdiction, and sometimes that of other regulators as well. Each section briefly describes the financial product, recent market developments, and selected policy issues that may lead each market away from its efficient price or outcomes. These sections focus on the consumer and household perspective as well as consumer protection policy issues in each market. \n\n\t\tMortgage Lending Market\n\nA mortgage loan is a loan collateralized by a house and its land. Generally, consumers use these loans to purchase a new home or refinance an existing one. These types of mortgages are often called first liens, because if a consumer defaults on the loan, the lender is typically the first in line to be compensated through the proceeds of a home foreclosure. First-lien mortgage loans are usually installment loans, in which the consumer pays off the loan in monthly installments over 15 years or 30 years. Most mortgage loans in the United States have a fixed interest rate and fixed installment amount over the course of the loan, affected by the consumer's credit score and market conditions. \nHouseholds buying a new home and taking out a mortgage loan to purchase it generally cannot borrow for the house's full value. To limit the risk to the lender, borrowers are typically required to make a down payment, the difference between the house's value and the mortgage loan. If the down payment is less than 20% of the home's value, the borrower is often required to pay for additional insurance.\nIn addition to first-lien purchase mortgages, a consumer may choose to take out a home equity line of credit (often referred to as HELOC) or a smaller installment mortgage loan, which often is a second lien. A second lien means that the lender is second in line, after the first lien holder, to be compensated if the consumer defaults and the home is foreclosed upon. These loans are underwritten using the home's value, but can be used for a variety of different purposes either related to the home or not. For example, second mortgages can be used to renovate the home, pay for college, or consolidate credit card debts.\nMortgage loans are by far the largest consumer credit market in the United States, and homes are a large part of most households' wealth. According to the Fed, more than $9 trillion of mortgage debt is currently outstanding, and more than $15.5 trillion in real estate equity is owned by households. As of the first quarter of 2019, 64.2% of U.S. households owned their home. Many people view homeownership as an important way to build wealth over time, through both price appreciation and home equity gained by paying down their mortgages. Nevertheless, because home prices can fluctuate over time, this investment can be risky, especially if the homeowner only stays in the home for a short time. Although homeownership has certain benefits, such as tax benefits like the mortgage interest tax deduction, it also imposes costs on the household, such as mortgage loan closing costs and home maintenance.\nAs noted above, most experts believe that a housing price bubble was a central cause of the 2008 financial crisis. In response, Dodd-Frank reformed the mortgage market by attempting to strengthen mortgage underwriting standards, to reduce the risk that consumers default on their mortgages even if house prices fluctuate in the future. Dodd-Frank also directed the CFPB to update federal mortgage disclosure forms (called the combined TILA\/RESPA form) and improve standards for mortgage servicing (a company who manages mortgage loans after the loan is originated).\nDuring and after the financial crisis, mortgage lenders tightened underwriting standards, making it harder for consumers to qualify for a loan. Although most borrowers with good credit scores continued to qualify for mortgage credit, other borrowers in weaker financial positions found it more difficult to obtain a mortgage. As the economy has recovered, concerns exist about whether new consumer compliance regulation in the mortgage market has struck the right balance between prudent mortgage underwriting and access to credit for potential borrowers to build wealth. Certain features of mortgages during the mortgage boom that were considered to be particularly risky, such as teaser interest rates and loans with little or no income verification, are now uncommon in the mortgage market. However, research suggests that regulating underwriting standards may have caused lenders to prefer certain borrowers, such as those with lower debt-to-income ratios.\nMortgage shopping is another policy issue in this market. Consumers do not tend to shop among lenders for more advantageous mortgage interest rates, even though large price differences exist in the market. According to the CFPB, nearly half of all borrowers only seriously consider one lender or broker before taking out a mortgage. Given the range of interest rates available to a consumer at any given time, the CFPB estimates that a consumer could save thousands of dollars on a mortgage by shopping for the best interest rates. \nHouse price affordability has been another policy issue in recent years. In high-cost, large metropolitan areas, house prices rose quickly in the past decade, making it harder for consumers to buy a home in these cities. Likewise, the national homeownership rate has declined by almost 5 percentage points since 2005, from 69.1% to 64.2%. Given that homeownership can help a family build wealth over time, this trend concerns some policymakers.\n\n\t\tStudent Loans\n\nStudent loans allow students and their families to pay for postsecondary education expenses while they are enrolled in school. Education is an investment intended to allow students to earn higher incomes after they complete school and throughout the rest of their careers. In general, student loans are paid back in installments\u00e2\u0080\u0094for example, a fixed payment every month for 10 years. Student loan debt has more than doubled in the past decade. Since 2010, student loan debt has been the second-largest category of consumer debt, after mortgage debt. In academic year 2016-2017, the average amount of student loan debt for a bachelor's degree recipient who borrowed funds to complete the degree was $28,500.\nUnlike other consumer financial markets, most student loans are originated and owned by the federal government. In general, these federal loans are accessible to large portions of the postsecondary student population and their families with limited underwriting of their creditworthiness, estimated future income, or other estimates of their ability to repay the loan. The Department of Education (ED) manages most of the federal student loan programs. Congress sets interest rates and other loan terms and conditions in statute each year. ED contracts out student loan servicing, sets servicing standards in these contracts, and enforces these servicing standards. The CFPB is the primary regulator for private student loan lending and servicing and has also asserted a role in ensuring compliance with consumer protection laws related to federal student loan servicing.\nFrom a regulatory perspective, policymakers continue to debate what role the CFPB should play in the federal student loan industry. Consumer groups advocate for more active CFPB enforcement of consumer protection standards in federal student loan servicing. However, because ED already assumes a significant role in how its contractors service federal student loans\u00e2\u0080\u0094and taxpayers are responsible for additional servicing costs and default risk for nonpayment\u00e2\u0080\u0094some have questioned the need for the CFPB to regulate in the same space. \nA major concern in the student loan market is whether students are able to manage their debt after graduation. Moreover, unlike other consumer debts, student loans are generally not dischargeable during a bankruptcy proceeding except in limited circumstances. These concerns have led to efforts to make loan repayment terms more flexible. For example, some federal student loan borrowers now have the option to choose income-driven repayment plans, under which a borrower's monthly loan payments are based on a percentage of the borrower's discretionary income. Loan forgiveness programs have also been developed and expanded in recent years, especially for borrowers in public service occupations. ED manages several of the student loan forgiveness and repayment loan programs. Reports from the CFPB student loan ombudsman have uncovered issues in these programs' implementation\u00e2\u0080\u0094such as with payment processing, billing, customer service, and borrower communication\u00e2\u0080\u0094that make it difficult for borrowers to know their options, understand the process, and qualify for forgiveness or repayment loan programs.\nQuestions have also arisen regarding student loan availability and whether loans should be limited to certain types of educational programs that enable their students to gain quality employment and successfully pay back their loans. Many students make school choice and curriculum decisions at a young age, when they might not have much experience making financial decisions. In addition, information on program quality and student employment outcomes after graduation is limited. These information asymmetry problems can make it difficult for students to make good financial decisions for their future careers. Questions also exist about the extent to which student loan access causes tuition prices to rise. For example, if access to student loans makes it easier for schools to raise tuition, then it might lead to some students being worse off. Some question whether the availability of student loans might harm the larger economy. For example, researchers debate student loan debt's effects on future macroeconomic performance, including effects on career choice, family formation, home ownership, and retirement savings.\n\n\t\tAutomobile Loans\n\nAn automobile (auto) loan allows a consumer to finance the cost of a new or used car. Auto loans are usually structured as installment loans, in which a consumer pays a fixed amount of money each month for a predetermined time period, frequently three to seven years. Lenders often require consumers to make a down payment to obtain the loan. Auto loans are secured by the automobile, so if a consumer cannot pay the loan, the lender can repossess the car to recoup the loan's cost.\nAuto loans are the third-largest consumer credit market. At the end of 2018, 113 million consumers\u00e2\u0080\u0094roughly 45% American adults\u00e2\u0080\u0094had an auto loan, and auto loan debt outstanding totaled almost $1.3 trillion. According to the CFPB, auto loan terms have increased recently. In 2009, 26% of auto loans originated were for six or more years, whereas in 2017, these loans constituted 42% of originations. This trend may be due in part to rising vehicle costs and consumers keeping their cars longer.\nReportedly, most auto loans are arranged at the auto dealership where the car is purchased, referred to as the indirect auto financing market . Indirect auto financing involves the auto dealer forwarding information about the prospective borrower to one or more lenders to solicit potential financing offers. The dealer is often compensated for originating the loan through a discretionary markup, which is the difference between the lender's interest rate and the rate a consumer is charged. The lender may cap the possible size of the dealer markup (e.g., 2.5%) to limit the loan from becoming too susceptible to default. Auto dealers and consumers can negotiate the loan's interest rate within this range, and therefore indirectly determine how much to compensate the auto dealer for the convenience of arranging the loan.\nAlternatively, consumers can go directly to a bank, credit union, or other lender for an auto loan before making their purchases, avoiding the dealer markup cost. Consumers may prefer arranging auto financing through an auto dealer or directly through a lender, depending on their preferences regarding convenience, cost, and other factors. In either case, the lender usually owns the loan and can service it itself or through a third-party company.\nIn the indirect auto financing market, the dealer markup arrangement can incentivize the auto dealer to negotiate\u00e2\u0080\u0094and profit from\u00e2\u0080\u0094a higher interest rate with the consumer. The auto dealer may also choose the lender who compensates it the most\u00e2\u0080\u0094for example, the lender that allows the largest markup, rather than the lender offering the best terms for the consumer. Although other consumer credit markets include markups, it is less common for bank or credit union lenders to allow an outside broker in the transaction discretion as to the amount of the markup. For example, although the Real Estate Settlement Procedures Act restricts such practices in the mortgage market, after reports of mortgage brokers steering customers to more expensive loans due to \"kickbacks\"\u00e2\u0080\u0094unearned fees for a referral\u00e2\u0080\u0094in the lead-up to the financial crisis, Congress in 2010 took actions to further restrict these practices.\nThe information asymmetry in the indirect auto finance market sometimes can lead to higher prices for consumers. Consumers are not always aware that they can negotiate on loan terms when obtaining dealer-arranged financing. For this reason, many consumers do not shop for auto loans. Consumers' lack of awareness\u00e2\u0080\u0094combined with auto dealers' discretion on markups\u00e2\u0080\u0094may leave them vulnerable to bad actors, making the auto loan market uncompetitive.\nThe CFPB oversees consumer protection compliance for auto lenders, but not for auto dealers' typical activities. Dodd-Frank states that \"the Bureau may not exercise any [authority] over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.\" The scope of this exclusion continues to be debated, given the key role auto dealers play in the auto lending market.\nIn 2013, the CFPB issued a controversial bulletin providing guidance to indirect auto lenders on how to comply with the Equal Credit Opportunity Act (ECOA). This guidance generally stated that indirect auto lenders should impose controls on or revise and monitor dealer markups to ensure they do not result in disparate impact based on race or other protected classes. From 2013 to 2016, the CFPB, in coordination with the Department of Justice, issued consent orders to settle enforcement actions against American Honda Finance Corporation, Toyota Motor Credit Corporation, Fifth Third Bank, and Ally Financial & Ally Bank for ECOA violations in indirect auto lending markets. The CFPB generally alleged that these institutions violated ECOA by permitting their dealers to charge markups that resulted in disparate impacts on the basis of race and ethnicity. Auto lenders generally do not collect information on the race or ethnicity of borrowers. In the absence of direct evidence, the CFPB used a new proxy methodology, a statistical method developed for estimating race and ethnicity using geography and surname-based information. Although this method may not be able to flawlessly identify race or ethnicity for an individual, aggregate, company-wide estimates of disparate impacts are much more precise. In general, these institutions did not admit or deny the allegations as part of the consent orders but, among other things, paid monetary penalties and agreed to limit their markups to reduce these alleged disparities. \nThe CFPB's indirect auto lender guidance and the resulting enforcement actions were the subject of significant attention and debate. For example, some expressed the view that the guidance went beyond what ECOA and the Dodd-Frank Act require of auto lenders, while others considered it an important step toward addressing discrimination. In 2018, Congress rescinded the guidance pursuant to the Congressional Review Act. Nevertheless, some observers argue that discrimination in auto lending markups continues to be an area of concern.\n\n\t\tCredit Cards and Payments\n\nRetail payment services allow consumers to pay merchants for goods and services without cash, sometimes called a payment transaction . Consumers can use these services to pay bills, make person-to-person payments, or withdraw cash. These services can be found in many consumer financial products, including credit, debit, and prepaid cards and checking accounts. Given the rise of internet shopping, retail payment services have become especially critical for consumers to be able to make daily purchases. The most common methods of payment are debit cards, cash, and credit cards, respectively. Debit and prepaid cards generally are associated with a funded account from which the consumer draws money to pay for transactions. In contrast, credit cards allow a consumer to pay for transactions using credit.\nAccording to the CFPB, in 2017, just under 170 million consumers, roughly 70% of the U.S. adult population, had a credit card. Credit cards provide consumers with unsecured revolving credit, meaning the loan is not secured with any collateral if the consumer defaults (and thus, the lender has no recourse to seize any property connected to the loan in case of consumer default). In some cases, credit cards are used for payment transaction convenience and paid in full each month without incurring interest. These types of users are sometimes called transactors . In other cases, credit card users borrow money up to a credit limit and make only a m inimum payment (generally a small portion of the outstanding balance) on the debt each month, incurring interest on the unpaid balance. These types of credit card users are called revolvers . In 2016, average interest rates for general purpose credit cards were just over 17%. Although a consumer can move between transacting and revolving, consumers tend to show persistent payment behavior. According to a Fed survey, roughly half of consumers transact and half revolve. \nCredit cards are valuable to consumers in part because they are flexible\u00e2\u0080\u0094both the amount borrowed and the amount paid can vary each month according to the consumer's needs. For example, if a household experiences a financial shock, such as unemployment or a car or house repair, the household can use credit cards to borrow money quickly and easily, which the household can then pay back when it is able. Credit cards can also be used to smooth consumption over time, which may be particularly valuable to households with tight budgets. \nHowever, credit cards also are structured in a way that can take advantage of many consumer decisionmaking biases, which can result in households incurring debt. For example, mental accounting biases can lead to overspending, and credit cards allow households to overspend easily, perhaps without even realizing it until their monthly bill is due. Research suggests that the half of credit card holders who are persistently in credit card debt are likely to be present biased and have little liquid savings. \nThe type of information disclosed in a typical credit card statement may play an important role in how revolving consumers repay credit card debt. Research suggests that many people are anchored by the minimum payment amounts included in each statement, which bias their decisions about how much to pay each month. Specifically, the research suggests these consumers are either paying the minimum payment or employing heuristics to pay near the minimum (e.g., twice the minimum or $20 above the minimum). This cue may unconsciously influence consumers to make a lower payment than they otherwise would.\nFor these reasons, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) established new disclosure requirements for credit cards. The CARD Act changed the periodic disclosure credit card companies are required to make to consumers to include information on how long it will take to pay off a consumer's debt if the consumer makes only the minimum payment. The disclosure also now includes the amount a consumer would have to pay to repay the debt in three years and how much interest the consumer would save by paying the debt off in three years compared with the minimum payment. These changes in the disclosure requirements were intended to nudge consumers to pay more on their credit cards each month, but research suggests that they did not have as big of an effect on consumer payment behavior as intended, in part because online portals\u00e2\u0080\u0094which have become a popular method of credit card payment\u00e2\u0080\u0094are not required to contain these disclosures. \n\n\t\tPayday and Other Credit Alternative Financial Products106\n\nWhen consumers face financial shocks, such as unemployment or a car repair, sometimes they need credit to manage the unforeseen event. One option a consumer may access is a short-term, small-dollar loan, which tends to be outstanding for a short period of time and for a small amount of money, generally less than $1,000. Banks and credit unions sometimes provide these types of loans through cash advances or checking account overdraft programs. Many consumers, often those with a low credit score or no credit history, also turn to alternative financial products from a nonbank institution to provide credit when needed. Alternative financial products include payday loans, pawn shop loans, auto title loans, and other types of products from nonbank providers. According to the Federal Deposit Insurance Corporation (FDIC), in 2017, 19.7% of American households did not have access to mainstream credit and 6.9% used a credit alternative financial service. Households that rely on credit alternative financial services are more likely to be lower-income, younger, and a racial or ethnic minority compared to the general U.S. population. \nPerhaps the best known of these products are payday loans, which have been the subject of significant regulatory, congressional, and media attention. Payday loans are structured as short-term advances that allow consumers to access cash before they receive a paycheck. These loans are designed to be paid back on a consumer's next payday. Payday loans are offered through storefront locations or online for a set fee. The underwriting of these loans is minimal, with consumers required to provide little more than a paystub and checking account information to take out a loan. Rather than paying off the loan entirely when it is due, many consumers roll over or renew these loans. Sequences of continuous rollovers may result in consumers being in debt for an extended period. Because consumers generally pay a fee for each new loan, payday loans can become expensive.\nIn 2010, the Dodd-Frank Act authorized the CFPB to oversee payday lenders for the first time at the federal level, but prohibited the CFPB from imposing an interest rate limit on any type of credit, including payday loans. As of February 2019, 17 states and the District of Columbia either ban or limit the interest rates on these loans.\nIn the payday market, policy disagreements tend to center on balancing access to credit with consumer protection. The academic research is mixed in terms of payday loans' effect on consumer well-being. When consumers have emergencies, short-term, small-dollar credit can help them make ends meet. Payday loans' product features, such as the option to roll over, can allow consumers to pay back their loan flexibly, but also can play into cognitive biases, including present biases and scarcity tunnel vision. Some consumers pay off payday loans quickly, but a sizable minority are in debt for a long period of time\u00e2\u0080\u0094a CFPB study found 36% of new payday loan sequences were repaid fully without rollovers, while 15% of sequences extended for 10 or more loans.\nIn October 2017, during the leadership of then-Director Richard Cordray, the CFPB finalized a rule covering payday and other small-dollar, short-term loans that has not yet gone into effect . The 2017 rule asserts that it is \"an unfair and abusive practice\" for a lender to make certain types of short-term, small-dollar loans \"without reasonably determining that consumers have the ability to repay the loans.\" The rule would mandate underwriting provisions for short-term, small-dollar loans unless made with certain features. In February 2019, the CFPB under Trump-appointed Director Kathy Kraninger issued a proposed rule that would rescind the mandatory underwriting provisions before the 2017 final rule goes into effect. The 2019 proposed rule would leave unchanged other parts of the 2017 rule, such as other payment provisions relating to protections for consumers paying back these loans.\nGiven the concerns about consumer harm from payday and other small-dollar, short-term loans , some financial institutions are interested in exploring other loan models that try to give consumers access to credit for short-term needs at a lower cost and with an easier re pay ment process . For this reason, prudential regulators, such as the Office of the Comptroller of the Currency (OCC) and the FDIC, are exploring ways to encourage banks to offer small-dollar credit products to consumers. However, i t is unclear whether these different types of products can improve outcomes for consumers compared to payday loans , given that the population of consumers these products would target and those consumers' biases concerning money management are likely similar.\n\n\t\tChecking Accounts and Substitutes\n\nChecking accounts allow consumers to deposit money and make payments, for example, using bill pay and paper checks. Frequently, a checking account includes access to a debit card, to increase a consumer's ability to make payment transactions through the account. Checking accounts are generally provided by a bank or credit union, and consumers' deposits are government insured (up to a certain amount) against the institution's failure.\nIn recent years, the availability of free or low-cost checking accounts has reportedly diminished, and fees associated with checking accounts have grown. The most common fees that checking account consumers incur are overdraft and nonsufficient fund fees. Consumers can incur an overdraft when they transact below their account balance, and the bank or credit union covers the negative balance for the consumer for a fee. In general, negative balance episodes are short in duration. According to the CFPB, half of all episodes last three or fewer days, and more than three-quarters last a week or less. \nOverdraft services can help consumers pay bills on time. However, overdraft fees can be costly, particularly for consumers who are inattentive or tend to overspend due to tight budgets and mental accounting biases. CFPB research suggests that a small number of checking account holders incur most overdraft fees, with 8.3% of consumers overdrafting more than 10 times per year and accounting for 73.7% of overdraft fees. According to the CFPB, these frequent overdrafters tend to be more credit constrained, have lower credit scores, and are less likely to have a general-purpose credit card than the general U.S. population. \nIn 2009, a provision of the CARD Act required consumers to affirmatively opt in for overdraft coverage of ATM withdrawals and nonrecurring deb i t card transactions. Since this requirement was implemented, opt-in rates have tended to vary by bank , from single-digit percentages to more than 40% within particular institutions . Frequent overdrafters who opt in to overdraft services seem to have similar characteristics to those who do not opt in, but tend to pay more in fees. Given this research, consumer advocates have raised concerns about whether overdraft programs are sufficiently transparent and whether consumers receive sufficient disclosures regarding these programs. Advocates have also questioned how financial institution practices influence the opt-in decision. \nOverdrafts may be caused by the lapse of time between payment authorization, account settlement, and when funds are available to the consumer. Because of these time lapses in the payments system, some consumers may not realize no funds are available when they overdraft their account. For this reason, some argue that a faster payment system or other financial planning products may help consumers keep better track of their balances, preventing overdrafts.\nOverdraft fees may lead to involuntary checking account closures, leaving some households without access to a bank account. According to the FDIC, in 2017, 6.5% of households were unbanked , meaning that no one in the household had a checking or savings account from an insured institution. Unbanked households tend to be younger and are more likely to be racial or ethnic minorities than the general U.S. population. The main reasons households cite for not having a bank account include insufficient account funds, not trusting banks, and high account fees. Moreover, in 2017, an additional 18.7% of households were underbanked , meaning that the household obtained financial products or services outside of the banking system, products sometimes called alternative financial services. Certain observers contend that financial outcomes for the unbanked and underbanked would be improved if banks\u00e2\u0080\u0094which may be a more stable source of relatively inexpensive financial services relative to certain alternatives\u00e2\u0080\u0094were more active in serving these customers. For this reason, policymakers and observers will likely continue to explore ways to make banking more accessible to a greater portion of the population. However, it may be expensive for banks to serve these customers\u00e2\u0080\u0094for example, they might have low-balance accounts. At least some of these consumers may be served better by alternative financial providers if their products are less expensive or if they provide more customer service than banks.\nGeneral-purpose prepaid cards may be considered an alternative to a traditional checking account, and they can be obtained through a bank, at retail stores, or online. These cards can be used in payment networks, such as Visa or MasterCard. It is also possible to direct deposit payroll checks onto these cards. But unlike checking accounts, funds on prepaid cards are not always federally insured against an institution's failure. According to the Federal Reserve Bank of Boston, almost half of all unbanked households use a general-purpose prepaid card.\n\n\tOverview of Consumer Finance Market Support Systems\n\nAlthough each consumer credit market is unique, certain common aspects of the consumer credit system facilitate the pricing of credit offers and the resolution of delinquencies and defaults for most consumer credit markets. This section discusses two of what this report will refer to as market support systems : the consumer credit reporting system (which helps lenders price consumer loans) and the debt collection market (which helps lenders to collect upon consumer default). Notably, in both these market support systems, consumers do not have the ability to choose the financial institution or entity with whom they engage, and therefore are unable to take their business elsewhere if issues arise. For this reason, when consumer abuses occur in these markets, consumer protection laws and regulations may be particularly important. According to the CFPB, credit reporting and debt collection are the consumer finance markets with by far the most complaints, together accounting for 63% of the total complaints the agency received in 2018 (38% and 25%, respectively). \n\n\t\tCredit Reporting, Credit Bureaus, and Credit Scoring\n\nThe consumer data industry collects information on consumers, such as financial payment history data, to predict their future financial product performance. This industry includes financial firms who report on consumers' payment behaviors, credit bureaus who collect and store this information, and credit scoring companies that use this data to develop algorithms to predict consumers' future payment behaviors. The three largest credit bureaus\u00e2\u0080\u0094Equifax, Experian, and TransUnion\u00e2\u0080\u0094provide credit reports nationwide. The consumer data industry is important because it significantly affects consumer access to financial products or opportunities. For example, negative or derogatory information on a credit report, such as information stating that a consumer has paid late or defaulted on a loan, may influence a lender to deny a consumer access to credit.\nThe main statue regulating the credit reporting industry is the Fair Credit Reporting Act (FCRA), enacted in 1970. The FCRA requires \"that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit ... in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.\" Among other things, the FCRA establishes permissible uses of credit reports and imposes certain responsibilities on those who collect, furnish, and use the information contained in consumers' credit reports. \nThe FCRA also includes consumer protection provisions. Under the FCRA, a lender must advise a consumer when the lender has used their information from a credit reporting agency (CRA) in taking an adverse action (generally a denial of credit) against the consumer. That information must be disclosed free of charge. Consumers have a right to one free credit report every year (from each of the three largest nationwide credit reporting providers) even in the absence of an adverse action (e.g., credit denial). Consumers also have the right to dispute inaccurate or incomplete information in their reports. After a consumer alerts a CRA of such a discrepancy, the CRA must investigate and correct errors, usually within 30 days. The FCRA also limits the length of time negative information may remain on credit reports. Negative debt collection information typically stays on credit reports for 7 years, even if the consumer pays in full for the item in collection; information about a personal bankruptcy stays on a credit report for a maximum of 10 years. \nThe CFPB has rulemaking and enforcement authorities over all CRAs in connection with certain consumer protection laws, including the FCRA; it also has supervisory authority, or the authority to conduct examinations, over the larger CRAs. In July 2012, the CFPB announced that it would supervise CRAs with $7 million or more in annual receipts, which included 30 firms representing approximately 94% of the market.\nInaccurate or disputed consumer data within the credit bureaus' reports is an ongoing concern in this market. Inaccurate information in a credit report may limit a consumer's access to credit in some cases or increase the costs to the consumer of obtaining credit in others. In response to this concern, the CFPB has recently encouraged credit bureaus and financial institutions to improve data accuracy in credit reporting. In 2017, the CFPB released a report of its supervisory work in the credit reporting system. The report discusses the CFPB's efforts to work with credit bureaus and financial institutions to improve credit reporting in three specific areas: data accuracy, dispute handling and resolution, and furnisher reporting. As the report describes, credit bureaus and financial firms have worked with the CFPB to develop data governance and quality control programs to monitor data accuracy. In addition, the CFPB has encouraged credit bureaus to improve their dispute and resolution processes, including making them easier and more informative for consumers.\nWhen credit reporting disputes arise, consumers sometimes find it difficult to advocate for themselves because they are not aware of their rights and how to exercise them. According to a CFPB report, some consumers are confused about what credit reports and scores are, find it challenging to obtain credit reports and scores, and struggle to understand the contents of their credit reports. The CFPB provides financial education resources on its website to help educate consumers about their rights regarding consumer reporting. The credit bureaus' websites also provide information about how to dispute inaccurate information, and consumers can contact the credit bureaus by phone or mail. However, debates continue regarding whether these efforts are enough to ensure that consumers can effectively advocate for themselves.\nData protection and security are important issues in consumer data reporting, particularly following the announcement, on September 7, 2017, of the Equifax cybersecurity breach that potentially revealed sensitive consumer data information for 143 million U.S. consumers. CRAs are subject to the data protection requirements of Section 501(b) of the Gramm-Leach-Bliley Act (GLBA). Section 501(b) requires the federal financial institution regulators to \nestablish appropriate standards for the financial institutions subject to their jurisdiction relating to administrative, technical, and physical safeguard\u00e2\u0080\u0094(1) to insure the security and confidentiality of consumer records and information; (2) to protect against any anticipated threats or hazards to the security or integrity of such records; and (3) to protect against unauthorized access or use of such records or information which could result in substantial harm or inconvenience to any customer.\nThe FTC has the authority to enforce Section 501(b) against CRAs, and it has promulgated rules implementing the GLBA requirement. However, because the FTC has little upfront supervisory or enforcement authority, the agency typically only exercises its enforcement authority after an incident has occurred.\n\n\t\tDebt Collection and Bankruptcy\n\nWhen a consumer defaults on a debt, her debt obligations are often collected not by the lender to whom she originally owed the debt, but rather by a third-party debt collector (here in after referred to as a debt collector ) that by contract receives a share of the amount collected on behalf of the original lender or buys the debt obligation in full. In general, a robust debt collection market allows lenders to recoup their losses to the maximum extent possible after a consumer defaults on a loan, leading to lower initial loan costs and more access to credit for consumers. \nMany America ns experience debt collection. According to a CFPB survey, about one-third of consumers with a credit bureau file reported being contacted in the last year by at least one creditor or collector trying to collect on one or more debt s . Consumers with lower incomes and nonprime credit scores were more likely to report experience with debt collection than consumers with higher incomes and prime credit scores. In 2018, debt from unpaid loans or other financial services account ed for approximately 40 % of debt collection revenue. The other 60% of debt collection revenue includes medical, telecom, and other retail debt . \nThe Fair Debt Collection Practices Act (FDCPA), enacted in 1977, is the primary federal statue regulating the debt collection market and aims \"to eliminate abusive debt collection practices by debt collectors.\" Among other things, it prohibits debt collectors from engaging in certain types of conduct (such as misrepresentation or harassment) when seeking to collect debts from consumers, requires that debt collectors disclose certain information to consumers, and grants consumers the right to dispute an alleged debt. \nThe Dodd-Frank Act granted the CFPB authority to write regulations to implement the FDCPA, both regarding debt collectors as defined in the FDCPA and those who collect debt related to a consumer financial product service as defined in the Dodd-Frank Act. The CFPB also has enforcement authorities over the debt collection market and supervisory authority, or the authority to conduct examinations, over nonbank firms with more than $10 million in annual receipts from consumer debt collection activities.\nThe FDCPA requires that, after a debt collector initially contacts a consumer, the collector must send the consumer a validation notice (generally, a notice disclosing certain information about the debt to the consumer). Thereafter, a debt collector can call, send letters, and use other methods to contact the consumer to collect an alleged debt. In general, debt collectors expect that they will collect only a fraction of the face value of any particular debt, knowing that some consumers will never pay back their debt in full. Therefore, when a third-party debt collector contacts a consumer, both parties can negotiate the amount and payment schedule of the debt. Although debt collectors are not required to furnish information about the debt to credit bureaus, they may do so. According to the CFPB, debt collectors generally choose not to furnish data to credit bureaus due to the cost and potential legal liability, though most debt collectors furnish data occasionally. \nIf a consumer does not settle a debt, the debt owner often has several options, such as seizing the collateral for secured loans (e.g., car, home) or garnishing a consumer's wages after obtaining a court order. According to CFPB research, \"the cost of filing a claim plays a large role in litigation decisions and varies significantly across jurisdictions based on differences in factors such as filing fees and what types of collections claims can be brought in small claims court.\" More than half of filed suits lead to default judgments in favor of the debt owner, often because consumers fail to appear in court.\nConsumers who cannot pay their debts may seek relief through the federal bankruptcy process, which is generally governed by the Bankruptcy Code. In general, the bankruptcy process allows a consumer to enter a court-administered proceeding by which the consumer can discharge certain debts and thus obtain a fresh start. However, consumers may face negative repercussions by choosing bankruptcy, for example, a lower credit score and reduced access to credit for several years afterward. In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), in response to what some perceived as a high number of consumer bankruptcy filings. While BAPCPA made a number of amendments to the Bankruptcy Code, for the purposes of this report, its most notable change was to impose a \"means test\" to determine whether consumers are eligible for certain relief under the Bankruptcy Code. In addition to the federal bankruptcy process, many states limit the length of time consumers are legally obligated to pay a debt. \nOngoing concerns relating to debt collection include debts incorrectly attributed to consumers or for incorrect amounts; consumers' inability to advocate for themselves through the process; and consumers' inability to avoid abusive practices from debt collectors. According to a CFPB survey, more than half of consumers who had been contacted about a debt in collection reported that there was an error as to at least one such debt, and over a quarter disputed the debt with the debt collector. People with higher incomes and older people were more likely than lower-income and younger people to report disputing a debt, although reported errors did not vary significantly based on demographics. These verification issues may exist because debt collectors are not required to obtain a debt's full files from the original lender. Sometimes, the original lender conveys only basic information to the debt collector unless a consumer disputes the debt, reducing costs for debt collectors. In addition, the minimum amount of information that must be included in debt validation notices under FCRA might not be sufficient for some consumers to recognize their debts, according to the CFPB. \nRecent consumer complaints to the CFPB find similar verification issues. In 2018, the most common debt collection complaints to the CFPB asserted that debt collectors had attempted to collect a debt the consumer did not owe (44%); a consumer received insufficient written notification about a debt, such as not enough information to verify the debt or not learning about a debt until it was on a credit report (24%); and general complaints about a debt collector's communications tactics, such as frequent or repeated calls (12%). To address some of these concerns, the CFPB recently issued a proposed rule that would clarify what information debt collectors should disclose to consumers and how they should communicate with consumers under FCRA.\n\n\tConclusion\n\nFor all of the consumer financial markets described in this report, the societal goal is that each market will create a transparent and competitive price that leads to an efficient market outcome. As described earlier in the report, government policy can potentially correct market failures, such as information asymmetries or behavioral biases, to bring the market to a more efficient outcome, maximizing social welfare. Yet, government policy can lead to unintended consequences as well. Policy changes will typically impose costs and benefits, but these effects can be difficult to calculate in advance of a new law or regulation. It is often challenging to determine whether a policy intervention will help or harm market efficiency.","output":null}
{"id":"gao_GAO-20-322","pid":"gao_GAO-20-322_0","input":"\tBackground Government-wide Reform Plan Requirements and Timeline\n\nAs shown in figure 2, a number of activities led up to OMB publishing the  reform plan in June 2018, and subsequently OMB has provided updates  on the proposals in the reform plan.\nIn March 2017, the President issued an executive order requiring  comprehensive reorganization plans for executive branch agencies. In  April 2017, OMB provided guidance to federal agencies for developing  their respective reform plans. According to this guidance, the  government-wide reform plan was to have been based on the agency  reform plans, OMB-coordinated crosscutting proposals, and public input.  In addition, OMB\u2019s guidance indicated that OMB would track the progress  of the reforms in coordination with the President\u2019s Management Council.  OMB\u2019s guidance also stated that it would track progress of the reforms by  leveraging the federal performance planning and reporting framework that  was originally put into place by the Government Performance and Results  Act of 1993 (GPRA), and significantly enhanced by the GPRA  Modernization Act of 2010 (GPRAMA). Accordingly, OMB\u2019s guidance  explained that progress would be tracked through the use of cross- agency priority (CAP) goals, agency priority goals, and  Performance.gov.\n\n\tThe President\u2019s Management Agenda\n\nIn March 2018, OMB released the President\u2019s Management Agenda,  which identified a set of CAP goals, required under GPRAMA. The CAP  goals target areas where multiple agencies must collaborate to effect  change, and agencies must report CAP goal progress in a manner the  public can easily track.\n\n\tThe Government-wide Reform Plan\n\nIn June 2018, the administration released its government-wide reform  plan, Delivering Government Solutions in the 21st Century: Reform Plan  and Reorganization Recommendations (reform plan). In July 2019, the  administration reported on the first year of progress toward its reform  proposals. According to the 1-year update, the President\u2019s Fiscal Year  2020 Budget included 18 of the proposed reform proposals in whole, or in  part, and also described administrative actions by agencies to implement  more than 20 of its 32 proposals. Of these proposals, the administration  reported progress toward four of the five reforms we selected for review:  (1) moving personnel security clearance background investigations from  OPM to DOD; (2) solving the cybersecurity workforce shortage; (3)  establishing the GEAR Center; and (4) reorganizing OPM. OMB officials  said that they are not planning to move forward with the customer  experience improvement capability reform during fiscal year 2020  because they are pursuing other customer experience activities, such as  those included in the CAP goal for Improving Customer Experience with  Federal Services.\n\nThe Extent to Which Key Practices for Effective Reforms Were Followed Has Varied, and Agencies Identified Some Legal Authorities for Implementation\n\n\tMoving Background Investigations from OPM to DOD: Most Selected Key Practices Addressed\n\nWe added the government-wide personnel security clearance process to  our High-Risk List in January 2018 because it continues to face  challenges in the timely processing of clearances, measuring the quality  of investigations, and ensuring the security of related information  technology (IT) systems. The National Defense Authorization Act (NDAA)  for Fiscal Year 2018 included provisions that resulted in the transfer of  background investigations from OPM\u2019s National Background  Investigations Bureau (NBIB) to DOD for certain DOD personnel, which  represented approximately 70 percent of all federal background  investigations performed by NBIB. Subsequently, the selected reform  proposal recommended moving the remaining 30 percent of  investigations to DOD. According to the reform plan, this transfer would  provide an opportunity to conduct the background investigations more  efficiently and economically than having them be performed by separate  agencies.\nIn January 2019, DOD formally established the Personnel Vetting  Transformation Office (PVTO) to implement and oversee activities related  to the transfer of NBIB functions. In April 2019, the President issued  Executive Order 13869 which generally provided for the transfer of the  remaining background investigation operations from OPM to DOD. The  executive order also called on the Secretary of Defense to enter into an  agreement with the Director of OPM to set forth expectations and  designate the appropriate support functions for the transfer. As directed,  in June 2019, OPM and DOD signed an interagency memorandum that  set forth expectations for activities necessary for the transfer of functions  of NBIB and associated employees and resources from OPM to DOD,  including measurable deliverables, key considerations for executing  deliverables, and processes for coordination and governance. According  to documents we received from DOD, the transfer of NBIB functions to  DOD occurred by September 30, 2019, as required by the April executive  order.\nAs shown in figure 3, OMB, OPM, and DOD have generally addressed  most key reform practices in implementing the transfer of background  investigations from OPM to DOD. According to DOD, more than 99  percent of NBIB employees, totaling 2,979 individuals, accepted positions  transferring them to DOD\u2019s Defense Counterintelligence and Security  Agency (DCSA) by September 30, 2019. According to the DOD\u2019s PVTO  Director, 17 individuals chose not to transfer, and instead retired as  permitted. Going forward, we will continue to monitor the government- wide personnel security clearance process as part of our work to identify  and assess high-risk issues across the government.\n\n\t\tEstablishing Goals and Outcomes\n\nOMB, OPM, and DOD have generally addressed key practices related to  establishing goals and outcomes. The NDAA for Fiscal Year 2018 and  Executive Order 13869 established a goal and related requirements for  the transfer of OPM\u2019s NBIB personnel, resources, and functions to  DOD. Specifically, the executive order established a goal to complete  the transfer of all NBIB administrative and operational functions to DOD  by September 30, 2019. The executive order also outlined a series of  deliverables and objectives for OMB, OPM, and DOD to achieve during  the transfer. For example, the executive order required DOD to execute a  written agreement with OPM to establish expectations for the transition  period related to detailing personnel, safeguarding information  technology, contracting, and funding background investigations, among  others. OPM and DOD achieved their intended goal, and as of September  30, 2019, DOD is the primary provider of national security background  investigations for the federal government.\nAs directed, OPM and DOD signed an interagency agreement in June  2019 to address expectations, including governance, information  technology, contracting, and funding issues, among others. According to  documents provided by DOD, the Transfer Tollgate group and the  Executive Steering Committee provided interagency leadership including  an executive-level decision venue for implementation, resourcing, and  other decisions. According to DOD, these interagency groups also  provided accountability for implementation milestones. Under the  leadership of these two groups, DOD officials shared with us that they  worked with OPM to resolve a host of issues such as the transfer of  personnel, funding for transfer costs, transfer of information technology  assets, financial management issues, and acquisition concerns, among  other critical issues. To help address differences in the financial  management and funding of background investigations between OPM  and DOD, the agreement required DOD to establish a Working Capital  Fund to fund DCSA\u2019s background investigation mission by September 1,  2019. According to DOD officials and the agency\u2019s Transfer Status  Dashboard, the Working Capital Fund was established prior to the  September 1, 2019, deadline; and, as of October 7, 2019, the fund had a  balance of approximately $1 billion.\nNeither the NDAA for Fiscal Year 2018 nor the executive order outlined  measurable outcomes related to the efficient and effective delivery of  background investigations, but rather goals and deliverables related to  transferring NBIB functions to DOD, among other things. According to  DOD officials we spoke with, the reform\u2019s objective was the timely  transfer of background investigation functions and coordination between  affected agencies and stakeholders. DOD officials explained that  following completion of the transfer, on October 1, 2019, PVTO, in  coordination with other DOD components and federal stakeholders,  began work transforming DCSA\u2019s processes and procedures, including  the background investigation process, to improve outcomes.\n\n\t\tInvolving Employees and Key Stakeholders\n\nOMB, OPM, and DOD generally addressed key practices related to  involving employees and key stakeholders. OPM and DOD generally  communicated with affected employees and key stakeholders and  involved them in the implementation of the transfer of NBIB functions to  DOD. Agencies\u2019 communication included email correspondence to  affected staff from agency leaders including OPM\u2019s Acting Director, and  the Director of NBIB. These emails provided NBIB staff regular updates  on the status and details surrounding the transfer of NBIB functions to  DOD.\nBased on documents provided by OPM, communication to affected staff  began in June 2017, informing staff that Congress was considering a  legislative proposal to move certain NBIB functions to DOD. According to  documents we received, communication with staff has continued regularly  since this time, including a July 29, 2019, message to affected staff with  an official notice that NBIB employees would be offered an appointment  to DOD\u2019s DCSA effective September 29, 2019. This notice explained that  OPM\u2019s NBIB employees accepting this appointment would transfer to  DOD without changes to their duty stations, grades, or benefits.\nIn addition to email communication, in-person town hall meetings were  held between agency leaders and affected staff to provide updates on the  status of the transfer and answer questions. According to OPM\u2019s then  NBIB Director, a July 2017 town hall was held addressing the  congressional proposal to move the majority of NBIB staff to DOD. The  Director also reported that OPM and DOD had worked via meetings,  information exchanges, site visits, and communication at all levels in the  organization to assemble information on the implication of the transfer  and its potential impacts.\nOPM officials testified at a number of hearings in 2018 and 2019 related  to the transfer, and OPM officials told us that they joined DOD in  providing quarterly briefings required by the NDAA for Fiscal Year 2018,  on the status and progress of the transfer. DOD and OPM also  developed a Joint Transfer Plan that described strategic communication  activities with affected employees, contractors, and other stakeholders  including public media outlets, ourselves, and state and local law  enforcement agencies, among others. DOD officials at the PVTO  explained that they developed a more detailed communication plan in  March 2019 that was implemented prior to the transfer.\n\n\t\tAddressing High-Risk Areas and Longstanding Management Challenges\n\nOMB, OPM, and DOD have partially addressed key practices related to  addressing high-risk areas and longstanding management challenges. As  previously mentioned, we placed the government-wide personnel security  clearance process on our High-Risk List because of continuing  challenges in the timely processing of clearances, measuring the quality  of investigations, and ensuring the security of related IT systems. While  OMB and lead agencies have considered our related high-risk work, the  reform proposal and implementation plans do not demonstrate how the  transfer and delegation of background investigation functions from OPM  to DOD will address these challenges. Moreover, in November 2019,  OPM\u2019s Inspector General identified the background investigation legacy  information systems as an ongoing top management challenge that will  need to be addressed by both OPM and DOD moving forward.\nThe Director of the PVTO told us that the office\u2019s initial goal was to  ensure a smooth and timely transition of functions from OPM\u2019s NBIB to  DOD by the beginning of fiscal year 2020. The Director also told us that  after the transfer occurred, the office would shift its focus to address our  high-risk area by, among other things, transforming these security  clearance services to optimize processes government-wide. Specifically,  the PVTO charter established a goal to \u201cidentify efficiencies to be gained,  areas where the organizational structure and business services may be  incomplete, maximize synergy where possible, and propose mitigation  strategies to address gaps and shortfalls.\u201d We will continue to monitor the  government\u2019s progress toward addressing security clearance challenges  as part of our work to track high-risk issues across the government.\n\n\t\tLeadership Focus and Attention\n\nOMB, OPM, and DOD have generally addressed key practices related to  leadership focus and attention. In particular, Executive Order 13869  outlined the roles and responsibilities of OMB, OPM, and DOD, and  authorized a new office (PVTO) to assist in the execution of the transfer.  The executive order also clarified agencies\u2019 roles and requirements for  coordinating the transfer, delegation, and other activities. Specifically, the  executive order directed the Secretary of Defense and the OPM Director,  in consultation with the OMB Director and the Security Executive Agent,  to provide for the transfer of the bulk of OPM\u2019s investigative functions to  the DCSA, along with any appropriate OPM-associated personnel and  resources, including infrastructure and certain investigation-related  support functions.\nWith regard to a dedicated implementation team, PVTO was responsible  for ensuring coordination and resource alignment during the transfer, as  well as ensuring that personnel security background investigations  continued without disruption during the transfer. The PVTO Director told  us in July 2019 that his team reports directly to the Office of the Under  Secretary of Defense for Intelligence. The Director stated that he has  experience in the areas of acquisitions, mergers, and reorganizations,  and has support from experts and top leadership throughout the  department. In addition, the PVTO charter states that the office be  composed of employees with extensive experience and expertise in  personnel vetting processes and reform efforts, as well as business and  technology innovation, program evaluation, acquisitions and mergers, and  organization and change management.\n\n\t\tManaging and Monitoring\n\nOMB, OPM, and DOD have generally addressed key practices related to  managing and monitoring. Specifically, PVTO developed a joint transfer  plan outlining critical assumptions for the transfer, major activities, and  time frames across nine functional areas, including personnel, training,  information technology, financial management, acquisitions, strategic  communications, and security, among others. For each functional area,  the transfer plan provided a summary of the functional area\u2019s objective  and a set of recommended major activities. For example, the functional  area for IT had an objective to provide secure, current hardware and  software in compliance with DOD and federal standards, and promote the  unique requirements of a highly mobile, geographically dispersed  workforce managing significant volumes of personally identifiable  information and other sensitive data. Major activities included:  (1) the transfer of IT infrastructure,  (2) the completion of a gap analysis to determine which NBIB systems  and hardware are transferrable or require new acquisitions, and  (3) the provision of secure devices that support mobile operations.\nThe PVTO Director also showed us a detailed implementation plan  organized around the nine functional areas identified in the broader joint  transfer plan. The implementation plan tracked thousands of activities and  provided a detailed timeline for completion. The Director also provided us  a dashboard that his team used to track implementation progress. The  Director told us that his office used the dashboard to manage and monitor  the transfer daily. The dashboard allowed the implementation team to  identify areas where attention was needed using red, yellow, and green  stoplight indicators signaling the status of major objectives.\nThe annual assessments of timeliness and quarterly briefings required by  the NDAA for Fiscal Year 2018 also serve as mechanisms for Congress  and the executive branch to monitor timeliness, costs, and continuous  evaluation, among other things. OMB also publishes quarterly milestone  progress and metrics on the related Security Clearance, Suitability, and  Credentialing Reform cross-agency priority goal on Performance.gov.\n\n\t\tEmployee Engagement\n\nOMB, OPM, and DOD have generally addressed key practices related to  employee engagement. In addition to the communication and outreach  activities described above, OPM and DOD have undertaken additional  efforts to engage affected employees and monitor levels of employee  engagement at both agencies. For example, according to DOD officials,  to engage and communicate with affected employees the agency held  several town hall meetings to provide information and answer questions.  They also said that DOD leadership regularly emailed affected staff  providing updates on the status of the transfer and held separate  question-and-answer sessions to keep staff informed and engaged.  According to PVTO planning documents, the office also developed a  strategy to achieve stakeholder buy-in through empowering leaders and  through efforts to build a coalition of stakeholders around a common  vision for the future of the background investigation function at DOD.\nIn April 2019, OPM also conducted an internal survey of agency staff to  collect information on employees\u2019 perceptions of the transition to DOD,  personal work experiences, satisfaction with their job, and any intent to  leave DOD and reasons for leaving. The survey asked NBIB employees  the extent to which they felt informed about the upcoming transition to  DOD. According to the roughly one-third of staff who responded, 35  percent felt extremely or moderately informed, 32 percent felt somewhat  informed, and 33 percent felt slightly or not at all informed.\nApproximately 75 percent of the survey respondents reported that they  had enough information to do their job well, and 74 percent reported that  they were proud to tell others they worked at their organization. When  asked about satisfaction with involvement with decisions that affect their  work, 38 percent of respondents were positive, 34 percent were neutral,  and 28 percent were negative. OPM officials told us that they continued to  monitor engagement of NBIB staff throughout the transition.\n\n\t\tStrategic Workforce Planning\n\nOPM and DOD have partially addressed key practices related to strategic  workforce planning. In March 2019, we reported that, to make progress  on removing the Government-wide Personnel Security Clearance  Process from our High-Risk List, OPM and DOD should develop and  implement a comprehensive strategic workforce plan that identifies the  workforce needed to meet the current and future demand for its services,  as well as reduce the current backlog to a manageable level. OPM  completed this action in September 2019 with the release of the NBIB  Strategic Workforce Plan for the Background Investigation Mission. The  strategic workforce plan includes initiatives to strengthen investigative  workforce capacity and training, promote the use of different hiring  authorities, and provide succession planning, among other initiatives.  According to the plan, senior leadership will build upon the strategic  workforce plan to create an implementation strategy. While OPM has  taken action, DOD has yet to complete its workforce plan. As of October  2019, DOD\u2019s strategic workforce plan for the new DCSA enterprise was  under development.\n\n\tMoving Background Investigations from OPM to DOD: Agencies Identified a Number of Legal Authorities\n\nIn response to our request for information, OPM, DOD, and OMB  provided information regarding the authorities they are using to implement  the reform proposal to move all background investigations from OPM to  DOD. According to OPM and OMB, the legal authorities by which NBIB  moved to DOD consisted of section 925 of the National Defense  Authorization Act for Fiscal Year 2018 (NDAA 2018) and Executive Order  13869, issued in April 2019, which re-designated DOD\u2019s DCSA as the  primary investigative service provider for national security  investigations. OPM also cited 5 U.S.C. \u00a7 1104, which permits OPM to  delegate certain personnel management functions to other agencies.\nSection 925 of the NDAA 2018 authorized DOD to conduct its own  background investigations and required DOD to begin carrying out an  implementation plan required under the National Defense Authorization  Act for Fiscal Year 2017 (NDAA 2017) by October 1, 2020. The NDAA  2018 also required the Secretary of Defense, in consultation with the  OPM Director, to provide for a phased transition of DOD background  investigations from OPM to DOD. According to OPM, the DOD  background investigations, consisting of investigations for civil service,  military, contract, and non-appropriated fund personnel, constitute  approximately 70 percent of the work performed by NBIB.\nExecutive Order 13869 provided for the transfer of the primary  responsibility for conducting national security background investigations,  government-wide, from OPM to DOD. The executive order designated  DOD, rather than OPM, as the agency to serve as the primary entity for  conducting background investigations for national security adjudications,  pursuant to and consistent with the NDAA 2018 and section 3001(c) of  the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA).  According to OPM, this has the effect of moving the remaining national  security investigations, not already transferred by section 925 of the  NDAA 2018, to DOD.\nThe Executive Order also acknowledged that OPM will delegate, pursuant  to 5 U.S.C. \u00a7 1104, other background investigation functions to DOD for  non-DOD personnel, such as investigations performed to enable the  adjudication of the subject\u2019s suitability or fitness for federal employment,  eligibility for logical or physical access to systems and facilities, fitness to  perform work for a federal agency under a government contract, and  fitness to work as a nonappropriated fund employee. In accordance with  the executive order, DOD and OPM signed an agreement on June 25,  2019 that set forth the expectations for necessary activities for the  transfer of functions of the NBIB from OPM to DOD. The agreement  provided that the period of transition was from June 24, 2019, through  September 30, 2019. The agreement covered such areas as personnel,  information technology, facilities and property, contracting, administrative  support, records access, claims, and funding.\n\n\tSolving the Cybersecurity Workforce Shortage: Most Selected Key Practices Partially Addressed\n\nThis reform proposal directs OMB and DHS, in coordination with other  agencies, to prioritize and accelerate efforts to recruit, evaluate, hire, pay,  and distribute cybersecurity talent across the federal government.  Ensuring the cybersecurity of the nation is a longstanding challenge that  has been on our High-Risk List for more than two decades. Efforts to  solve the cybersecurity workforce shortage will help to address a number  of high-risk issues we have previously identified. To accomplish the  objective of filling cybersecurity vacancies, the reform lays out a series of  projects and activities intended to identify and close workforce skills gaps  and develop a standardized approach to hiring, training, and retaining  qualified cybersecurity professionals. Specifically, the proposal calls for:  identifying and categorizing the federal cybersecurity workforce using  the National Initiative for Cybersecurity Education Cybersecurity  Workforce Framework (NICE framework),  implementing DHS\u2019s Cyber Talent Management System (CTMS) with  options to expand the capability across the government,  rationalizing and expediting the security clearance process,  standardizing training for cybersecurity employees,  increasing the mobility of cybersecurity positions, developing plans to establish a cybersecurity reservist program to  provide needed surge capacity,  reskilling federal employees to fill critical cyber positions, and  rationalizing the size and scope of federal cybersecurity education  programs.\nAs shown in table 2, OMB, DHS, and other federal agencies have made  progress in implementing certain projects and activities included in the  reform proposal.\nAlthough OMB and DHS have several projects and activities underway  related to this reform, they did not provide us with information about the  government-wide goals or implementation plans for the proposal. In  November 2019, OMB staff told us that they did not have additional  information to share regarding their application of key reform practices  because they are still developing this reform. As a result, we found that  most of the key reform practices were partially met (see figure 4). We did  obtain information showing that OMB and DHS addressed key practices  for some of the projects and activities included in the reform proposal, but  the extent to which these practices were being applied to the reform  proposal as a whole, or being coordinated government-wide, was unclear.\n\n\t\tEstablishing Goals and Outcomes\n\nOMB and DHS have partially addressed key practices related to  establishing goals and outcomes. We found that this reform established  an objective to solve the cybersecurity workforce shortage across the  government, and DHS established outcome-oriented goals and  performance measures for certain agency-specific projects that are part  of the reform. For example, as shown in table 2, DHS established a  measure to hire at least 150 cybersecurity professionals at the agency  during fiscal year 2020 using its new Cyber Talent Management System.  In addition, DHS provided us its 2017 Comprehensive Cybersecurity  Workforce Update, which includes an array of data and analysis,  including cybersecurity workforce trends, metrics on DHS components\u2019  vacancies, attrition, capacity gaps, hiring, and other information  describing the status of the agency\u2019s cybersecurity workforce. The  administration also released a National Cyber Strategy in September  2018 outlining broad activities related to the government-wide reform  such as building a talent pipeline, reskilling employees, and improving the  process of recruiting and retaining qualified cybersecurity professionals.  These documents may provide a first step toward developing clear  outcome-oriented goals and performance measures for the reform as a  whole.\nHowever, OMB and DHS have not yet established measurable outcome- oriented goals for the government-wide projects and activities outlined in  the reform proposal. For example, there are not government-wide  measurable goals for hiring cybersecurity professional across the  government, reductions to attrition, training, or other aspects of the  reform. As shown in table 2, OMB and agencies have made progress on  a number of areas related to the reform; however, without establishing  government-wide measurable goals and outcomes, OMB and DHS will  not be able to determine whether progress is being made across the  federal government to solve the cybersecurity workforce shortage.\n\n\t\tInvolving Employees and Key Stakeholders\n\nOMB and DHS have partially addressed key practices related to involving  employees and key stakeholders. We obtained information on targeted  outreach to employees and stakeholders for certain projects and activities  outlined in the reform, but as of November 2019, OMB and DHS did not  have information on how they were addressing these key practices for the  reform as a whole.\nFor example, DHS\u2019s Cybersecurity and Infrastructure Security Agency  (CISA) officials told us that they participate in interagency coordination  activities related to the NICE framework with OMB, the Department of  Commerce National Institute of Standards and Technology (NIST), the  Federal Chief Information Officers Council, and outside stakeholders.  CISA officials said they worked with government and industry  stakeholders to develop the NICE framework, and are working with  educators and certification vendors to help build a pipeline of  cybersecurity talent. Additionally, in March 2019, we reported that OPM  and NIST coordinated with academia and the private sector to develop a  cybersecurity coding structure that aligns with the work roles identified in  the NICE framework.\nWhile OMB and DHS conducted outreach for certain projects and  activities included in the reform proposal, it is unclear what, if any,  outreach occurred for other projects. However, without a government- wide or project-by-project plan for communicating with and involving  employees and stakeholders across the government, OMB and lead  agencies will not know if certain agencies or employee groups are being  adequately involved and informed. We have previously reported that  creating an effective, ongoing communication strategy is essential to  implementing a government-wide reform. The most effective strategies  involve communicating early and often, ensuring consistency of message,  encouraging two-way communication, and providing information to meet  the specific needs of affected employees. This reform will be more likely  to achieve its intended objective if OMB and DHS establish effective lines  of communication with affected federal employees and the broader  cybersecurity community.\n\n\t\tAddressing High-Risk Areas and Longstanding Management Challenges\n\nOMB and DHS have partially addressed key practices related to  addressing high-risk areas and longstanding management challenges.  We have designated information security as a government-wide high-risk  area since 1997. We expanded this high-risk area in 2003 to include protection of critical cyber infrastructure and, in 2015, to include  protecting the privacy of personally identifiable information. OMB and  DHS generally considered areas that we previously identified as high-risk.  OMB staff and DHS officials told us that they considered our high-risk  reports when developing reform proposals, and have provided some  documentation of these considerations. For example, OMB\u2019s former  Deputy Director for Management stated that, when developing the  Solving the Cybersecurity Workforce Shortage reform, OMB used our  2017 High-Risk Series and noted that of more than 2,500 past  recommendations, about 1,000 still needed to be implemented. OMB  also identified several of our reports that touch on cybersecurity workforce  issues.\nAlthough OMB and DHS have considered our prior work, as of November  2019, they had not demonstrated how the projects and activities outlined  in the reform proposal would address our related high-risk issues and  open recommendations. Without more detailed information describing  how our high-risk issues are being addressed across the reform projects  and activities, it is unclear which issues and recommendations are being  targeted, and which are outside of the scope of this reform.\n\n\t\tLeadership Focus and Attention\n\nOMB and DHS have partially addressed key practices related to  leadership focus and attention. In May 2019, the President issued  Executive Order 13870 requiring federal agencies to take a variety of  actions related to cybersecurity, including efforts to enhance the mobility  of cybersecurity practitioners, support the development of cybersecurity  skills, and create organizational and technological tools to maximize  cybersecurity talents and capabilities. Many of the actions outlined in  this executive order align with the stated objectives and components  outlined in the reform proposal.\nHowever, neither OMB nor DHS have created a dedicated team with  necessary resources to manage and implement this reform on a  government-wide scale. Moreover, DHS staff we spoke with told us that OMB was the government-wide lead for this reform, and their agency was  responsible for a subset of the projects and activities outlined in the  reform proposal. OMB staff did not provide us with any plans or other  documents regarding the individuals or team responsible for  implementation across the government. OMB staff explained that DHS\u2019s  CISA and the Federal Chief Information Security Officer Council have  some responsibility for federal cybersecurity workforce issues; however,  they did not clarify which organization, team, or individuals were  responsible for coordinating and implementing the reform government- wide.\nOur prior work has shown that establishing a strong and stable team that  will be responsible for the transformation\u2019s day-to-day management is  important to ensuring that it receives the resources and attention needed  to be successful. A dedicated leadership team responsible for  overseeing and implementing the reform can also help ensure that  various change initiatives are sequenced and implemented in a coherent  and integrated way.\n\n\t\tManaging and Monitoring\n\nOMB and DHS have partially addressed key practices related to  managing and monitoring. DHS has developed some agency-specific  implementation plans and mechanisms to monitor progress. For example,  DHS provides progress updates to Congress related to its continued  efforts to code cybersecurity positions and to review the readiness of the  cybersecurity workforce to meet DHS mission requirements, among other  agency-specific assessments. However, OMB and DHS have not yet  developed a government-wide implementation plan with goals, timelines,  key milestones, and deliverables for the reform proposal as a whole. As  previously discussed, OMB staff told us that they did not yet have a  government-wide reform plan because they are still developing this  reform. Without a government-wide implementation plan to track and  communicate implementation progress, OMB and DHS will be unable to  determine whether the reform is achieving its intended objectives, or  whether unanticipated challenges or negative workforce trends are  impeding efforts to close the cybersecurity workforce gaps across the  government.\n\n\t\tEmployee Engagement\n\nOMB and DHS have not addressed key practices related to employee  engagement. In February 2019, DHS officials told us that the agency had  not yet reached the stage of implementation for its projects and activities  where they were considering employee engagement in this reform.  According to DHS officials, they have started collecting data on  employees, but have not interacted with individual employees on specific  reform initiatives. As of November 2019, OMB had not provided  information on its efforts to engage affected employees across the  government on this reform.\nWe have reported that employee engagement affects attrition,  absenteeism, and productivity. Moreover, we have found that failure to  adequately address a wide variety of people and cultural issues, including  employee engagement, can also lead to unsuccessful change. We  identified six key drivers of engagement based on our analysis of selected  questions in the Federal Employee Viewpoint Survey, such as  communication from management. Given that the objective of this  reform is to address a critical workforce skills gap, it is important that  OMB and DHS remain attentive to the engagement levels of  cybersecurity employees across the government to ensure that  productivity and morale are not adversely affected. As previously  discussed, OMB and DHS lack a government-wide or project-by-project  plan for communicating with and involving employees across the  government. Such a communications strategy could be used to inform  and, as appropriate, involve employees on implementation of the reform.\n\n\t\tStrategic Workforce Planning\n\nOMB and DHS have partially addressed key practices related to strategic  workforce planning. As set forth in the Cybersecurity Workforce  Assessment Act, DHS developed and published its Cybersecurity  Workforce Strategy for 2019 through 2023. DHS\u2019s strategy contains a 5- year implementation plan and a set of goals and objectives. Goals and  objectives include an analysis of DHS\u2019s cybersecurity workforce needs, a  multi-phase recruitment strategy, professional and technical development  opportunities, and plans to develop a talent management system, among  others.\nOMB and DHS have yet to develop a government-wide cybersecurity  strategic workforce plan that addresses the needs of all federal agencies.  However, because this reform is focused on addressing a government- wide workforce shortage, it is particularly important that OMB and DHS  complete their efforts to develop a strategic workforce plan for  cybersecurity professionals that takes into account existing workforce  capabilities, workforce trends, and shortages across the government.  Without this information, DHS and OMB will not be able to determine if  they are making progress or when they have addressed the government\u2019s  cybersecurity workforce shortage.\n\n\tSolving the Cybersecurity Workforce Shortage: OMB and DHS Identified Legal Authorities for Certain Reform Activities, and Stated That Additional Authority Would Be Sought If Needed\n\nDHS identified some existing legal authority for implementing aspects of  the reform proposal, but neither DHS nor OMB provided us with a legal  analysis for full implementation of the reform. OMB\u2019s General Counsel  stated, in a November 2019 letter to us, that OMB continues to  collaborate with DHS and other federal agencies on a wide range of  measures to address the cybersecurity workforce shortage. OMB stated  that efforts had been within the confines of various current laws and  appropriations, and that new legislation had not been required for any of  these efforts. OMB did not provide additional details on the existing legal  authorities on which it is relying. OMB also stated that the administration  would seek legislation for any efforts beyond the scope of what is  permitted under current law.\nDHS identified activities it is currently implementing related to the reform  proposal that were previously authorized or required by law. For example,  the CISA Chief Counsel identified DHS\u2019s effort in establishing the  forthcoming Cyber Talent Management System (CTMS) as a reform  activity authorized by statute. The Chief Counsel noted DHS was  authorized to establish this new personnel system for recruitment and  retention of cybersecurity workers by the Border Patrol Agent Pay Reform  Act of 2014. Under the act, DHS may establish cybersecurity positions;  appoint personnel; fix rates of pay; and provide additional compensation,  incentives, and allowances, subject to certain restrictions. The authority to  implement this new system, however, is limited to DHS, and DHS officials  acknowledged that CTMS cannot be implemented government-wide  without statutory authorization.\nAdditionally, DHS officials identified work being conducted at DHS to  identify and categorize cybersecurity workforce positions, another activity  related to the reform proposal and required by statute. Specifically, DHS  was required by the Homeland Security Cyber Workforce Assessment Act  of 2014, to:  identify all cybersecurity workforce positions, determine the cybersecurity work category and specialty area of such assign data element codes developed by OPM in alignment with the  NICE framework for each position.\nFurthermore, 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 to report to Congress on the identification of IT,  cybersecurity, or cyber-related work roles of critical need. DHS officials  also explained that, consistent with the 2015 act, it is currently working  with other agencies and with industry to catalogue the federal  cybersecurity workforce.\nThe CISA Chief Counsel also identified DHS authorities that, under  subchapter II of chapter 35 of Title 44 of the United States Code, CISA  could leverage when implementing reform activities having government- wide or interagency impacts. Under these authorities, CISA (in  consultation with OMB) administers the implementation of agency  information security policies and practices, assists OMB with carrying out  its responsibilities for overseeing agency information security policies and  practices, and coordinates government-wide efforts on information  security policies and practices. The Chief Counsel added that CISA  \u201ccontinues to consider, new, more specific\u2026statutory authority aligned to  specific reform responsibilities.\u201d\n\n\tEstablishing the GEAR Center: OMB Generally or Partially Addressed Selected Key Practices\n\nThe administration is working toward establishing the GEAR Center,  which it described in the reform plan as a vehicle for applied research that  would help improve government operations and decision-making. OMB  staff stated that the GEAR Center would be administered as a public- private partnership, and that the administration spent about $3 million for  it in fiscal years 2018 through 2020 from available appropriations (see  table 3). On Performance.gov, OMB provided options for the GEAR  Center\u2019s structure; it could be housed in a physical location, composed of  a network of researchers working in multiple locations, or follow a  different model.\nThe administration does not envision that the GEAR Center will require  government funds to conduct all of its initiatives in the long term. Instead,  OMB staff said that the private sector would help fund its work after an  initial stand-up period. According to the reform plan, GEAR Center research could help inform, for example, how the government responds to  technological advances, how to provide better customer service  experiences, and how to better leverage government data.\nIn March 2019, OMB staff told us that they planned to establish the GEAR  Center in fiscal year 2019, but as of February 2020, the center had not  been formally established. To date, OMB staff have conducted  preparation activities for establishing the GEAR Center, such as gathering  stakeholder input through a Request for Information and a GSA- administered GEAR Center challenge competition to learn more about the  types of projects a GEAR Center could facilitate.\nThrough the challenge, GSA requested ideas on possible research  projects, as well as related materials such as a project plan and ways to  measure success. The challenge competition judges, which included  OMB staff, selected three winning project plans with a prize of $300,000  each (for a total of $900,000). GSA specified that the cash prizes were for  high potential project plans, and not grants to execute work on behalf of  the government. In September 2019, GSA announced and awarded the  winners of the GEAR Center challenge. The grand prize winners  submitted 1-year project plans to:  (1)  help solve the federal cybersecurity workforce shortage by  involving neurodiverse individuals, such as those with autism;  (2)  integrate currently disparate datasets to measure the impact of a  federally funded program; and  (3)  train federal employees on how to better use their data for  decision-making and accountability.\nIn addition to the challenge competition, OMB contracted with the Center  for Enterprise Modernization, a Federally Funded Research and  Development Center operated by the MITRE Corporation, to examine  options for operating the GEAR Center, in two projects. The first project\u2014 conducted from July 2019 through September 2019\u2014was to explore a  number of options for operating the GEAR Center. Following the first  project, OMB staff laid out three tasks to accomplish during calendar year  2020 that they said would help them establish the GEAR Center:  (1)  establish a central coordinating function for the GEAR Center,  (2)  build the GEAR Center\u2019s network of research partners, and  (3)  develop a draft government-wide learning agenda with input from  federal agencies to inform the GEAR Center\u2019s research and  piloting activities.\nFor the second project\u2014which began in September 2019 and is  scheduled to be completed in July 2020\u2014the contractor is to provide  additional detail on options for operating the GEAR Center, including on  creating a network of research partners to support the GEAR Center.  Table 3 provides details on these expenditures.\nAs shown in figure 5, OMB has generally addressed most of our relevant  key reform practices, and partially addressed the others.\n\n\t\tDetermining the Appropriate Role of the Federal Government\n\nOMB staff generally addressed key practices related to determining the  appropriate role of the federal government for the GEAR Center. While  OMB staff have not developed a detailed governance structure for the  GEAR Center, they have determined, with input from the private sector,  that the GEAR Center will be a public-private partnership. Specifically,  OMB staff considered the private sector\u2019s ability or likelihood to invest its  own resources in the initiatives the GEAR Center undertakes and  otherwise contribute to the GEAR Center\u2019s work. OMB did this by formally  seeking the private sector\u2019s input on these topics first through a Request  for Information, and subsequently through a challenge competition.\n\n\t\tEstablishing Goals and Outcomes\n\nOMB has partially addressed key practices related to establishing goals  and outcomes. Specifically, OMB has initiated a process for developing  outcome-oriented goals and performance measures for the GEAR  Center, but has not finalized them. The GEAR Center challenge  competition asked respondents to provide short- and long-term outcome- focused measures of success for the proposed projects in their  submissions. However, as of November 2019, OMB staff told us they  have not finalized these goals and measures for the GEAR Center. They  stated that this is because they have not yet analyzed the results of the  progress made by the challenge competition\u2019s grand prize winners, and  because they believe the purpose, or broad goal, of the GEAR Center is  sufficient for their purposes at this stage of implementation. OMB staff  told us that while they acknowledge that grand prize winners are not  required to complete the projects they proposed, they anticipate the  winners will carry them out to some extent, and they plan to monitor their  work to inform GEAR Center planning activities. As OMB moves forward  with establishing the GEAR Center, OMB staff should complete their  efforts to develop goals and measures, because they will be necessary to  track and communicate the GEAR Center\u2019s progress over time.\nIn addition, OMB staff have not yet fully assessed the costs and benefits  of the various options OMB is considering for operating the GEAR Center.  As previously discussed, OMB has stated that the GEAR Center could be  housed in a physical location, composed of a network of researchers  working in multiple locations, or follow a different model. Also, as  previously stated, MITRE is currently exploring details of options for  operating the center, and plans to provide them to OMB in July 2020.  However, OMB has not yet conducted an analysis of the costs and  benefits of the options for operating the center. In July 2018, OMB\u2019s then  Deputy Director for Management said that defining costs and benefits is  dependent on refining and finalizing implementation plans. As of  November 2019, OMB had not developed an implementation plan for  establishing the GEAR Center. As OMB moves forward with establishing  the center, assessing the costs and benefits of the various options for  operating it will enable OMB to communicate the value of each option to  Congress and other stakeholders. This assessment can help build a  business case for OMB\u2019s ultimate choice of how to operate the GEAR  Center that presents facts and supporting details among competing  alternatives.\n\n\t\tInvolving Employees and Key Stakeholders\n\nOMB has generally addressed key practices related to involving  employees and relevant stakeholders. Specifically, OMB has coordinated  with internal government stakeholders, sought input from the private  sector, and publicly communicated GEAR Center progress. For example,  OMB staff said that they have worked to develop the GEAR Center with  the President\u2019s Management Council, the National Science Foundation,  and DOD\u2019s National Security Technology Accelerator group. Also, OMB  held a Virtual Stakeholder Forum to provide information about the GEAR  Center and to gather stakeholder input. During the forum, OMB sought  attendees\u2019 input through live polls, and announced that attendees could  ask questions and provide additional input by sending messages to an  OMB email account. OMB also sought stakeholder input through the  GEAR Center Request for Information and challenge competition. Finally,  as shown in figure 6, OMB has publicly reported on the GEAR Center\u2019s  progress on Performance.gov.\n\n\t\tLeadership Focus and Attention\n\nOMB has generally addressed key practices related to leadership focus  and attention. To accomplish this, OMB has designated leaders, including  OMB\u2019s former Deputy Director for Management, a member of OMB\u2019s  Performance Team, and other staff to be responsible for implementing  the reform.\n\n\t\tManaging and Monitoring\n\nOMB has partially addressed key practices related to managing and  monitoring the reform to establish the GEAR Center. Specifically, OMB  has gathered input from stakeholders on what research it could pursue,  and from both stakeholders and a contractor on how the GEAR Center  could be operated. OMB has done some analysis of that input, but has  neither determined how the GEAR Center will operate nor developed an  implementation plan. For example, OMB\u2019s analysis of Request for  Information responses shows that OMB is considering several options for  how to execute the GEAR Center\u2019s public-private partnership\u2014a network  of researchers, a physical location, etc.\u2014but has not decided on one. In  addition, as discussed previously, OMB contracted with MITRE to further  assist with determining how the GEAR Center will operate. As OMB  moves forward with establishing the GEAR Center, it will be able to track  the GEAR Center\u2019s progress, and communicate these results to  Congress and key stakeholders, by developing and communicating an  implementation plan with key milestones and deliverables.\n\n\tEstablishing the GEAR Center: OMB Stated That It Will Seek Additional Authority to Conduct Implementation Activities, If Needed\n\nIn response to our request to identify the legal authority OMB will need to  implement this reform, OMB\u2019s General Counsel stated in a November  2019 letter to us that it and its agency partners have relied upon existing  legal authorities and available appropriations to develop the Request for  Information, obtain external submissions for ideas to develop the GEAR  Center, and issue the prize challenge. OMB stated that in conducting any  future implementation activities, it would seek new legislative authority, if  necessary.\n\nConclusions\n\nWhile planning and implementation progress has been made since the  administration\u2019s government-wide reform plan was released in June 2018,  important details surrounding the implementation of certain reform  proposals have not been developed or communicated. OMB has a central  role in overseeing and prioritizing these reforms for implementation, with  support from lead agencies. In our previous work on government  reorganization and reforms, we have found that there are key practices  that, if followed, can help manage the risk of reduced productivity and  effectiveness that often occurs as a result of major change initiatives.  Important practices such as engaging and communicating with Congress,  employees, and key stakeholders; dedicating a senior leadership team;  and developing implementation plans, can help to ensure the successful  implementation of reorganizations and reforms.\nOMB and DHS partially addressed most of the leading practices through  their efforts to implement several projects related to the cybersecurity  workforce reform, including efforts to reskill employees to fill vacant  cybersecurity positions, establish a cybersecurity reservist program to  provide needed surge capacity, and streamline relevant hiring processes.  However, OMB, in coordination with DHS, has not yet followed relevant  key practices to implement its reforms government-wide. Specifically,  OMB and DHS have not yet developed a communications strategy to  involve Congress, employees, and other stakeholders; established a  dedicated government-wide leadership team; or developed a  government-wide implementation plan with outcome-oriented goals,  timelines, key milestones, deliverables, and processes to monitor  implementation progress. In addition, OMB and DHS have not  demonstrated how the projects and activities outlined in the reform  proposal would address our related high-risk issues and major  management challenges, or developed workforce plans that assess the  effects of the proposal on the current and future workforce. If OMB, in  coordination with DHS, applied key reform practices government-wide,  they would be better positioned to manage the reform, and track progress  across all agencies facing cybersecurity workforce shortages.\nOMB has taken steps toward determining how the GEAR Center will  operate, such as, by determining the appropriate role of the federal  government; providing leadership focus and attention; and collecting input  from the public, academia, and industry on how the center could operate  and on ideas for possible research projects. However, OMB has neither  assessed the costs and benefits of the options it is considering for  operating the center, nor developed an implementation plan with  outcome-oriented goals and performance measures for it. As OMB moves  forward with establishing the GEAR Center, completing these two  activities can help OMB (1) make a case for why OMB\u2019s ultimate  decisions on how to operate the center are the most optimal, and (2)  provide greater transparency to the public and private partners involved in  its development, help build momentum, and demonstrate the center\u2019s  value.\n\nRecommendations for Executive Action:\n\nWe are making a total of seven recommendations to OMB.\nThe Director of OMB, working with DHS, should develop a government- wide communications strategy to inform and, as appropriate, involve  Congress, employees, and other stakeholders in implementation of the  reform proposal to solve the cybersecurity workforce shortage.  (Recommendation 1)\nThe Director of OMB, working with DHS, should establish a dedicated  government-wide leadership team with responsibility for implementing the  reform proposal to solve the cybersecurity workforce shortage.  (Recommendation 2)\nThe Director of OMB, working with DHS, should develop a government- wide implementation plan with goals, timelines, key milestones, and  deliverables to track and communicate implementation progress of the  reform proposal to solve the cybersecurity workforce shortage.  (Recommendation 3)\nThe Director of OMB, working with DHS, should provide additional  information to describe how the projects and activities associated with the  reform proposal to solve the cybersecurity workforce shortage will  address our high-risk issues related to ensuring the cybersecurity of the  nation. (Recommendation 4)\nThe Director of OMB, working with DHS, should develop a government- wide workforce plan that assesses the effects of the reform proposal to  solve the cybersecurity workforce shortage on the current and future  federal workforce. (Recommendation 5)\nThe Director of OMB should assess the costs and benefits of options for  operating the GEAR Center. (Recommendation 6)\nThe Director of OMB should develop an implementation plan that includes  outcome-oriented goals, timelines, key milestones, and deliverables to  track and communicate implementation progress of the reform proposal  to establish the GEAR Center. (Recommendation 7)\n\nAgency Comments\n\nWe provided a draft of this report for review and comment to the  Directors of OMB and OPM, the Secretary of DOD, the Acting Secretary  of DHS, and the Administrator of GSA.\nOMB did not comment on the report. DHS and DOD provided technical  clarifications, which we incorporated as appropriate. OPM and GSA  responded that they did not have comments on the report.\nWe are sending copies of this report to the Director of OMB and the  heads of the agencies we reviewed as well as appropriate congressional  committees and other interested parties. In addition, the report is  available at no charge on the GAO website at http:\/\/www.gao.gov.\nIf 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 this report. GAO staff who made key contributions to this report  are listed in appendix IV.\n\nAppendix I: Key Practices and Questions to Assess Agency Reforms\n\nIn a 2018 report, we developed key questions based on our prior work on  key practices that can help assess agency reform efforts. The 58  questions are organized into four broad categories and 12 subcategories,  as shown in table 4. For the purpose of this review, we selected those  subcategories and key questions that were most relevant to the selected  reforms based on the information contained in the reform proposals,  agency documentation, and interviews with the Office of Management  and Budget and lead agencies for each of the reforms.\n\nAppendix II: Reform Plan Effort to Reorganize the Office of Personnel Management\n\n\tReorganizing OPM: Most Key Practices Partially Addressed; National Defense Authorization Act for Fiscal Year 2020 Calls for Study of OPM\n\nThe administration\u2019s proposal to reorganize the Office of Personnel  Management (OPM) evolved from June 2018 through November 2019,  and was effectively halted by Congress in December 2019. In the June  2018 government-wide reform plan, the administration proposed:  (1) moving OPM\u2019s policy functions to a new office in the Executive Office  of the President, which would also provide a government-wide view of  human capital policy issues,  (2) merging a number of OPM\u2019s responsibilities with the General Service  Administration\u2019s (GSA) or other government entities\u2019 to be determined at  a later date, and  (3) renaming GSA as the Government Services Agency.\nThe goals of this proposal were to help elevate the importance of these  functions, improve efficiency of operations, and save money, according to  the reform plan. Specifically, the administration suggested integrating the  following duties into the Government Services Agency or other  government entities: administration of healthcare and insurance programs,\nHuman Resources Solutions (HRS), which provides products and  services to other federal agencies on a reimbursable basis, and  information technology services.\nIn addition, the reform plan contained another proposal to move all of  OPM\u2019s national security background investigation functions to the  Department of Defense (DOD).\nThe President\u2019s Fiscal Year 2020 Budget, published in March 2019,  expanded and modified the original OPM reorganization proposal. It  proposed that all of OPM\u2019s functions beyond those moving to the  Executive Office of the President and DOD be transferred to GSA, rather  than merging a portion of them into a newly formed Government Services Agency. It also called for creating a new GSA service area to house  certain functions, and for moving OPM\u2019s Office of the Inspector General  to GSA.\nIn May 2019, the administration submitted a legislative proposal to  Congress requesting new authority to implement aspects of the OPM  reorganization reform proposal. As of December 2019, this proposal had  not been introduced in Congress.\nIn May 2019, we testified on issues to consider in the proposed  reorganization of OPM. We found that the Office of Management and  Budget (OMB) and the two lead agencies (OPM and GSA) had generally  not addressed key practices for reforms, such as establishing outcome- oriented goals, assessing costs and benefits, or developing an  implementation plan, and had not fully involved or communicated their  efforts with Congress, employees, and other key stakeholders. We also  found that OMB, OPM, and GSA had not shown how they would address  management challenges that may affect their ability to successfully  reorganize the government\u2019s central human capital functions. Between  May and September 2019, OPM provided us with additional information,  which contributed to our assessment of the extent to which OMB, OPM,  and GSA addressed key practices for this reform (see figure 7).\nIn October and November 2019, OMB staff and OPM and GSA officials  provided us with updates on the status of the OPM reorganization reform  proposal. OMB staff and OPM and GSA officials told us that the transfer  of major functions from OPM to GSA, such as retirement services and  HRS, was on hold until Congress, through legislation, provided the  necessary authority to move these functions. They also told us that they  were working together on moving the following functions from OPM to  GSA through their existing authorities: (1) administrative responsibilities  for the Chief Human Capital Officers (CHCO) Council; (2) the Program  Management Office for the Security, Suitability, and Credentialing  Performance Accountability Council (PAC); and (3) management of two  OPM office buildings\u2014the Theodore Roosevelt Building, which houses  OPM\u2019s headquarters in Washington, D.C., and the Federal Executive  Institute located in Charlottesville, Virginia.\nOMB staff and OPM and GSA officials stated that the primary purpose of  these moves was to achieve greater efficiency of operations, and that  these transfers were not components of the OPM reorganization reform  proposal. In November 2019, OPM\u2019s Inspector General expressed  concern over ongoing efforts to merge these functions with GSA, noting  that the specific details of the full merger continued to evolve, and every  iteration of the proposed reorganization would fundamentally alter how  agency functions and duties are performed.\nIn the National Defense Authorization Act (NDAA) for Fiscal Year 2020,  signed into law in December 2019, Congress effectively halted actions to  reorganize OPM pending the completion of reports by the National  Academy of Public Administration (NAPA) and OPM. The law directed  OPM to enter into a contract with NAPA to conduct a study to identify  challenges associated with OPM\u2019s execution of its functions and make  recommendations for addressing them, including a cost-benefit analysis  of proposed changes, and the identification of statutory or regulatory  changes needed to execute recommended actions, among other things.  Approximately 6 months after the NAPA report, OPM must submit a  report providing its views on the NAPA report and its recommendations  for changes to its functions. OPM is also to include a business case  analysis associated with such changes and a proposal for legislative and  regulatory action required to effect the changes. Many of these  requirements reflect the issues we raised in our May 2019 testimony on  the extent to which the proposal to reorganize OPM was consistent with  our key reform practices.\nAccording to the President\u2019s fiscal year 2021 budget request, the  administration continues to pursue implementation of OPM\u2019s  reorganization. Specifically, it proposes to transfer the functions of OPM  to GSA, contingent upon enactment of authorizing legislation.\n\n\t\tEstablishing Goals and Outcomes\n\nOMB, OPM, and GSA partially addressed the key practices related to  establishing goals and outcomes. First, OMB, OPM, and GSA considered  how the upfront costs of the reform would be funded by, for example,  requesting funds through the President\u2019s Fiscal Year 2020 Budget.  However, OMB, OPM, and GSA did not fully address other aspects of the  key practices.\nSpecifically, since our May 2019 testimony, OPM provided us  information on additional draft goals and measures for some portions of  the reform. For example, according to a document we received from OPM  in August 2019, a team leading the reform effort was developing \u201ccritical  to quality\u201d metrics in areas such as cost reduction, employee  engagement, and flexible operations. However, these metrics did not  have targets and had not been finalized.\nIn November 2019, OMB staff told us that metrics were not yet final  because they were still working with Congress to develop a legislative  proposal authorizing the reform, and implementation of the merger was  not yet underway. The NDAA for Fiscal Year 2020 requires NAPA and  OPM to make recommendations for changes to OPM\u2019s structure,  functions, responsibilities and authorities, which may differ from those the  administration proposed.\nWe have also previously reported that major change initiatives should be  based on either a clearly presented business case or analysis of costs  and benefits grounded in accurate and reliable data, both of which can  show stakeholders why a particular initiative is being considered and the  range of alternatives considered. While OPM officials had some  information on the costs and benefits they planned to achieve by merging  functions with other agencies, they did not have an analysis or underlying  data supporting their conclusions. Specifically, OPM provided us with its  rationale for the reform in several documents, including: a summary of the agency\u2019s financial and management challenges, a qualitative business case, a list of state and foreign governments\u2019 administrative models where  human resources and administrative functions are merged, and a presentation providing OPM\u2019s estimate of the annual savings that  could be realized by \u201cfully integrating OPM\u2019s operations into GSA.\u201d\nHowever, the information that OPM provided did not include measurable  performance or outcome metrics, or quantify benefits relative to costs, to  provide a complete assessment of the costs and benefits and any  alternative solutions to the reform proposal. OPM\u2019s Office of Inspector  General also found, in its fiscal year 2020 top management challenges  report, that OPM had not developed a thorough analysis of costs and  benefits.\nShortly after OMB published the reform plan, OMB\u2019s then Deputy Director  for Management, who also served as OPM\u2019s Acting Director, said that  defining costs and benefits was dependent on refining and finalizing  implementation plans. Since then, in the NDAA for Fiscal Year 2020,  Congress required that NAPA\u2019s study include an analysis of the benefits,  costs, and feasibility of each recommendation, and a timetable for  implementing these options. In addition, the law requires that OPM\u2019s  report include a business case analysis that describes the operational  efficiencies and cost savings (both short- and long-term) associated with  its recommendations.\n\n\t\tInvolving Employees and Key Stakeholders\n\nOMB, OPM, and GSA partially addressed the key practices related to  involving employees and key stakeholders. Specifically, since our May  2019 testimony, OPM officials provided us with documents to  demonstrate that the agency took additional actions in this area, as  discussed in more detail below. However, we found that OPM\u2019s early  outreach efforts to employees and stakeholders were insufficient, the  agency did not have a plan for incorporating employee and stakeholder  feedback, and it did not share relevant implementation details that may  have affected employees and stakeholders.\nFor example, OPM provided us with a communications tracker that listed  meetings and correspondence with Congress, staff, and employee groups  from OPM\u2019s Acting Director, Deputy Director, and Deputy Chief of Staff.  While this document listed a number of meetings and calls, it showed that  most of OPM\u2019s efforts to involve Congress, employees, and employee  groups began in April 2019, more than 9 months after OMB published the  reform plan, and more than 8 months after OPM\u2019s Director and GSA\u2019s  Administrator testified before Congress about their plans for carrying out  the reform proposal.\nIn addition, both members of Congress and employee groups expressed  dissatisfaction with initial outreach from OMB, OPM, and GSA, including  lack of transparency. For example, during a House Committee on  Oversight and Reform Subcommittee on Government Operations hearing  on May 21, 2019, members of Congress and employee groups testified  that they felt insufficiently involved in the reform. Both groups stated that  OPM officials communicated with them on few occasions, and members  of Congress said that they had not received key documents they  requested from OPM, including an implementation plan.\nIn August 2019, OPM provided us with a strategic communications plan  that included high level messages and strategies for reaching out to  Congress, employees, and the public. This and other OPM documents  demonstrated that OPM communicated with employees and key  stakeholders, and provided opportunities for its employees to ask  questions and provide comments about the reform, activities consistent  with our key practices.\nHowever, the documents did not indicate how senior OPM officials  planned to use the feedback they received from their employees.  Similarly, neither OMB nor GSA described how they planned to use  employee feedback to inform their reform efforts. The NAPA study  required by the NDAA for Fiscal Year 2020 must include methods for  involving, engaging with, and receiving input from other federal agencies,  departments, and entities potentially affected by any change in OPM that  NAPA recommends. The study must also incorporate the views of  stakeholders.\n\n\t\tAddressing High-Risk Areas and Longstanding Management Challenges\n\nOMB, OPM, and GSA partially addressed the key practices related to  addressing high-risk areas and longstanding management challenges,  consistent with our assessment in May 2019. Since then, OPM provided  additional documents related to (1) our relevant high-risk area of strategic  human capital management, as well as (2) longstanding challenges at  OPM we and OPM\u2019s Inspector General have reported. However, OMB,  OPM, and GSA did not explain how the OPM reorganization reform  proposal would address our high-risk issue or mitigate major  management challenges, and did not have plans to monitor the potential  effects of the reform on these issues. As a result, OMB, OPM, and GSA  did not fully consider the potential risks of transferring OPM systems with  longstanding weaknesses to GSA, and of GSA taking on duties in areas  such as information technology, where it faces major management  challenges. They also lacked a means of monitoring the reform\u2019s potential  effects on our strategic human capital management high-risk area and on  major management challenges. Moreover, in November 2019, OPM\u2019s  Office of the Inspector General continued to identify the proposed merger  of OPM with GSA as a top management challenge because the proposal  did not include an implementation plan, and created a burden for the  agency to fully study, plan, and execute reorganization activities.\nIn November 2019, OMB staff told us that, because the proposed merger  was a long-term effort and plans were still under development, they had  not yet determined how our high-risk and other management challenges  would be addressed. The NDAA for Fiscal Year 2020 requires the NAPA  study to include analyses of OPM\u2019s challenges and a recommended  course of action for resolving them.\n\n\t\tLeadership Focus and Attention\n\nOMB, OPM, and GSA generally addressed the key practices related to  leadership focus and attention. Specifically, since our May 2019  testimony, OPM officials provided us with documents demonstrating that  OMB, OPM, and GSA made progress in this area. For example, OPM  documents showed that OPM, OMB, and GSA leaders approved a  governance structure for leading reform efforts that included: an executive steering committee that provided guidance and made  decisions. Its members included the OMB Deputy Director for  Management (serves as executive sponsor and chair), the OPM  Director (serves as a vice-chair), and the GSA Administrator (serves  as a vice-chair). The group used the Lean Six Sigma management  approach to make decisions related to planning and implementing the  reform during Tollgate meetings. an interagency task force that led activities to implement the reform,  and that raised issues to the Executive Steering Committee as  needed. Its members included leaders from OMB, OPM, and GSA.  interagency teams, which provided subject matter expertise and  performed tasks and activities to implement the reform. Their  members were OPM and GSA officials.\nFrom August 2018 through April 2019, our analysis of OPM documents  showed that these groups met and communicated frequently\u2014from every  few days to every few weeks, depending on the group. From May 2019\u2014 when the administration transmitted their legislative proposal to Congress  to reorganize OPM\u2014to November 2019, these groups met less  frequently, according to OMB staff and GSA officials.\n\n\t\tManaging and Monitoring\n\nOMB, OPM, and GSA partially addressed the key practices related to  managing and monitoring. Since our May 2019 testimony, OPM provided  us with documents that demonstrated improvements in this area, but as  of November 2019, had yet to finalize an implementation plan.  Specifically, the documents showed that OMB, OPM, and GSA held  leadership meetings and systematically tracked various aspects of the  reform. For example, OPM officials tracked the status of certain activities  associated with the reform, such as progress on developing a plan for  communicating with employees and stakeholders, through leadership  meetings. Also, OPM had a document identifying risks associated with  the reform, such as ensuring continuity of services, as well as mitigation  strategies, such as including provisions in OPM-GSA interagency  agreements. The document also specified individual agency officials  responsible for each risk.\nOMB, OPM, and GSA did not develop an implementation plan for the  OPM reorganization reform that included key milestones and  deliverables. In November 2019, OMB staff told us that their plans were  still being developed because they were waiting for Congress to pass the  administration\u2019s legislative proposal authorizing the reform. The NDAA for  Fiscal Year 2020 requires NAPA and OPM to make recommendations for  changes to OPM\u2019s structure, functions, responsibilities, and authorities,  which may differ from those the administration proposed.\n\n\t\tEmployee Engagement\n\nOMB, OPM, and GSA partially addressed the key practices related to  employee engagement. Specifically, while OMB and agencies undertook  activities to measure employee engagement, such as surveying and  communicating with employees, they did not develop a comprehensive  strategy for sustaining and strengthening employee engagement during  and after the reform. For example, GSA officials told us that they  established a GSA-OPM change management and communications  workgroup, which developed a change management and communications  plan that included employee engagement activities. Also, in April 2019,  OPM conducted an internal survey of agency staff to measure employee  engagement, among other factors.\nOPM officials also identified employee morale issues as a risk in a  document identifying risks associated with the reform and risk mitigation  strategies. To address employee dissatisfaction and low morale, OPM  officials, including OPM\u2019s then-Acting Director, shared the survey results  with employees, held listening sessions to determine employees\u2019  preferences for communications about the OPM reorganization reform  proposal, and developed a communications strategy.\nHowever, OPM officials did not determine how they planned to use these  communications to sustain and strengthen employee engagement. In  November 2019, OMB staff told us that because they were still in the  planning stages of the reorganization, the proposed reform had not yet  involved major changes for employees, so they put employee  engagement efforts on hold. The NAPA study required by the NDAA for  Fiscal Year 2020 is to include methods for involving, engaging with, and  receiving input from other federal agencies, departments, and entities  potentially affected by any change in OPM that NAPA recommends. The  study is to also incorporate the views of stakeholders.\n\n\t\tStrategic Workforce Planning\n\nOMB, OPM, and GSA did not address the key practices related to  strategic workforce planning. OPM and GSA officials told us that they  were conducting workforce planning activities associated with the OPM  reorganization reform. Also, the President\u2019s Fiscal Year 2020 Budget  provided some information about staff levels at OPM and GSA. However,  OMB, OPM, and GSA did not produce strategic workforce plans for OPM  and GSA employees. OPM and GSA officials stated that they had not  provided us with these plans because they were under development. In  November 2019, GSA officials added that they were waiting for  congressional authorization to carry out the reform proposal, so they had  put their efforts to develop a workforce plan on hold. The NDAA for Fiscal  Year 2020 requires that NAPA and OPM make recommendations on  changes to OPM, which may differ from the administration\u2019s proposed  reorganization of OPM.\n\n\tReorganizing OPM: NDAA for Fiscal Year 2020 Provides for the Identification of Legal Authorities\n\nAs part of our review, our Office of General Counsel sent letters to the  Offices of General Counsel at OPM, GSA, and OMB requesting they  provide us with a description of the legal authorities they were using to  support the proposed OPM reorganization. OMB, OPM, and GSA  provided responses to our letter, but did not identify which aspects of the  OPM reorganization could be carried out under existing law and which  would require legislative authority. GSA, OPM, and OMB officials stated  that they had not yet finalized their legal analysis, and that they were still  determining which legal authorities they could use to implement elements  of the reform. OMB General Counsel stated that to implement the  administration\u2019s proposed reorganization, both legislative and  administrative actions would be necessary and dependent on each other  \u201cin the long run.\u201d\nIn May 2019, the administration submitted a legislative proposal  requesting authority to transfer OPM functions\u2014such as Human  Resources Solutions, Information Technology, Retirement, and Health  and Insurance Services\u2014to GSA. As of December 2019, the proposal  had not been introduced in Congress. OMB staff told us that the  legislative proposal was an effort to communicate transparently about the  extent to which new authorities would be required.\nAs discussed earlier, in December 2019, Congress passed the NDAA for  Fiscal Year 2020. In the NAPA study required under the NDAA, NAPA is  to provide a comprehensive assessment and analysis of the statutory or  regulatory changes needed to implement any recommended course of  action, and to submit this report to Congress and the Director of OPM.  The Director of OPM is then to submit a report to Congress that lays out  OPM\u2019s views on the findings and recommendations of the NAPA study,  along with OPM\u2019s recommendations for change. Any recommendation  submitted by OPM for change is to include a business case analysis that  sets forward the efficiencies and cost savings (both short- and long-term)  associated with the change, and a proposal for legislative or  administrative action required to effect the change.\nThe statutory provisions in the act generally provide that no aspect of the  agency that is assigned in law to OPM may be moved to GSA, OMB, or  the Executive Office of the President until 180 days after OPM\u2019s report is  submitted to congressional committees, and subject to the enactment of  any required legislation.\n\nAppendix III: Reform Plan Effort to Develop a Capability to Improve the Customer Experience\n\nThis reform proposal aims to modernize and streamline the way citizens  interact with the federal government, and to raise customer experience to  a level comparable with leading private sector organizations. With  support from the United States Digital Service (USDS) and GSA\u2019s  Technology Transformation Service, OMB has stated that it will lead an  effort to establish a government-wide capability that will enable agencies  to identify their customers, map their interactions (or journeys) with  federal programs or services, and leverage digital tools and services to  improve their experiences and overall satisfaction. For example, as  reported in the reform plan, the U.S. Department of Agriculture created a  \u201cdigital front door,\u201d accessible at Farmers.gov, that is organized around  the user experience rather than the government\u2019s structure. The reform  plan further explains that the improved capability provided by USDS and  GSA would also provide for a government-wide resource to manage  organizational change, including improved project planning, facilitating  interagency collaboration, and sharing best practices on change  management.\nOMB staff told us in early 2019 that they have delayed implementation of  this reform, and instead will focus on other customer experience activities,  such as those outlined in the related Cross-Agency Priority (CAP) goal.  Upon release of the President\u2019s Fiscal Year 2020 budget in March 2019,  we confirmed that this reform was not included in the administration\u2019s  reorganization priorities, and OMB confirmed that no funding was  requested for its implementation. OMB and agencies are also pursuing a  related but distinct CAP goal under the President\u2019s Management  Agenda\u2013Improving Customer Experience with Federal Services\u2013with the  aim of providing a modern, streamlined, and responsive customer  experience across government, comparable to leading private-sector  organizations. According to OMB, the reform proposal is meant to stand  up a central capacity, or office, within GSA to manage customer  experience government-wide; whereas, the CAP goal is intended to  support capacity growth and accountability within agencies to develop  and manage their own customers\u2019 experience and satisfaction.\nBecause OMB has not yet begun to implement this reform, and no  actions are planned for fiscal year 2020, we are not able to assess the  extent to which the reform is adhering to key reform practices. When the  administration moves forward with implementing this reform, it will be  better positioned for its successful implementation if the key reform  practices are followed. In response to our request to identify the legal  authority OMB will need to implement this reform, OMB\u2019s General  Counsel responded in a November 2019 letter that the initiative will not  require new legislation. OMB stated the reform can be implemented  within current law and available appropriations.\n\nAppendix IV: GAO Contacts and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nTriana McNeil at (202) 512-6806 or Mcneilt@gao.gov.\nIn addition to the contact named above, Sarah E. Veale (Assistant  Director, Strategic Issues), Peter Beck (Analyst-in-Charge, Strategic  Issues), Colenn Berracasa, Karin Fangman, Steven Putansu, Janet  Temko-Blinder, Peter Verchinski, and Kellen Wartnow made key  contributions to this report. Timothy Carr, Jacqueline Chapin, Tom Costa,  Sara Cradic, Brenda Farrell, Patrick Hickey, Shirley Jones, Tammi  Kalugdan, Brian Mazanec, Kimberly Seay, Gregory Wilshusen, and Alicia  White also contributed to this report.","output":null}
{"id":"gao_GAO-20-344","pid":"gao_GAO-20-344_0","input":"\tBackground\n\nThe Improper Payments Information Act of 2002 (IPIA), as amended by  IPERA and the Improper Payments Elimination and Recovery  Improvement Act of 2012, requires executive branch agencies, among  other things, to (1) review all programs and activities and identify those  that may be susceptible to significant improper payments (commonly  referred to as conducting 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.\nIPERA also requires executive agencies\u2019 IGs to annually determine and  report on whether their respective agencies complied with six 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 IG considers the agency to  be noncompliant overall. The six criteria are as follows:  1.  publish a financial report in the form and including all content  required by OMB\u2014typically an AFR or a 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;  4.  publish corrective action plans for those programs and activities  assessed to be susceptible to 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.\nAs described above, not all criteria are applicable to every agency. For  example, if an agency publishes a financial report and conducts a risk  assessment and determines that none of its programs or activities are  susceptible to significant improper payments, then the remaining criteria  would not be applicable.\nOMB plays a key role in implementing laws related to improper payment  reporting. As required by statute, OMB has established guidance for  federal agencies on estimating, reporting, reducing, and recovering  improper payments. Such guidance includes OMB Circular A-123  Appendix C, Requirements for Payment Integrity Improvement, which  also includes guidance to IGs on determining agency compliance with  IPERA. The Council of the Inspectors General on Integrity and  Efficiency (CIGIE) also published guidance in July 2019 to assist IGs who  are required to conduct an annual improper payment review under  IPERA.\nWe continued to report improper payments as a material weakness in  internal control in our audit report on the U.S. government\u2019s consolidated  financial statements for fiscal years 2018 and 2017 because of the federal  government\u2019s inability to determine the full extent to which improper  payments occur and reasonably ensure that appropriate actions are taken  to reduce them. We have also reported that estimation of improper  payments is key to understanding the extent of the problem and to  developing effective corrective actions to address it. However, the  government\u2019s ability to understand the full scope of its improper payments  is hindered by incomplete, unreliable, or understated estimates; risk  assessments that may not accurately assess the risk of improper  payment; and noncompliance with criteria listed in IPERA. For example,  we previously reported that issues and inconsistencies we identified in  selected agencies\u2019 processes for estimating improper payments may  affect the quality of their estimates. In addition, certain IGs 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.\n\n\tFederal Agencies\u2019 Estimates of Fiscal Year 2019 Improper Payments Totaled $175 Billion\n\nBased on agencies that reported improper payment estimates in their  AFRs and PARs, government-wide estimated improper payments for  fiscal years 2019 and 2018 totaled about $175 billion and $151 billion,  respectively. See appendix I for the reported amounts by agency and  program for fiscal years 2019 and 2018. As shown in figure 1, of the $175  billion for fiscal year 2019, about $121 billion (approximately 69 percent)  is concentrated in three program areas: (1) Medicaid, totaling about $57.4  billion (approximately 32.8 percent); (2) Medicare (comprised of three  reported programs: Fee-for-Service (Parts A and B), Advantage (Part C),  and Prescription Drug (Part D)), totaling about $46.2 billion  (approximately 26.5 percent); and (3) Earned Income Tax Credit (EITC),  totaling about $17.4 billion (approximately 9.9 percent).\nKey information contained in agency AFRs and PARs regarding the types  and causes of fiscal year 2019 estimates of improper payments, and  reasons for significant changes in reported estimates from fiscal year  2018, are summarized as follows:\nThe $175 billion total reported government-wide estimates for fiscal  year 2019 is broken down per OMB\u2019s Paymentaccuracy.gov Data Call  Instructions by type as follows: overpayments, totaling about $79.1 billion (approximately 45.2 underpayments, totaling about $12.9 billion (approximately 7.4 unknown, totaling about $74.1 billion (approximately 42.4  technically improper due to statute or regulation, totaling about  $8.7 billion (approximately 5 percent).\nAbout $74.6 billion (approximately 42.7 percent) of the government- wide estimates was reported as monetary loss.\nAbout $151.2 billion (approximately 86.6 percent) of the reported  government-wide improper payment estimates for fiscal year 2019  related to root causes that occurred in the three areas below. See  appendix II for details on the root causes that agencies identified for  their reported improper payment estimates for fiscal year 2019.\nInsufficient documentation to determine payment accuracy.  About $74.1 billion (approximately 42.4 percent) resulted from  situations where the agency lacked supporting documentation  necessary to verify the accuracy of the payments.\nAdministrative or process error. About $39.1 billion  (approximately 22.4 percent) resulted from incorrect data entry,  classifying, or processing of applications or payments.\nInability to authenticate eligibility. About $38 billion  (approximately 21.8 percent) resulted from the agency not being  able to authenticate eligibility criteria.\nThe fiscal year 2019 total reported government-wide estimated  improper payments, among programs that reported estimates,  increased by about $24 billion from the fiscal year 2018 total reported.  While decreases in estimated improper payments were reported for  several programs, these were offset by increases for certain other  programs. Between fiscal years 2018 and 2019, six programs had an  increase and five programs had a decrease of over $1 billion in  estimated improper payments. Appendix III provides information on all  the programs that had a substantial change in estimated improper  payments between fiscal years 2018 and 2019 and the reasons for  those changes as reported in agency AFRs. Examples of substantial  changes in improper payments and the reasons for such changes that  agencies provided in their AFRs include the following:\nDepartment of Health and Human Services (HHS) reported an  increase in the total estimated improper payments for the  Medicaid program in excess of $21.1 billion for fiscal year 2019.  The majority of the increase in the total estimated improper  payments for the Medicaid program was due to HHS\u2019s  reintegration of the eligibility component of the Payment Error  Rate Measurement (PERM) for Medicaid for fiscal year 2019.  From fiscal years 2015 through 2018, HHS did not estimate  improper payments attributed to eligibility determinations, but did  include a proxy estimate, which was the last reported rate in fiscal  year 2014 for the eligibility component, while HHS worked to  update this component.\nFor fiscal year 2019, HHS estimated improper payments attributed  to eligibility determinations in 17 states (about one-third of all  states). HHS\u2019s national eligibility estimated improper payment rate  still includes a proxy estimate for 34 remaining states that have  not yet been measured since the reintegration of the PERM  eligibility component.\nHHS reported that most eligibility errors identified through the new  measurement process were due to insufficient documentation to  verify eligibility or noncompliance with eligibility redetermination  requirements. HHS also reported that these insufficient  documentation situations were related primarily to income or  resource verifications. HHS\u2019s fiscal year 2019 AFR noted that  another significant cause for estimated Medicaid improper  payments is errors resulting from state noncompliance with  provider screening and enrollment requirements.\nThe Department of the Treasury (Treasury) began reporting  improper payment estimates for fiscal year 2019 for two programs  deemed newly susceptible to significant improper payments.  Specifically, Treasury reported about $7.2 billion and $2.1 billion in  improper payment estimates for Additional Child Tax Credit and  American Opportunity Tax Credit, respectively.\nIn addition, HHS reported a decrease in the total estimated  improper payments for the Medicare Fee-for-Service (Parts A and  B) program of about $2.7 billion. According to HHS\u2019s fiscal year  2019 AFR, the decrease in the estimate is due to a reduction in  estimated improper payments for home health; Medicare Fee-for- Service Part B; and Durable Medical Equipment, Prosthetics,  Orthotics, and Supplies claims.\nAs stated earlier, the federal government\u2019s ability to understand the full  scope of its improper payments is hindered by incomplete, unreliable, or  understated agency estimates and risk assessments that may not  accurately assess the risk of improper payment. For example,  certain federal programs and activities that agencies determined to be  at risk for significant improper payments did not report estimates of  improper payments for fiscal year 2019, including the Premium Tax  Credit and Temporary Assistance for Needy Families programs, and as we previously reported, the Department of Defense (DOD) lacks  quality assurance procedures to ensure the completeness and  accuracy of the payment populations from which it develops improper  payment estimates.\n\n\tCFO Act Agencies\u2019 Reported Compliance with IPERA\n\n\t\tHalf of the CFO Act Agencies Were Reported as Compliant for Fiscal Year 2018\n\nEight years after the implementation of IPERA, half of the 24 CFO Act  agencies were compliant with IPERA overall for fiscal year 2018, as  reported by their IGs. See appendix IV for each CFO Act agency\u2019s overall  compliance with IPERA. With regard to the six IPERA criteria, as shown  in figure 2, IGs reported all agencies as compliant with the requirement to  conduct program-specific risk assessments if it was applicable to the  agency. In addition, 22 of 24 agencies (92 percent) met the requirement  to publish a PAR or AFR.\nBased on the IGs\u2019 fiscal year 2018 compliance reports, agencies were  most frequently reported as noncompliant with the IPERA requirement to  publish and meet annual targets for improper payment reduction. Out of  the 14 agencies for which this requirement was applicable, IGs for eight  agencies (57 percent) reported that their agencies were noncompliant.  The second most-frequently reported area of noncompliance related to  the IPERA requirement for agencies\u2019 reported improper payment rates to  be below 10 percent for programs that published estimates. Out of the 15  agencies for which this requirement was applicable, IGs for five agencies  (33 percent) reported that their agencies were noncompliant. See  appendix IV for additional details on each CFO Act agency\u2019s compliance  with the six IPERA criteria for fiscal year 2018, as reported by their IG.\nIn addition, IGs for certain CFO Act agencies reported quality issues in  their agencies\u2019 reporting of improper payment data. Although the issues  did not result in noncompliance with the related IPERA criterion, the IGs  noted these as areas that need improvement. For example, one agency reported inaccurate amounts for identified and recaptured improper  payments in its AFR. However, the IG reported that the agency was  compliant with the IPERA criterion for publishing financial information in a  PAR or AFR. Another agency\u2019s IG reported that its agency did not  accurately evaluate its corrective actions\u2019 effectiveness in recapturing  improper payments. However, the IG reported that the agency was  compliant with the IPERA criterion to publish corrective action plans. As  we stated above pertaining to the IGs\u2019 determination of compliance with  IPERA criteria, these determinations are based on whether the agency  met the requirements and is not a judgment on the quality of the work  conducted in order to meet those requirements.\n\n\t\tTrends in Reported Overall IPERA Compliance for Fiscal Years 2016 through 2018\n\nAs stated above, IGs for 12 of the 24 CFO Act agencies reported that  their agencies were compliant with IPERA overall for fiscal year 2018. As  shown in figure 3, this is an increase from 10 agencies reported as  compliant for fiscal year 2017, and 11 agencies reported as compliant for  fiscal year 2016. The improvement in IPERA compliance is attributable to  the Departments of Commerce and Education, which were reported by  their IGs as noncompliant in fiscal year 2017 but compliant in fiscal year  2018. No agencies that IGs reported as compliant in fiscal year 2017  were reported as noncompliant in fiscal year 2018.\nIn addition, the IGs reported that 21 programs within these agencies were  noncompliant with IPERA for each of the past 3 fiscal years (2016\u20132018).  Improper payment estimates for these programs totaled about $78 billion,  representing approximately 52 percent of the $151 billion government- wide reported improper payment estimates for fiscal year 2018. As shown  in table 1, this includes improper payment estimates for Medicaid of about  $36 billion and for EITC of about $18 billion.\nAs shown in figure 4, the number of programs reported as noncompliant  with IPERA for 3 or more consecutive years has increased since fiscal  year 2016. Specifically, the number of programs reported as  noncompliant for 3 or more consecutive years increased from 14  programs in fiscal year 2016 to 18 programs in fiscal year 2017 and 21  programs in fiscal year 2018. The reported improper payment estimates  for these programs totaled about $109 billion for fiscal year 2016, $74  billion for fiscal year 2017, and $78 billion for fiscal year 2018. The total  improper payment estimates for programs reported as noncompliant for 3  or more consecutive years decreased for fiscal 2017 primarily because  the Medicare Fee-for-Service program, with about $41 billion of improper  payments in fiscal year 2016, was reported as compliant beginning fiscal  year 2017.\n\n\tAgency Comments\n\nWe provided a draft of this report to OMB and CIGIE for review and  comment. CIGIE stated that it had no comments. OMB did not provide  any comments.\nWe also provided the full draft for review and comment to agencies and  respective IG offices we met with throughout the course of this work. In  addition, we sent summary facts to other agencies that had substantial  changes in reported improper payment estimates between fiscal years  2018 and 2019 (as shown in app. III), and provided the full draft for review  and comment, upon request, to those agencies. We received written  comments from the U.S. Agency for International Development, which is  reproduced in appendix V. The Department of Health and Human  Services, Department of Veterans Affairs, and the Social Security  Administration\u2019s Office of Inspector General provided technical  comments, which we incorporated in the report as appropriate. The  remaining agencies and IG offices informed us that they had no  comments.\nWe are sending copies of this report to the appropriate congressional  committees, the Director of the Office of Management and Budget, the  Chairman of the Council of the Inspectors General on Integrity and  Efficiency, and other interested parties. In addition, the report is available  at no charge on the GAO website at http:\/\/www.gao.gov.\nIf 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 VI.\n\nAppendix I: Reported Improper Payment Estimates and Rates by Agency and Program for Fiscal Years 2019 and 2018\n\nTable 2 details the improper payment estimates and rates that federal  agencies reported to the Office of Management and Budget or in their  agency financial reports or performance and accountability reports for  fiscal years 2019 and 2018. In addition, as shown in the table 2, 17  programs had a substantial change in their reported improper payment  estimates or rates between fiscal years 2018 and 2019. The reasons for  the changes, as reported in the agency financial reports, are detailed in  appendix III.\n\nAppendix II: Agency-Reported Root Causes for Improper Payment Estimates for Fiscal Year 2019\n\nTable 3 shows the government-wide agency-reported improper payment  estimates and rates for fiscal year 2019, grouped by Office of  Management and Budget (OMB) improper payment root cause  categories.\nOMB defines the root cause categories as follows:  Insufficient documentation to determine: For this category, there is  a lack of supporting documentation necessary to verify the accuracy  of a payment identified in the improper payment testing sample. For  example, a program does not have documentation to support a  beneficiary\u2019s eligibility for a benefit, and without that particular  documentation, the agency is unable to discern that the payment was  for the correct amount or went to the right recipient.\nAdministrative or process errors: In this category, errors were  caused by incorrect data entry, classifying, or processing of  applications or payments. For example, an eligible beneficiary  receives a payment that is too high or too low because of a data entry  mistake (such as transposing a number) or an agency enters an  incorrect invoice amount into its financial system.\nInability to authenticate eligibility: In this category, an improper  payment is made because the agency is unable to authenticate  eligibility criteria. These types of errors include but are not limited to  (1) inability to access data and (2) data needed do not exist.\nProgram design or structural issue: For this category, improper  payments result from the design of the program or a structural issue.  For example, a scenario in which a program has a statutory (or  regulatory) requirement to pay benefits when due, regardless of  whether all the information has been received to confirm payment  accuracy.\nMedical necessity: For this category, a medical provider delivers a  service or item that does not meet coverage requirements for medical  necessity (for example, providing a power wheelchair to a patient  whose medical record does not support meeting coverage  requirements for a power wheelchair).\nFailure to verify data: In this category, the agency (federal, state, or  local), or another party administering federal dollars, fails to verify  appropriate data to determine whether a recipient should be receiving  a payment, even though such data exist in government or third-party  databases. In these situations, the data needed exist, and the agency  or other party administrating federal dollars had access to them but  did not check the payment against those data prior to making the  payment.\nOther reason: This category covers when the improper payment  does not meet any of the above categories.\n\nAppendix III: Programs with Substantial Changes in Reported Improper Payment Estimates or Rates from Fiscal Year 2018 to Fiscal Year 2019\n\nTable 4 shows the 17 programs that had a substantial change in the  improper payment estimates or rates between fiscal years 2018 and  2019, and the reasons for those changes, as reported in the agency  financial reports.\n\nAppendix IV: Fiscal Year 2018 CFO Act Agencies\u2019 IPERA Compliance as Reported by Their Inspectors General\n\nFigure 5 details the Chief Financial Officers Act of 1990 (CFO Act)  agencies\u2019 overall compliance with the Improper Payments Elimination and  Recovery Act of 2010 (IPERA), as well as the agencies\u2019 compliance with  each of the six IPERA criteria for fiscal year 2018, as reported by their  inspectors general.\n\nAppendix V: Comments from the U.S. Agency for International Development\n\nAppendix VI: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact Staff Acknowledgments\n\nBeryl H. Davis, (202) 512-2623 or davisbh@gao.gov  In addition to the contact named above, Matt Valenta (Assistant Director),  Cherry Vasquez (Auditor in Charge), Pat Frey, Jason Kelly, Jim Kernen,  Anne Thomas, Judy Tsan, and Landon Western made key contributions  to this report.","output":null}
{"id":"crs_R40638","pid":"crs_R40638_0","input":"\tThe Congressional Role\n\nOver the years, the federal intergovernmental system of governance has been characterized by many scholars as becoming increasingly centralized and coercive, with the federal government using federal grants, federal mandates, and federal preemption of state authority to expand its influence in many policy areas previously viewed as being the traditional responsibility of state and local governments. In FY2019, the federal government is expected to provide state and local governments about $750 billion in federal grants encompassing a wide range of public policy areas, such as health care, transp ortation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for just under one-third of total state government funding, and more than half of state government funding for health care and public assistance.\nCongress has a central role in determining the scope and nature of federal grant programs. In its legislative capacity, Congress first determines what it wants to accomplish and then decides whether a grant-in-aid program is the best means to achieve it. Congress then selects which of the six grant mechanisms to use (project categorical grant, formula categorical grant, formula-project categorical grant, open-end reimbursement categorical grant, block grant, or general revenue sharing), and crafts legislation to accomplish its purpose, incorporating the chosen grant instrument. As with all legislation generally, Congress oversees the grant's implementation to ensure that the federal administrating agency is held accountable for making certain that congressional expectations concerning program performance are met.\nFederalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members (especially those of party leaders and committee and subcommittee chairs and ranking minority Members); and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups (especially the National Governors Association, the National League of Cities, U.S. Conference of Mayors, and the National Association of Counties), the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning federal grant-in-aid programs.\nOverarching all of these factors is the evolving nature of cultural norms and expectations concerning government's role in American society. Over time, although the American public has become increasingly skeptical of government performance, they have also become increasingly accepting of government activism in domestic affairs generally, and of federal government activism in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society; technological innovations in communications, which have raised awareness of societal problems; and exponential growth in economic interdependencies brought about by an increasingly global economy.\nThis report provides a historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system's scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system's development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system.\n\n\tFederal Grants to State and Local Governments\n\nDifferent federal departments and agencies, including the U.S. Census Bureau, the Government Accountability Office (GAO), and the U.S. Office of Management and Budget (OMB), use different definitions to determine what counts as a federal grant-in-aid program. However, there is agreement on the general characteristics associated with each grant type.\nThe three general types of federal grants to state and local governments are categorical grants, block grants, and general revenue sharing (see Table 1 ). Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities. Block grants can be used only for a specifically aided set of programs and usually are not limited to narrowly defined activities. General revenue sharing can be used for any purpose not expressly prohibited by federal or state law and is not limited to narrowly defined activities.\nThe four types of categorical grants are project categorical grants, formula categorical grants, formula-project categorical grants, and open-end reimbursement categorical grants. Project categorical grants are awarded on a competitive basis through an application process specified by the federal agency making the grant. Formula categorical grants are allocated among recipients according to factors specified within enabling legislation or administrative regulations (e.g., population, median household income, per capita income, poverty, and number of miles driven). Formula-project categorical grants use a mixture of fund allocation means, typically involving the use of a formula specified within enabling legislation or administrative regulations to allocate available funds among the states, followed by an application process specified by each recipient state to allocate available funds on a competitive basis among local governments or other eligible applicants. Open-end reimbursement categorical grants, often regarded as the equivalent of formula categorical grants, provide a reimbursement of a specified proportion of recipient program costs, eliminating competition among recipients as well as the need for an allocation formula.\n\n\t\tA Continuum of Federal Grant Administrative Conditions\n\nOf the six grant types, project categorical grants typically impose the most restraint on recipients (see Table 1 ). Federal administrators have a high degree of control over who receives project categorical grants (recipients must apply to the appropriate federal agency for funding and compete against other potential recipients who also meet the program's specified eligibility criteria); recipients have relatively little discretion concerning aided activities (funds must be used for narrowly specified purposes); and there is a relatively high degree of federal administrative conditions attached to the grant, typically involving the imposition of federal standards for planning, project selection, fiscal management, administrative organization, and performance.\nGeneral revenue sharing imposes the least restraint on recipients. Federal administrators have a low degree of discretion over who receives general revenue sharing (funding is allocated automatically to recipients by a formula or formulas specified in legislation); recipients have broad discretion concerning aided activities; and there is a relatively low degree of federal administrative conditions attached to the grant, typically involving periodic reporting criteria and the application of standard government accounting procedures.\nBlock grants are at the midpoint in the continuum of recipient discretion. Federal administrators have a low degree of discretion over who receives block grants (after setting aside funding for administration and other specified activities, the remaining funds are typically allocated automatically to recipients by a formula or formulas specified in legislation); recipients have some discretion concerning aided activities (typically, funds can be used for a specified range of activities within a single functional area); and there is a moderate degree of federal administrative conditions attached to the grant, typically involving more than periodic reporting criteria and the application of standard government accounting procedures, but with fewer conditions attached to the grant than project categorical grants.\n\n\tOutlays for Federal Grants to State and Local Governments\n\nAs indicated in Table 2 , outlays for federal grants to state and local governments have generally increased over the years, with a relatively rapid increase from FY2008 through FY2010 due primarily to the enactment of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provided state and local governments $274.7 billion in grants, contracts, and loans combined. State and local governments received $52.9 billion in ARRA grants, contracts, and loans in FY2009, $111.9 billion in FY2010, $68.8 billion in FY2011, $25.6 billion in FY2012, 11.8 billion in FY2013, and $1.6 billion in FY2014 to assist their recovery from the \"Great Recession\" (December 2007-June 2009). \nAs expected, after reaching $608.4 billion in FY2010, outlays for federal grants to state and local governments declined somewhat in FY2011 as ARRA funding began to unwind, and then declined further to $544.6 billion in FY2012 and to $546.2 billion in FY2013 as most of ARRA's funding expired. Outlays for federal grants to state and local governments have increased since then, primarily due to increased outlays for Medicaid. \nAs indicated in Table 2 and Figure 1 , in FY2019 health care is anticipated to account for more than half of total outlays for federal grants to state and local governments (an estimated $453.9 billion in FY2019, or 60.6% of the total), followed by income security ($114.2 billion, or 15.2%), education, training, employment, and social services ($67.5 billion, or 9.0%), transportation ($67.2 billion, or 9.0%), community and regional development ($21.9 billion, or 2.9%), and all other ($24.9 billion, or 3.3%). \nMedicaid, with $418.7 billion in expected federal outlays in FY2019, has, by far, the largest budget of any federal grant-in-aid program. Ten other federal grants to state and local governments are expected to have federal outlays in excess of $10 billion in FY2019: Federal-Aid Highways ($43.9 billion), Child Nutrition ($23.9 billion), Tenant Based Rental Assistance\u2014Section 8 vouchers ($22.3 billion), the Children's Health Insurance Fund ($18.4 billion), Accelerating Achievement and Ensuring Equity (Education for the Disadvantaged\u2014$17.4 billion), Temporary Assistance for Needy Families ($16.5 billion), Special Education ($13.2 billion), State Children and Families Services Programs ($10.9 billion), Urban Mass Transportation Grants ($10.3 billion), and the Disaster Relief Fund ($10.2 billion).\n Table 3 provides data on outlays for federal grants to state and local governments in nominal and constant (inflation-adjusted) dollars, as a percentage of total federal outlays and as a percentage of national gross domestic product (GDP) for selected fiscal years since FY1960. It also indicates the percentage of these outlays that are payments for individuals, as opposed to payments for capital improvements and government operations.\nAs indicated in Table 3 , total outlays for federal grants to state and local governments have generally increased since the 1960s. However, the magnitude of those increases has varied over the years. For example, outlays for federal grants to state and local governments increased, in nominal dollars, 187.3% during the 1960s, 246.4% during the 1970s, 33.4% during the 1980s, 98.0% during the 1990s, and 98.6% during the first decade of the 2000s. \nOutlay growth for federal grants to state and local governments has, in most years, exceeded inflation. However, as indicated in Table 3 , those outlays, expressed in constant (FY2012) dollars, did not keep pace with inflation during the early 1980s and during the early 2010s.\nFederalism scholars have noted that since the 1980s, the focus of federal grants to state and local governments has shifted from providing assistance to places (e.g., to build public highways, support public education, criminal justice systems, economic development endeavors, and government administration) to people (e.g., providing health care benefits, social welfare income, housing assistance, and social services). Much of this shift is attributed to Medicaid, which has experienced relatively large outlay growth over the past several decades. As shown in Table 3 , during the 1960s and 1970s about one-third of total outlays for federal grants to state and local governments were for individuals, compared with more than 75% in FY2018.\n\n\tNumber of Federal Grants to State and Local Governments\n\nIn the past, the now-defunct U.S. Advisory Commission on Intergovernmental Relations (ACIR) and OMB used information contained in the Catalog of Federal Domestic Assistance (CFDA) to count the number of federal grants to state and local governments. The CFDA \"is a government-wide compendium of Federal programs, projects, services, and activities that provide assistance or benefits to the American public.\" It lists 15 categories of federal grants: formula grants (including formula categorical grants, formula-project categorical grants, and block grants); project grants; direct payments for specified uses to individuals and private firms; direct payments with unrestricted use to beneficiaries who meet federal eligibility requirements; direct loans; guaranteed\/insured loans; insurance; sale, exchange, or donation of property and goods; use of property, facilities, and equipment; provision of specialized services; advisory services and counseling; dissemination of technical information; training; investigation of complaints; and federal employment. It lists all authorized federal grant programs, including grants that have not received an appropriation. Because the CFDA focuses on the needs of applicants, if a program uses a separate application or other delivery mechanism, the CFDA considers it a separate program. This complicates efforts to count federal grants to state and local governments. \nACIR periodically published counts of funded federal grants to state and local governments during the 1960s and then for Fiscal Years 1975, 1978, 1981, 1984, 1987, 1989, 1991, 1993, and 1995. OMB provided counts of funded grants to state and local governments for FY1980-FY2003. Because they used a different methodology to determine which grant programs to include in their count, their results differed. OMB consistently identified fewer federal grants to state and local governments than ACIR. For example, in FY1995, OMB identified 608 funded federal grants to state and local governments compared to ACIR's count of 633. No authoritative count of funded federal grants to state and local governments is known to have been issued in recent years.\nACIR included in its counts all direct cash grants to state or local governmental units, other public bodies established under state or local law, or their designee; payments for grants-in-kind, such as purchases of commodities distributed to state or local governmental institutions; payments to nongovernmental entities when such payments result in cash or in-kind services or products that are passed on to state or local governments; payments to state and local governments for research and development that is an integral part of their provision of services; and payments to regional commissions and organizations that are redistributed at the state or local level to provide public services.\nOMB counted only grants for traditional governmental operations, as defined in OMB Circular A-11. The definition covered only grants that \"support State or local programs of government operations or provision of services to the public.\" It excluded federal grants that went directly to individuals, fellowships, most grants to nongovernmental entities, and technical research grants.\nA search of the CFDA's 2018 print edition and electronic version indicated that state governments, local governments, U.S. territories, and federally recognized tribal governments are eligible to apply for 1,616 federal grants (defined as authorized project grants, formula grants, cooperative agreements, direct payments for specified uses, and direct payments for unrestricted uses). Of these grants, 141 were not currently funded, 160 were research or fellowship programs that were not targeted solely at either public institutions of higher education or other public agencies, and 41 had broad eligibility extending beyond state and local governments. Removing them from the list left 1,274 funded federal grants to state and local governments (see Table 4 ).\nBecause there is no consensus on the methodology used to count federal grants to state and local governments, the 1,274 count of federal grants to state and local governments listed in Table 4 should be viewed as illustrative, as opposed to definitive, of the current number of federal grants to state and local governments.\nAs the data in the table suggest, the number of federal grants to state and local governments increased slowly from 1902 to 1930. Then, partly in reaction to the Great Depression, Congress doubled the number of federal grants to state and local governments during the 1930s, and continued to increase the number of federal grants to state and local governments during the 1940s and 1950s. \nDuring the mid-1960s, Congress increased the number of federal grants to state and local governments exponentially, primarily in response to national social movements concerning poverty and civil rights. Nine federal grants to state and local governments were added in 1961, 17 in 1962, 20 in 1963, 40 in 1964, 109 in 1965, 53 in 1966, 3 in 1967, and 4 in 1968. \nCongress continued to increase the number of federal grants to state and local governments during the 1970s, but at a relatively slow pace as it addressed budgetary constraints presented by \"guns versus butter\" issues associated with the Vietnam conflict. Then, at the urging of President Ronald Reagan in 1981, Congress approved the largest reduction in the number of federal grants to state and local governments in American history by creating 9 new block grants which consolidated 77 categorical grants and revised two earlier block grants. The Reagan Administration also eliminated funding for 62 categorical grants in 1981, mainly through authority provided under P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981. \nThe number of federal grants to state and local governments increased relatively slowly during the remainder of the 1980s, as Congress faced budgetary constraints presented by demographic changes in American society that led to escalating costs for several federal entitlement programs, especially for Social Security, Medicare and Medicaid, and by the Reagan Administration's general opposition to the expansion of the federal grants-in-aid system.\nAs the data in Table 4 indicate, the number of federal grants to state and local governments continued to increase during the 1990s, and has continued to do so, but more slowly in recent years.\n\n\tLand Grants and \"Dual Federalism\": 1776-1860\n\nThe relative influence of internal versus external factors on congressional decisions affecting the federal grants-in-aid system has varied, both over time and in each specific policy area. Prior to the Civil War, external factors, especially cultural norms and expectations concerning government's role in American society, restricted congressional options concerning enactment of federal grant-in-aid programs for state and local governments.\nDuring this time period, America was primarily a rural nation of farmers. Travel conditions were, compared with today's standards, primitive. Many Americans rarely left their home state, and many others never set foot in another state. Government as we know it today, with regulations and spending programs affecting many aspects of American life, did not exist. Although ratification of the Articles of Confederation and Perpetual Union on March 1, 1781, formally established the United States of America, personal allegiance was still directed more toward the individual's home state than to the nation. It was an era of what federalism scholars have called \"dual federalism,\" where states were expected to be the primary instrument of governance in domestic affairs.\nHowever, even before the Constitution's ratification, the federal government found ways to provide state and local governments with assistance to encourage them to pursue national policy objectives. For example, under the Articles of Confederation and Perpetual Union, Congress did not have the power to lay and collect taxes and relied heavily on state donations to fund the government. This lack of revenue, and expenses related to national defense, limited congressional spending options in domestic affairs. The Congress of the Confederation addressed that issue by adopting the Land Ordinance of 1785. The Ordinance generated revenue for the government by authorizing the sale of land acquired from Great Britain at the conclusion of the American Revolutionary War. The Ordinance also required every new township incorporated in those lands, called the Ohio Country, to be subdivided into 36 lots (or sections), each 1 mile square. Lots 8, 11, 26, and 29 were reserved for the United States. The new townships were required to use Lot 16 \"for the maintenance of public schools, within the said township. \" Some schools are still located in lot 16 of their respective townships, although many of the school lots were sold to raise money for public education. These land grants for public education were reauthorized by Congress in the Northwest Ordinance of 1787. Congress subsequently adopted similar legislation for all states admitted to the union from 1802 to 1910, with exceptions for Texas, which retained all of its public land, and Maine and West Virginia, which were formed from other states. From 1802 to 1848, one lot in each township was to be used for education, from 1848 to 1890 two lots, and from 1894 to 1910, with one exception, four lots.\nWhen the Framers met in Philadelphia in 1787 to rework the Articles of Confederation and Perpetual Union, the national economy was in recession, state governments were saddled with large debts left over from the Revolutionary War, the continental dollar was unstable and destined to be a national joke (\"not worth a continental\"), the navy could not protect international shipping, and the army proved unable to protect its own arsenal during Shay's rebellion in 1786. To address these issues, Congress was provided 17 specific powers in Article 1, Section 8 of the U.S. Constitution, ratified in 1789, including the power to coin money, establish post offices, regulate copyright laws, declare war, regulate the Armed Forces, borrow money, and, importantly, lay and collect taxes.\nThe power to lay and collect taxes provided Congress the means to expand the federal government's role in domestic affairs. Moreover, the Supreme Court issued several rulings under Chief Justice John Marshall concerning congressional authority to regulate interstate commerce that effectively cleared the way for congressional activism in domestic policy. However, the prevailing view in Congress at this time was that any power not explicitly provided to Congress in the Constitution was excluded purposively, suggesting that in the absence of specific, supporting constitutional language the exercise of governmental police powers (the regulation of private interests for the protection of public safety, health, and morals; the prevention of fraud and oppression; and the promotion of the general welfare) was either meant to be a state or local government responsibility, or outside the scope of governmental authority altogether.\nNevertheless, during the 1800s there were congressional efforts, primarily from representatives from western states, to adopt legislation to provide federal cash assistance for various types of internal improvement projects to encourage western migration and promote interstate commerce. Most of these efforts failed, primarily due to sectional divisions within Congress which, at that time, made it difficult to build coalitions large enough to adopt programs that targeted most of their assistance to western states. Some opposition came from Members of Congress who viewed reducing the national debt from the American Revolutionary War as a higher priority. Other Members opposed federal interventions as a matter of political philosophy. They viewed the provision of cash assistance for internal improvements, other than for post roads, which were specifically mentioned in the Constitution as a federal responsibility, a violation of states' rights, as articulated in the Tenth Amendment: \"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.\"\nGiven the prevailing views concerning the limited nature of the federal government's role in domestic affairs, Congress typically authorized federal land grants to states instead of authorizing direct cash assistance to states for internal improvements. For example, in 1823 Ohio received a federal land grant of 60,000 acres along the Maumee Road to raise revenue to improve that road. In 1827, Ohio received another federal land grant of 31,596 acres to raise revenue for the Columbus and Sandusky Turnpike.\nIn 1841, nine states (Ohio, Indiana, Illinois, Alabama, Missouri, Mississippi, Louisiana, Arkansas, and Michigan) \u0336 and, with three exceptions, all subsequent newly admitted states \u0336 were designated land grant states and guaranteed at least 500,000 acres of federal land to be auctioned to support transportation projects, including roads, railroads, bridges, canals, and improvement of water courses, that expedited the transportation of United States mail, military personnel, and military munitions. By 1900, over 3.2 million acres of federal land were donated to these states to support wagon road construction. Congress also authorized the donation of another 4.5 million acres of federal land to Illinois, Indiana, Michigan, Ohio, and Wisconsin to raise revenue for canal construction and 2.225 million acres to Alabama, Iowa, and Wisconsin to improve river navigation. In addition, states were provided 37.8 million acres for railroad improvements and 64 million acres for flood control. States were provided wide latitude in project selection, and federal oversight and administrative regulations were minimal.\nAlthough land grants were prevalent throughout the 1800s, given prevailing views concerning states' rights, land grants, as well as cash grants, were subject to opposition on constitutional grounds. For example, in 1854, Congress adopted legislation authorizing the donation of 10 million acres of federal land to states to be sold to provide for the indigent insane. President Franklin Pierce vetoed the legislation, claiming that\nI cannot find any authority in the Constitution making the federal government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution, and subversive of the whole theory upon which the union of these States is founded.... I respectfully submit that, in a constitutional point of view, it is wholly immaterial whether the appropriation be in money, or in land.... should this bill become a law, ... the several States instead of bestowing their own means on the social wants of their own people, may themselves ... become humble supplicants for the bounty of the Federal Government, reversing the state's true relation to this Union.\nOne notable exception to the federal reluctance to provide cash grants to states occurred in 1837. The federal government used proceeds from western land sales to retire the federal debt in 1836. The Deposit Act of 1836 directed that, after reserving $5 million, any money in the federal Treasury on January 1, 1837, shall be distributed to states in proportion to their respective representation in the House and Senate. There were no restrictions placed on how states were to use the funds. About $30 million was distributed to states in three quarterly payments in 1837 before the banking crisis of 1837 led to a recession and payments were stopped. To avoid a promised veto from President Andrew Jackson, the legislation indicated that the funds were a deposit subject to recall, rather than an outright grant of cash.\nOverall, domestic policy in the United States prior to the Civil War was dominated by states. As a federalism scholar put it:\nWith respect to the classic trinity of sovereign powers\u2013taxation, the police power, and eminent domain\u2013the states enjoyed broad autonomous authority, which they exercised vigorously. Indeed, property law, commercial law, corporation law, and many other aspects of law vital to the economy were left almost exclusively to the states.... Federalism thus provided a receptive structure for expressions of state autonomy and pursuit of state-oriented economic objectives, not only as a matter of constitutional theory and the distribution of formal authority but also as a matter of real power. \n\n\tThe Origins of the Modern Grants-In-Aid System: 1860-1932\n\nThe Union's victory in the Civil War marked the beginning of a second evolutionary era in American federalism. It effectively put to an end to the doctrine that the Constitution was a compact among sovereign states, each with the right to nullify an act of Congress that the state deemed unconstitutional, and each with the legal right to secede from the Union. It also signaled the triumph of the northern states' commercialism over the southern states' agrarianism:\nUnimpeded by the political opposition of the southern slavocracy, the Republican coalition of north and west carried through a program of comprehensive changes that insured the expansion of industry, commerce, and free farming.... Instead of the policies of economic laissez faire that the slavocracy had demanded ... the Republicans substituted the doctrine that the federal government would provide assistance for business, industry, and farming; the protective tariff, homestead, land subsidies for agricultural colleges, transcontinental railroads and other internal improvements, national banks. When the defeated south came back into the Union, it had to accept the comprehensive alternation in government policy and economic institutions that historian Charles A. Beard was later to name the Second American Revolution.\nFollowing the war, three constitutional amendments\u2014the Thirteenth adopted in 1865, the Fourteenth adopted in 1868, and the Fifteenth Amendment adopted in 1870\u2014abolished slavery, prohibited states from denying due process or equal protection to any of their citizens, and banned racial restrictions on voting, respectively. In addition, Congress enacted the Reconstruction Acts of 1867 and 1868, which imposed military government on the formally secessionist states and required universal manhood suffrage. Despite this active federal presence in domestic policy in the South following the Civil War, the concept of dual federalism and deference to states in domestic affairs remained a part of American culture. For example, several Supreme Court rulings during this time period limited congressional efforts to override state laws on civil rights, in effect leaving civil and voting rights matters to states until the 1950s and 1960s. The Supreme Court also limited congressional efforts to regulate interstate commerce by limiting the Interstate Commerce Commission's authority.\nReflecting prevailing views concerning dual federalism, and limited federal fiscal resources, the first on-going, federal cash grant to states, other than for the support of the National Guard, was not adopted until 1879. P.L. 45-186, the Federal Act to Promote the Education of the Blind, appropriated $250,000 to create a perpetual source of income for the purchase of teaching materials for the blind. It marked the beginning of the modern federal grants-in-aid system. The funds were used to purchase interest bearing bonds. The interest was used to purchase teaching materials for the blind. These teaching materials were then distributed among the states (and the District of Columbia) annually, with each state applying for assistance receiving a share of the available teaching materials based on the state's share of the total number of pupils enrolled in public schools of education for the blind. The second federal cash grant to states was authorized by the Hatch Act of 1887. It provided each state an annual cash grant of $15,000 to establish agricultural experiment stations. In 1888, an annual grant of $25,000 was appropriated for the care of disabled veterans in state hospitals. States were provided $100 per disabled veteran. In 1890, funding was provided to subsidize resident instruction in the land grant colleges made possible by the Morrill Act of 1862, which provided each existing and future state with 60,000 acres of federal land, plus an additional 30,000 acres for each of its congressional representatives, to be sold for the endowment, support, and maintenance of at least one college where the leading subject was agriculture and the mechanic arts. \nIn 1902, there were five federal grants to states and local governments (in addition to funding for the National Guard): teaching materials for the blind, agricultural experiment stations, the care of disabled veterans, resident instruction in the land grant colleges, and funding to the District of Columbia. Outlays for these grants were about $7 million in FY1902, or about 1% of total federal outlays. State and local government total outlays at that time were slightly over $1 billion, evidence of the relatively limited nature of federal involvement in domestic policy at that time. \nAn important difference between land grants and cash grants had emerged, even at this early date. Because federal grants were funded from the federal treasury, many in Congress felt that they had an obligation to ensure that the funds were spent by states in an appropriate manner. As a result, Congress began to attach an increasing number of administrative requirements to these grant programs. For example, in 1889, states were required to match federal funding for the care of disabled veterans or lose it. The Morrill Act of 1890 authorized the Secretary of the Interior to withhold payments, pending an appeal to Congress, from states that failed to meet conditions specified in the act. In 1895, expenditures authorized by the Hatch Act for agricultural experiment stations were conditioned by annual audits. In 1911, funding authorized by the Weeks Act to support state efforts to prevent forest fires was conditioned by advance approval of state plans for the funds' use, annual audits and inspections, and a state matching requirement.\nThe Sixteenth Amendment's ratification in 1913 provided Congress the authority to lay and collect taxes on income. Although the federal income tax initially generated only modest amounts, it provided Congress an opportunity to shift from land grants to cash grants to encourage state and local governments to provide additional attention to policy areas Congress considered of national interest. Between 1913 and 1923, Congress adopted new federal grant-in-aid programs for highway construction, vocational education, public health, and maternity care. Outlays for federal grants to state and local governments increased from $12 million in FY1913 to $118 million in FY1922.\nIn 1923, Massachusetts brought suit against the Secretary of the Treasury, Andrew Mellon, claiming that the maternal care grants authorized by the Sheppard-Towner Act of 1921 were unconstitutional infringements on states' rights. The Supreme Court dismissed the case on the grounds that it lacked jurisdiction. Nonetheless, Justice George Sutherland, writing on behalf of the unanimous Court, indicated that, in his view, this form of congressional spending was not unconstitutional because federal grants to state and local governments were optional and, as such, were not coercive instruments. As a result, although few new federal grants to state and local governments were adopted during the remainder of the 1920s, those grants were now accepted as a legal means for Congress to encourage state and local governments to pursue national goals.\n\n\tThe New Deal and the Rise of \"Cooperative Federalism\": 1932-1960\n\nPolitical scientists contend that about once in every generation partisan affiliations realign across the nation, typically taking a few years to materialize but often becoming apparent during a \"critical\" presidential election. Critical elections typically result in relatively dramatic and lasting changes in the partisan composition within Congress and state governments. They also usually signal the coming to power of a new partisan coalition that dominates congressional decisionmaking for a relatively long period of time. For example, the election of 1896 ended the political stalemate between the Democratic and Republican parties and solidified the Republican Party's position as the majority party for the next 36 years. The election of 1932 signaled a new period of Democratic Party dominance, particularly in the \"Solid South,\" that lasted until the 1970s, when partisan attachments began to weaken, southern states became increasingly Republican, and the two major political parties became increasingly competitive, each seemingly on the verge of achieving majority party status at various times, but unable to retain that status permanently.\nThe 1932-1960 period also saw the emergence of the \"congressional conservative coalition,\" the unofficial title given to the shifting political alliances of southern, conservative Democrats and Republican Members. The conservative coalition became an increasingly important counter-balance to large Democratic majorities in both houses of Congress. Members of the conservative coalition generally advocated balanced budgets and states' rights, especially in civil rights legislation. They used congressional procedures, such as the filibuster or threat of a filibuster, to win concessions from the Democratic majority, and, in some instances, to prevent legislation they opposed from becoming law. They also benefitted from the congressional seniority system, which, during this time period, allocated committee chairmanships according to seniority. Because many of the congressional districts in the \"solid south\" were noncompetitive seats, southern representatives held a disproportionate number of committee chairmanships in the House, further strengthening the conservative coalition's influence on congressional policymaking.\nThe conservative coalition prevented civil rights legislation from being enacted during this time period, but it could not prevent Democratic majorities in the House and Senate from expanding the federal government's presence in domestic policy. However, throughout this time period, the conservative coalition actively sought concessions to ensure that any new federal programs, including any new grants to state and local governments, respected state rights. As a result, the grant-in-aid programs adopted during this time period tended to be in policy areas where state and local governments were already active, such as in education, health care, and highway construction, or where additional federal assistance was welcomed, such as job creation. Also, federal administrative conditions attached to these grants during this era focused on the prevention of corruption and fraudulent expenditures as opposed to encouraging states to move in new policy directions. As a result, federalism scholars have labeled this time period as an era of \"cooperative federalism,\" where intergovernmental tensions were relatively minor and state and local governments were provided flexibility in project selection.\nFaced with unprecedented national unemployment and economic hardship, President Franklin Delano Roosevelt advocated a dramatic expansion of the federal government's role in domestic affairs during his presidency, including an expansion of federal grant-in-aid programs as a means to help state and local governments combat poverty and create jobs. Congress approved 16 new, continuing federal grants to state and local governments from 1933 to 1938, and increased funding for federal grants to states and local governments from $214 million in FY1932 to $790 million in FY1938.\nCongress also enacted several temporary, emergency relief grant-in-aid programs that distributed federal funds to states according to the state's fiscal capacity. Congress devised mathematical formulas, based on a variety of economic and business measures, to allocate funding to each state, resulting in the share of relief funds varying among states based on the formula's assessment of need. At their peak, in 1935, emergency relief measures provided states nearly $1.9 billion to create jobs and provide emergency assistance for the unemployed. The emergency relief programs were terminated during the 1940s, but they established a precedent for extensive federal involvement with state and local governments in areas of national concern and for the use of mathematical formulas for distributing federal assistance. \nThe Social Security Act of 1935 (SSA) was, arguably, the most significant legislative enactment of the New Deal period. It established a federal presence in social welfare policy. New federal grant-in-aid programs were established for old age assistance, aid to the blind, aid to dependent children, unemployment compensation, maternal and child health, crippled children, and child welfare. The act also enhanced federal oversight of grants to state and local governments as auditing requirements were now required in almost all grant programs. In addition, in 1939, state employees administering SSA programs were required to be selected by merit system procedures, a major advancement for the development of professional state and local government administration and a signal of the declining influence of state and local party bosses in American society. In 1940, the Hatch Act restricted the political activities of state and local government employees paid with federal funds.\nLegally, New Deal legislation was based on an expanded interpretation of congressional authority to spend through grant-in-aid programs to promote the nation's welfare under Article 1, Section 8, clause 1 of the Constitution, often referred to as the congressional \"spending power.\" Federal expenditures through grant-in-aid programs during the New Deal were made in several functional areas, including some, such as social welfare, that were traditionally viewed as state responsibilities. Opponents of an expanded role for the federal government in domestic policy argued that New Deal grant programs precluded state action in these traditionally state functional areas and, as such, violated the Constitution's Tenth Amendment. Advocates of an expansion of federal involvement in domestic affairs argued that the power of Congress to spend is more extensive than, rather than concurrent with, enumerated or even implied law-making powers. This disagreement led to a number of Supreme Court cases, a full discussion of which is beyond the scope of this report. The Supreme Court rejected the New Deal's expansion of federal authority in 8 of the first 10 cases that it decided. Then, after President Roosevelt's failed legislative proposal to \"pack the Court\" in 1937, the Supreme Court upheld the constitutionality of several New Deal laws, including the Social Security Act. As a federalism scholar noted,\nA new era of judicial construction had been launched. The commerce power was given broad interpretation in cases upholding the Labor Relations Act. The older distinction between direct and indirect effects of commercial activity was abandoned and the more realistic \"stream-of-commerce\" concept adopted. The scope of Federal taxing power was also broadened expansively. In sanctioning the Social Security Act, the unemployment excise tax on employers was upheld as a legitimate use of the tax power, and the grants to the states were viewed as examples of Federal-state collaboration, not Federal coercion. The act's old-age and benefit provisions were deemed to be proper because \"Congress may spend money in aid of general welfare.\" When combined, these decisions obviously amounted to last rites for judicial dual federalism. \nAlthough the Supreme Court was no longer viewed as a major obstacle for the expansion of the federal grants-in-aid system, external factors led to a reduction in outlays for federal grants to state and local governments from FY1939 to FY1946 as Congress focused on defense-related issues during World War II. For example, outlays for federal grants to state and local governments averaged $947 million from FY1939 through FY1946, less than half of the New Deal's peak. Following the war, the number of federal grants to state and local governments began to increase at a somewhat accelerated pace, reaching 68 grants in 1950 and 132 grants in 1960. Outlays for federal grants to state and local governments also accelerated, from $859 million in FY1945, to $2.3 billion in FY1950, to $3.2 billion in FY1955, and to $7 billion in 1960. A new development was increased outlays targeted at urban areas, such as grants for airport construction (1946), urban renewal (1949), and urban planning (1954). The most significant federal grant-in-aid program enacted during the 1950s was the $25 billion, 13-year Federal-Aid Highway Act of 1956, which authorized the construction of the then-41,000 mile National System of Interstate and Defense Highways, with a 1972 target completion date. For the next 35 years, federal surface transportation policy focused on the completion of the interstate system.\n\n\tThe Great Society and the Rise of \"Coercive Federalism\": 1960-1980\n\nThe 1960s was a turbulent decade, marked by both political and social upheaval of historic proportions. Three leading public figures were assassinated: President John F. Kennedy in 1963, civil rights leader the Reverend Martin Luther King Jr. in 1968, and President Kennedy's brother, presidential candidate and Senator Robert Kennedy, in 1968. The civil rights movement, led by the Reverend King, was often met with violent resistance, with bombings of black churches, murders of civil rights workers, and televised police beatings of civil rights demonstrators. One of the defining moments of the civil rights movement was the march on Washington, DC, in August 1963, where the Reverend King made his famous \"I Have A Dream\" speech. Congress responded to the social turmoil by adopting the Civil Rights Act of 1964, which superseded state civil rights laws by prohibiting discrimination based on race, color, religion, or national origin; the Voting Rights Act of 1965, which superseded state election laws by outlawing literacy tests, poll taxes, and other means to discourage minority voting; and the Civil Rights Act of 1968, which superseded state civil rights laws by prohibiting discrimination in the sale, rental, and financing of housing. Nonetheless, race riots took place in several urban areas in 1965 and in 1967.\nDuring the latter half of the decade, the civil rights movement was joined by what has been called the hippie movement, where young people rebelled against the conservative norms of the time and disassociated themselves from mainstream liberalism and materialism. This \"counterculture\" movement began in the United States and sparked a social revolution throughout much of the Western world. It began as a reaction against the conservatism and social conformity of the 1950s, and the U.S. government's military intervention in Vietnam. These groups questioned authority and government, and demanded more freedom and rights for women, gays, and minorities, as well as greater awareness of the need to protect the environment and address poverty.\nThe social movements and social unrest that swept across the nation during the 1960s had a strong impact on Congress. Reflecting the growing public demand for congressional action to address civil rights, poverty, and the environment, in 1961 the House approved, 217-212, a proposal by Speaker Sam Rayburn to enlarge the House Rules Committee from 12 to 15 Members. Prior to the change, the House Rules Committee was divided, 6 to 6, along ideological lines. Because a majority vote is necessary for the issuance of a legislative rule, the House Rules Committee served as an institutional barrier to the passage of legislation that the committee's more conservative Members believed infringed on states' rights, including civil rights legislation.\nThe enlargement of the House Rules Committee in 1961 signaled the weakening of the conservative coalition's influence within Congress and enabled the large Democratic majorities elected during the early 1960s in the House and Senate to adopt a succession of civil rights laws, highlighted by the previously mentioned Civil Rights Act of 1964. It also enabled Congress to expand the federal grants-in-aid system, focusing on grants designed to protect the environment and address poverty, both directly through public assistance and job training programs and indirectly through education, housing, nutrition, and health care programs.\nThese legislative efforts were both supported and encouraged by President Lyndon Baines Johnson. For example, during his commencement address at the University of Michigan on May 22, 1964, President Johnson announced that he would establish working groups to prepare a series of White House conferences and meetings to develop legislative proposals to revitalize urban America, address environmental problems, and improve educational opportunities \"to begin to set our course toward the Great Society\" which \"demands an end to poverty and racial injustice, to which we are totally committed.\" The term \"The Great Society\" came to symbolize legislative efforts during the 1960s to address poverty and racial injustice.\nIn concert with President Johnson's Great Society initiatives, Congress nearly tripled the number of federal grants to state and local governments during the 1960s, from 132 in 1960 to 387 in 1968. In 1965 alone, 109 federal grants to state and local governments were adopted, including Medicaid, which now has, by far, the largest budget of any federal grant-in-aid program. Outlays for federal grants to state and local governments also increased, from $7 billion in FY1960 to $20 billion in FY1969. Functionally, federal grants for health care increased from $214 million in FY1960 to $3.8 billion in FY1970, for income security from $2.6 billion to $5.7 billion, for education, training, employment, and social services from $525 million to $6.4 billion, for transportation from $3 billion to $4.6 billion, and for community and regional development from $109 million to $1.7 billion.\nFor the most part, these legislative efforts were not opposed by state and local government officials and their affiliated public interest groups (e.g., National Governors Association, National League of Cities, U.S. Conference of Mayors, and National Association of Counties), primarily because federal grants are voluntary and, in many instances, provided funding for activities that had broad public support. However, the new grants had a number of innovative features that distinguished them from their predecessors. Previously, most federal grants to state and local governments supplemented existing state efforts and, generally, did not intrude on state and local government prerogatives. Most of the federal grants created during the 1960s, on the other hand, were designed purposively by Congress to encourage state and local governments to move into new policy areas, or to expand efforts in areas identified by Congress as national priorities, especially in environmental protection and water treatment, education, public assistance, and urban renewal.\nIn addition, there was an increased emphasis on narrowly focused project, categorical grants to ensure that state and local governments were addressing national needs. Most of the new grants had relatively low, or no, matching requirements, to encourage state and local government participation. New incentive grants encouraged states to move into new policy areas and to diversify eligible grant recipients, including individuals, nonprofit organizations, and specialized public institutions, such as universities. A greater emphasis also was on grants to urban areas. For example, outlays for federal grants targeted at metropolitan areas more than tripled during the 1960s, and grew to include about 70% of total federal grant-in-aid funding, up from about 55% at the beginning of the decade. There was also a greater emphasis on mandated planning requirements.\nAlthough most of the federal grants adopted during the 1960s were narrowly focused project, categorical grants, the first two block grants were enacted during this time period. P.L. 89-749, the Comprehensive Health Planning and Public Health Services Amendments of 1966, later known as the Partnership for Public Health Act, created a block grant for comprehensive health care services (now the Preventive Health and Health Services Block Grant). It replaced nine formula categorical grants. Two years later, Congress created the second block grant, the Law Enforcement Assistance Administration's Grants for Law Enforcement program (sometimes referred to as the \"Crime Control\" or \"Safe Streets\" block grant) in the Omnibus Crime Control and Safe Streets Act of 1968. Unlike the health care services block grant, it was created de novo , and did not consolidate any existing categorical grants.\nThe rapid expansion of federal grants to state and local governments during the 1960s led to a growing concern that the intergovernmental grant-in-aid system had become dysfunctional and needed to be reformed. For example, ACIR argued that along with the expansion of the federal grant system came \"a rising chorus of complaints from state and local government officials\" concerning the inflexibility of fiscal and administrative requirements attached to the grants. It suggested that state and local government officials were subjected to an information gap because they found it difficult to keep up with the host of new programs and administrative requirements. It also cited the need for improved coordination among programs, noting that many state and local government officials were reporting administrative difficulties dealing with federal agencies and those agencies' regional offices:\nBetween 1962 and 1965 four new systems of regional offices were established as a consequence of grants-in-aid legislation. Adding these bodies to the separate, already existing regional structures brought the total number of regional systems to 12. Regional boundaries and field office locations varied widely. Kentucky, to cite the most extreme case, had to deal with federal agencies in ten different cities. This confusion imposed burdens on the recipients of grants and also made the task of coordinating operations by federal agencies in pursuit of national objectives more difficult.\nDuring the 1970s, President Richard Nixon and his successor, President Gerald R. Ford, argued that the intergovernmental grant-in-aid system was dysfunctional and advocated the sorting out of governmental responsibilities, with the federal government taking the lead in some functional areas and states in others. They also advocated a shift from narrowly focused categorical grants, especially project categorical grants, toward block grants and revenue sharing. They argued that block grants and general revenue sharing provided state and local governments additional flexibility in project selection and promoted program efficiency by reducing administrative costs. They, and others, believed that state and local governments should be provided additional flexibility in project selection and relief from federal administrative requirements because\ngreater reliance on state and local governments promotes a sense of state and local community responsibility and self-reliance; state and local government officials are closer to the people than federal administrators and, as a result, are better positioned to discern and adapt public programs to state and local needs and conditions; state and local governments encourage participation and civic responsibility by allowing more people to become involved in public questions; active state and local governments encourage experimentation and innovation in public policy design and implementation; active state and local governments reduce administrative workload on the federal government, which creates program efficiencies; and active state and local governments reduce the political turmoil that sometimes results from single policies that govern the entire nation.\nOpponents of a shift from categorical grants to block grants and revenue sharing presented several arguments, including\nbecause funding comes from the federal Treasury, Congress has both the right and an obligation to determine how that money is spent; many state and local governments lack the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services, such as education and health care, which are essential to economic success. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; state and local governments that have the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services essential to economic success are often unable to do so because they compete with other state and local governments for business and taxpaying residents. As a result, state and local governments tend to focus available resources on programs designed to attract business investment and taxpaying residents to their communities and states rather than on programs assisting the poor and disadvantaged. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; Congress has both the right and the obligation to ensure through the carrot of grant-in-aid programs and the stick of federal requirements that certain national goals, such as civil rights, equal employment opportunities, protection for the environment, and care for the poor and aged, are met because it is difficult to achieve change when reform-minded citizens must deal with 50 state governments and more than 79,000 local governments; and some governmental services have either costs or benefits that spill over onto other localities or states. Water and air pollution controls, for example, benefit not only the local community that pays for the air or water pollution controls, but all of the communities that are located downwind or downstream from that community. Because state and local taxpayers are generally reluctant to pay for programs whose benefits go to others, state and local governments often underfund programs with significant spillover effects. Therefore, Congress must act to ensure that these programs are funded at logical levels.\nOpponents also asserted that the arguments presented by advocates for a shift in emphasis to block grants and revenue sharing were actually a \"smoke screen\" masking their true intent which, allegedly, was to shift federal resources to their core constituencies. As mentioned previously, most federal grant-in-aid funding during the 1960s and 1970s was targeted to metropolitan areas, which, at that time, were considered Democratic Party strongholds. Many observers believed that shifting from project categorical grants to block grants or general revenue sharing would result in less money for metropolitan areas and more money for suburban and rural areas, areas that were more likely to be populated by Republicans than Democrats. This shift would occur because project categorical grants are awarded on a competitive basis by federal administrators while block grant and revenue sharing funding is allocated according to pre-determined formula, often with minimum funding guarantees for each state and with a portion of the funding determined by either population or per capita income. Because block grant and revenue sharing funding tends to be more geographically dispersed than project categorical grants, congressional debates over which grant mechanism was best had partisan overtones that often transcended discussions over which grant mechanism would improve grant performance.\nSome federalism scholars have also suggested that Congress tends to prefer categorical grants over block grants and revenue sharing because Members take pride in the authorship of sponsored programs. They argue that categorical grants provide more opportunities for sponsorship, and more opportunities for receiving political credit for that sponsorship, than block grants or revenue sharing. In their view, constituents are more interested in a Member's ability to serve in a material way than in their competence in broad policymaking or in \"the rightness of positions on issues of principle, form or structure.\" As a result, they argue that Members are more likely to be recognized for sponsoring or supporting specific, narrowly focused categorical grants than by championing a more general block grant or revenue sharing approach. For example, they assert that Members are more likely to receive recognition and political credit from constituents for sponsoring and supporting legislation to prevent lead-based paint poisoning among children than for legislation covering the broad area of preventive health services. \nPresidents Nixon's and Ford's efforts to gain congressional approval for a shift in emphasis from categorical grants to block grants and revenue sharing were only partially successful. For example, in his 1971 State of the Union speech, President Nixon announced a plan to consolidate 129 federal grant programs in six functional areas\u201433 in education, 26 in transportation, 12 in urban community development, 17 in manpower training, 39 in rural community development, and 2 in law enforcement\u2014into what he called six \"special revenue sharing\" programs. Unlike the categorical grants they would replace, the proposed special revenue sharing programs had no state matching requirements and relatively few auditing or oversight requirements, and the funds were distributed automatically by formula without prior federal approval of plans for their use. \nThe education, transportation, rural community development, and law enforcement proposals failed to gain congressional approval, primarily because they generated opposition from interest groups affiliated with the programs who worried that the programs' future funding would be compromised. However, three block grants, the first signed by President Nixon and the remaining two signed by President Ford, were approved. \nThe Comprehensive Employment and Training Assistance Block Grant program, created by the Comprehensive Employment and Training Act of 1973, merged 17 existing manpower training categorical grant programs. The Community Development Block Grant program (CDBG), created by the Housing and Community Development Act of 1974, consolidated six existing community and economic development categorical grant programs. Title XX social services, later renamed the Social Services Block Grant program, was created de novo and, therefore, did not consolidate any existing categorical grant programs. It was authorized by the 1974 amendments of the Social Security Act, which was signed into law on January 4, 1975. Also, in 1972, general revenue sharing was approved by Congress. General revenue sharing distributed funds to states from 1972 to 1981 and to localities from 1972 to 1986.\nNevertheless, Congress retained an emphasis on the use of categorical grants. On December 31, 1980, there were 534 categorical grant programs, 5 block grant programs, and 1 general revenue sharing program. Of the categorical grant programs, 361 were project categorical grants, 42 were project, formula categorical grants, 111 were formula categorical grants, and 20 were open-ended reimbursement categorical grants. Overall, categorical grants accounted for 79.3% of the $91.3 billion in outlays for federal grants to state and local governments that year, block grants accounted for 11.3%, and general revenue sharing 9.4%.\nEfforts to sort out governmental responsibilities were also met with resistance in Congress. For example, President Nixon's six special revenue sharing proposals would have provided state and local governments the leading role in decisionmaking in those six functional areas. Also, his proposed Family Assistance Plan would have replaced several public assistance categorical grant programs with a national public assistance system covering all low-income families with children. Although his Family Assistance Plan was not adopted, Congress did nationalize several adult-age public assistance grant-in-aid programs in 1972, including old-age assistance, aid to the blind, and aid to the permanently and totally disabled.\n\n\t\tAnother Related Development: Federal Mandates\n\nAnother related, new development during the 1960s and 1970s was the imposition by Congress of numerous federal mandates on state and local government officials. The concept of mandates covers a broad range of policy actions with centralizing effects on the intergovernmental system, including statutory direct-order mandates, both total and partial statutory preemption of state and local government law, federal tax policies affecting state and local tax bases, and regulatory action taken by federal courts and agencies. Many federalism scholars also consider program-specific and crosscutting federal grant administrative conditions mandates, even though the grants themselves are voluntary.\nCrosscutting requirements are, perhaps, the most widely recognized mandate. They are a condition of federal assistance that applies across-the-board to all, or most, federal grants to advance a national social or economic goal. Title VI of the Civil Rights Act of 1964 was the first post-World War II statute to use a crosscutting requirement. It specifies that\nNo person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program receiving Federal financial assistance.\nIn 1980, OMB counted 59 crosscutting requirements intended to further national social or economic goals in a variety of functional areas, including education and the environment. \nSome of the statutory direct-order mandates adopted during this era included the Equal Employment Opportunity Act of 1972, which extended the prohibitions against discrimination in employment contained in the Civil Rights Act of 1964 to state and local government employment; the Fair Labor Standards Act Amendments of 1974, which extended the prohibitions against age discrimination in the Age Discrimination in Employment Act of 1967 to state and local government employment; and the Public Utilities Regulatory Policy Act of 1978, which established federal requirements concerning the pricing of electricity and natural gas. \nACIR suggested that the expansion of federal intergovernmental regulatory activity during the 1960s and 1970s fundamentally changed the nature of intergovernmental relations in the United States: \nDuring the 1960s and 1970s, state and local governments for the first time were brought under extensive federal regulatory controls.... Over this period, national controls have been adopted affecting public functions and services ranging from automobile inspection, animal preservation and college athletics to waste treatment and waste disposal. In field after field the power to set standards and determine methods of compliance has shifted from the states and localities to Washington. \nThe continued emphasis on categorical grants, the increased emphasis on provisions encouraging states to move in new policy directions, and, especially, the increased imposition of federal mandates on state and local governments during the 1960s and 1970s led some federalism scholars to label the 1960s and 1970s as the beginnings of a shift toward \"coercive federalism.\" Cooperative features were still present, but congressional deference to state and local government prerogatives seen in previous eras was no longer in force. Instead of focusing primarily on the \"carrot\" of federal assistance to encourage state and local governments to pursue policies that aligned with national goals, Congress increasingly relied on the \"stick\" of federal mandates.\n\n\tCongress Asserts Its Authority: The Devolution Revolution That Wasn't, 1980-2000\n\nBy the end of the 1970s, the social turmoil that marked the previous two decades had receded. Into the 1980s, the United States and most of the Western world experienced a revival of conservative politics, the advancement of free market solutions to improve government efficiency and solve social problems, and a renewed emphasis on materialism and the possession of consumer goods. Yet, at the same time, social change continued to affect American lifestyles, as women became fixtures in the workplace, the gay rights movement become more active, environmental concerns intensified, and rock concerts featuring the leading rock bands and performers of the era were televised to millions of viewers across the nation and the world to raise money for various social causes, such as famine relief, support for family farms, and AIDS prevention and treatment.\nThe seemingly contradictory societal trends of self-promotion and altruism that swept across American society during the 1980s and 1990s were reflected in responses to national public opinion polls concerning politics and government. These polls evidenced a growing public hostility toward government intrusion and government performance, especially the federal government's performance, despite growing support for specific programs and regulations that represented the polar opposite of these attitudes. Perhaps reflecting these seemingly contradictory trends, during this era the public tended to elect a President of one political party and a Congress of another. Moreover, nationally, the two-party political system became more competitive as the once solid Democratic South turned increasing Republican. The Republican Party's resurgence was evidenced by its winning the presidency from 1981 to 1993, and its achieving majority status in the Senate from 1981 to 1987, and in both houses of Congress from 1995 to 2001.\nPresident Ronald Reagan's election in 1980, coupled with the Republican Party's resurgence, especially its winning majority party status in the Senate that year, signaled for some the potential for a \"devolution revolution\" in American federalism, where unfunded federal mandates would be rescinded, \"burdensome\" administrative federal grant-in-aid conditions removed, and the cooperative features of the federal grants-in-aid system enhanced. This belief was based on President Reagan's commitment to reducing the federal budget deficit. Because he was convinced that it was necessary to increase defense spending, President Reagan concluded that the only way to reduce the federal budget deficit was to increase revenue by encouraging economic growth through tax reduction and regulatory relief, and limiting the growth of federal domestic expenditures. As a former governor, he trusted state and local governments' ability to provide essential government services. As a result, he advocated a sorting out of governmental responsibilities that would reduce the federal government's role in domestic affairs, increase the emphasis on block grants to provide state and local government officials greater flexibility in determining how the program's funds are spent, and impose fiscal restraint on all federal grant-in-aid programs.\nFor example, on February 18, 1981, President Reagan addressed a joint session of Congress and proposed the consolidation of 84 existing categorical grants into 6 new block grants and requested significant funding reductions for a number of income maintenance categorical grants, including housing (rental) assistance, food stamps (now Supplemental Nutrition Assistance Program), Medicaid, and job training. Congress subsequently approved P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981, which consolidated 77 categorical grants and two earlier block grants into the following nine new block grants:\nElementary and Secondary Education (37 categorical grants), Alcohol, Drug Abuse, and Mental Health Services (10 categorical grants), Maternal and Child Health Services (9 categorical grants), Preventive Health and Human Services Block Grant (merged 6 categorical grants with the Health Incentive Grants for Comprehensive Health Services Block Grant), Primary Care (2 categorical grants), Community Services (7 categorical grants), Social Services (one categorical grant and the Social Services for Low Income and Public Assistance Recipients Block Grant), Low-Income Home Energy Assistance (1 categorical grant), and a revised Community Development Block Grant program (adding an existing discretionary grant and 3 categorical grants).\nOverall, funding for the categorical grants bundled into these block grants was reduced 12%, about $1 billion, from their combined funding level the previous year. President Reagan argued that the funding reductions would not result in the loss of services for recipients because the reductions would be offset by administrative efficiencies. In addition, the Reagan Administration eliminated funding for 62 categorical grants in 1981, mainly through authority provided under the Omnibus Budget Reconciliation Act of 1981.\nSome observers were convinced that the adoption of the Omnibus Budget Reconciliation Act of 1981 was proof of the coming devolution revolution. The number of federal grants to state and local governments was reduced and outlays for federal grants to state and local governments fell for the first time since World War II, from $94.7 billion in FY1981 to $88.1 billion in FY1982. However, in retrospect, federalism scholars now consider the 1981 block grants as more \"historical accidents than carefully conceived restructurings of categorical programs\" because they were contained in a lengthy bill that was primarily designed to reduce the budget deficit, not to reform federalism relationships. The bill was adopted under special parliamentary rules requiring a straight up or down vote without the possibility of amendment, and it was not considered and approved by authorizing committees of jurisdiction. Nonetheless, largely due to the Omnibus Budget and Reconciliation Act of 1981, in 1984 there were 12 block grants in operation (compared to 392 categorical grants), accounting for about 15% of total grants-in-aid funding.\nDuring the remainder of his presidency, President Ronald Reagan submitted 26 block grant proposals to Congress, with only one, the Federal Transit Capital and Operating Assistance Block Grant, added in 1982. In addition, Congress approved the Job Training Partnership Act of 1982, which created a new block grant for job training to replace the block grant contained in the Comprehensive Employment and Training Act of 1973.\nFederalism scholars generally agree that President Reagan had unprecedented success in achieving congressional approval for block grants in 1981. However, they also note that most of President Reagan's subsequent block grant proposals failed to gain congressional approval, primarily because they were opposed by organizations that feared, if enacted, the block grants would result in less funding for the affected programs. For example, in 1982, President Reagan proposed, but could not get congressional approval for, a $20 billion \"swap\" in which the federal government would return to states full responsibility for funding Aid to Families With Dependent Children (AFDC) (now Temporary Assistance for Needy Families) and food stamps (now Supplemental Nutrition Assistance Program) in exchange for federal assumption of state contributions for Medicaid. As part of the deal, he also proposed a temporary $28 billion trust fund or \"super revenue sharing program\" to replace 43 other federal grant programs, including 19 social, health, and nutrition services programs, 11 transportation programs, 6 community development and facilities programs, 5 education and training programs, Low Income Home Energy Assistance, and general revenue sharing. The trust fund, and federal taxes supporting it, would begin phasing out after four years, leaving states the option of replacing federal tax support with their own funds to continue the programs or allowing the programs to expire.\nBoth the swap proposal and the proposed devolution of 43 federal grants failed to gain congressional approval, primarily because they were opposed by organizations and Members who feared that, if enacted, the proposals would result in less funding for the affected programs. For example, the National Governors Association supported the federal takeover of Medicaid, but objected to assuming the costs for AFDC and food stamps. The economy was weakening at that time and governors worried that they would not have the fiscal capacity necessary to support the programs without continued federal assistance.\nEvidence of a coming devolution revolution proved elusive as the upward trend in outlays for federal grants to state and local programs resumed in FY1983, although at a somewhat lower rate of increase than during the previous two decades. As shown in Table 2 , outlays for federal grants to state and local governments increased from $91.4 billion in FY1980 to $135.3 billion in FY1990 and $285.9 billion in FY2000. Medicaid accounted for much of that revenue growth, increasing from $13.9 billion in FY1980 to $41.1 billion in FY1990 and $117.9 billion in FY2000.\nFunctionally, as shown in Table 2 , outlays for federal grants to state and local governments for health care increased from $15.8 billion in FY1980 to $124.8 billion in FY2000. Also, outlays for federal grants to state and local governments for income security increased from $18.5 billion in FY1980 to $68.7 billion in FY2000; for education, training, employment, and social services from $21.9 billion to $36.7 billion; for transportation from $13.0 billion to $32.2 billion; and for community and regional development from $6.5 billion to $8.7 billion. \nThe number of federal grants to state and local governments fell at the beginning of this era, from 541 in 1981 to an era low of 405 in 1984, but then resumed an upward trend. As indicated in Table 4 , there were 541 grants to state and local governments in 1981, 405 in 1984, 435 in 1987, 492 in 1989, 557 in 1991, 593 in 1993, 633 in 1995, and 664 in 1998. Moreover, the number of intergovernmental mandates continued to increase throughout the era. ACIR, for example, identified 36 significant federal mandates affecting state and local governments in 1980. In 1990, it identified 63. ACIR concluded that \"despite efforts to constrain the growth of intergovernmental regulation, the 1980s remained an era of regulatory expansion rather than contraction.\" It offered the following explanation for the increased number of federal mandates during the 1980s:\nThe causes of this continued regulatory growth are complex and varied. Many regulations address important and well documented problems from pollution to health care to civil rights. The goals associated with these programs are popular not only with the general public but with state and local government officials as well. But, whereas the Congress in the past might have responded to emerging needs with a new federal aid program, the scarcity of federal funds during a decade of historic deficits has made the alternative of federal mandates look increasingly attractive to federal policymakers.\nSome observers believed that the anticipated devolution revolution might be realized following the 1994 congressional elections, which resulted in the Republican Party gaining majority status in both the House and Senate. As evidence of the potential for a devolution revolution they pointed to the Unfunded Mandate Reform Act of 1995 (UMRA). Its intent was to limit the federal government's ability to impose costs on state and local governments or on the private sector through unfunded mandates. Providing relief from unfunded mandates was one of the stated goals of the Republican Party's 1994 Contract With America. \nUnder UMRA, congressional committees have the initial responsibility to identify certain federal mandates in measures under consideration. If the measure contains a federal mandate, the authorizing committee must provide the measure to the Congressional Budget Office (CBO). It reports back to the committee an estimate of the mandate's costs. The office must prepare full quantitative estimates for each reported measure with mandate costs over pre-determined thresholds in any of the first five fiscal years the legislation would be in effect. CBO's cost estimates include the direct costs of the federal mandates contained in the measure, or in any necessary implementing regulations; and the amount of new or existing federal funding the legislation authorizes to pay these costs. The thresholds triggering a full CBO cost estimate are adjusted annually for inflation. They were originally $50 million for intergovernmental mandates and $100 million for private sector mandates. The thresholds in 2019 are $82 million for intergovernmental mandates and $164 million for private sector mandates. CBO must prepare brief statements of cost estimates for those mandates that have estimated costs below these thresholds.\nMembers can raise a point of order if the measure containing the mandate lacks a CBO cost estimate, either because the committee failed to publish the CBO's cost estimate in its report or in the Congressional Record , or CBO determined that no reasonable estimate of the mandate's cost was feasible. Members can also raise a point of order if the measure has an intergovernmental cost estimate that exceeds the annually adjusted cost threshold in any of the first five fiscal years the mandate would be in effect.\nUMRA's impact on unfunded mandates has been relatively limited. For example, from 1996 to May 2019, 62 points of order were raised in the House and 4 in the Senate. One point of order, concerning a 1996 minimum wage bill, was sustained in the House and two points of order, concerning amendments relating to an increase in the minimum wage in 2005, were sustained in the Senate. In addition, UMRA covers only certain types of unfunded federal mandates. As a federalism scholar argued,\nUMRA primarily covers only statutory direct orders, excluding most grant conditions and preemptions whose fiscal effects fall below the threshold. Statutory direct orders dealing with constitutional rights, prohibition of discrimination, national security, and Social Security are among those excluded from coverage. Moreover, analytic and procedure requirements do not apply to appropriations bills, floor amendments or conference reports\u2013those tools of \"unorthodox lawmaking\" that have become increasingly prevalent in the Congress.\nMoreover, another federalism scholar noted that the overall record of the 104 th Congress, expected by some to decentralize and devolve federalism relationships, was more status quo than devolutionary:\nShifting back to the overall record of the 104 th Congress, it is appropriate here to note the various proposed devolutionary bills that were defeated. Chief among these was the proposed Medicaid block grant with a $163 billion cut in funding over five years. Both a public housing blocking proposal and the big regulatory reform measure that would have seriously limited the Federal government's power to issue rules affecting health, safety, and the environment were scuttled. Extension of the Clean Water Act, enactment of a consolidation of eighty-odd manpower training programs, and passage of a revised Endangered Species Act, which eliminated the Federal authority to restrict threatening activities, were all successfully resisted. A rollback of affirmative action, a conservative shift in the Superfund's program and rules, and the proposed Product Liability Legal Reform Act of 1996 were also scuttled. Of the nine here, two died because of Senate rejection; three, because of a presidential veto or the threat of one; two others failed because neither chamber dared take either one up; and the last two died because of a deadlocked Conference Committee and a lack of time to consider a Conference Report.\nThe devolution revolution never fully materialized during this era, despite growing public hostility toward the federal government. The emphasis on categorical grants and the issuance of federal mandates continued. Yet, some decentralization of decisionmaking authority did take place during the era. For example, in 1980, there were four block grants in operation. In 2000, there were 24 block grants, including the Surface Transportation Program (1991) and the Temporary Assistance for Needy Families (TANF) program (1996). Funded at $16.7 billion annually, TANF rivaled the Surface Transportation Program during this era for the largest budget of all the block grants. In addition, Congress authorized state waivers for Medicaid starting in 1981, and for child welfare assistance programs starting in 1994.\nThe seemingly contradictory trends of centralization and decentralization that took place in the federal intergovernmental system during the 1980s and 1990s perhaps reflected the contradictory societal trends that swept across America at the time. As mentioned previously, national public opinion polls indicated that the public was increasingly dissatisfied with the performance of government, especially the federal government's performance, and expressed a growing hostility toward government (and Congress) as a whole. It could be argued that these views suggest that the public wanted Congress to devolve federal grant-in-aid programs to state and local governments or, at least, provide state and local governments greater flexibility in determining how the grants' funding should be spent. Yet, at the same time, the public also expressed relatively strong support for individual federal government programs (and individual Members of Congress). It could be argued that these views suggest that the public wanted Congress to maintain federal government control over these programs, and expressed approval of their individual Members for doing so.\nAnother possible explanation for the continued focus on categorical grants and the imposition of federal mandates during this era is that federalism issues tend to be a second order priority for many federal policymakers. For example, it could be argued that President Reagan's commitment to strengthening federalism through program decentralization and devolution was unrivaled in the modern era. Yet, in an analysis of the Reagan Administration's federalism policies, a leading federalism scholar concluded that \"devolutionary policies consistent with the president's definition of federalism reform ... consistently lost out in the Reagan Administration when they ... conflicted with the sometimes competing goals of reducing the federal deficit, deregulating the private sector, and advancing the conservative social agenda.\" For example, this scholar noted that President Reagan opposed the expansion of General Revenue Sharing, advocated the elimination of the deductibility of state and local taxes, supported the preemption of state laws regulating double-trailer trucks and establishing minimum drinking ages, overrode state objections to increased off-shore oil drilling and increased use of nuclear power, and supported efforts to require states to establish workfare programs for public assistance recipients and suing localities which sought to retain aggressive affirmative action hiring policies.\n\n\tFederal Grants to State and Local Governments in the 21st Century\n\nSome observers thought that the number of federal grants to state and local governments and outlays for federal grants to state and local governments might fall during George W. Bush's presidency (2001-2009), given federal budgetary pressures created by what many called the \"war on terror\" following 9\/11, President Bush's commitment to reducing the annual federal budget deficit and addressing the federal debt, and the Republican Party's winning majority status in the House of Representatives from 2001 to 2007 and in the Senate for portions of 2001 and 2002, and from 2003 to 2007. Yet, outlays for federal grants to state and local governments increased during his presidency, from $285.8 billion in FY2000 to $461.3 billion in FY2008. \nOthers thought that the \"the ascendancy of George W. Bush to the presidency, in concert with a remarkably unified Republican control of the Congress, presaged a period of unified government \u2026 [that would lead to] the arrest and even reversal of federal policy centralization.\" For example, President Bush used his authority to grant state waivers to increase state flexibility in the use of Medicaid funds and, in his second term, in complying with No Child Left Behind requirements. He also proposed grant consolidations of community development programs, state control of the Head Start program, and waivers of regulations in many low-income programs (called superwaivers). However, despite these efforts, federalism scholars argue that the federal government continued to further centralize its authority in many policy areas during his presidency, often with President Bush's approval. For example, President Bush supported the extension of \"federal goals and standards to such areas as education testing, sales tax collection, emergency management, infrastructure, and elections administration\" and the imposition of restrictions on partial-birth abortions, new work requirements for TANF recipients, and new standards for issuing secure driver's licenses. President Bush also supported legislative efforts to prohibit same-sex marriage. \nThe expansion and centralization of the federal grants-in-aid system continued under President Barack Obama and has continued, albeit counter to his recommendations, under President Trump. As shown in Table 2 , outlays for federal grants to state and local governments has continued to increase in recent years (from $660.8 billion in FY2016 to $674.7 billion in FY2017, and to an anticipated $728.0 billion in FY2018), largely due to increased outlays for Medicaid (increasing from $368.3 billion in FY2016 to $374.7 billion in FY2017, and to an anticipated $400.4 billion in FY2018). However, outlays for federal grants to state and local governments has increased in other policy areas as well. \nAs shown in Table 4 , the number of federal grants to state and local governments has also increased, from 664 in 1998, to 953 in 2009, 996 in 2012, 1,188 in 2015, and 1,274 in 2018. In addition, the emphasis on categorical grants has been retained, as 1,253 of the 1,274 funded federal grants to state and local governments in 2018 were categorical grants, and 21 were block grants. \nAlso, despite UMRA, unfunded federal mandates have continued to be issued in many policy areas. For example, CBO reports that from January 1, 2006, to December 31, 2018, 217 laws were enacted with at least one intergovernmental mandate as defined under UMRA. These laws imposed 443 mandates on state and local governments, with 16 of these mandates exceeding UMRA's threshold, 14 with estimated costs that could not be determined, and 413 with estimated costs below the threshold. CBO reported that hundreds of other laws had an effect on state and local government budgets, but those laws did not meet UMRA's definition of a federal mandate.\nGrant conditions, historically the predominant means used to impose federal control over state and local government actions, have also continued to be used to promote national goals. For example, many observers consider the adoption of the No Child Left Behind Act of 2001, signed into law on January 8, 2002, to be President George W. Bush's signature federalism achievement. Although the act allows states to define the standards used for testing, it imposed federal testing, teaching, and accountability standards on states and school districts that, overall, significantly increased federal influence on public elementary and secondary education throughout the nation. In addition, during his presidency, the Help America Vote Act of 2002 instituted \"sweeping new federal standards, along with new funding, that regulated significant features of state and local election processes.\"\nPresident Obama did not issue a formal federalism plan and did not formally advocate a major shift in funding priorities within functional categories. Instead, the Obama Administration attempted to cultivate\na place-based approach, customizing support for communities based on their specific assets and challenges. This new approach seeks out communities' plans or vision for addressing a set of challenges and then works across agency and program silos to support those communities in implementing their plans. \nHowever, the expansion of Medicaid eligibility under P.L. 111-148 , the Patient Protection and Affordable Care Act (ACA), which President Obama strongly endorsed, increased health care's position as the leading category of federal assistance to state and local governments. The ACA also either authorized or amended 71 federal categorical grants to state and local governments, further enhancing the role of categorical grants in the intergovernmental grant-in-aid system.\nThe Obama Administration did not formally advocate a major shift in funding priorities from categorical grants to block grants, or from block grants to categorical grants. However, the number of funded block grants declined somewhat during the Obama Administration, from 24 in 2009 to 20 in 2016. Also, although the Obama Administration did support ARRA's funding for two relatively significant temporary block grants (the $53.6 billion Government Services State Fiscal Stabilization Fund for public education; and the $3.2 billion Energy Efficiency and Conservation Block Grant for energy efficiency and conservation programs) and ARRA's provision of additional, temporary funding to TANF ($5 billion), the Child Care and Development Block Grant ($2 billion), the Community Development Block Grant ($1 billion), the Community Services Block Grant ($1 billion), and the Native American Housing Block Grant ($510 million) programs, the Obama Administration generally advocated enactment of new competitive categorical grant programs (e.g., TIGER surface transportation grants and Race to the Top education grants) rather than the expansion of existing block grants or the creation of new ones. However, the Obama Administration did advocate the consolidation of categorical grant programs in several functional areas as a means to reduce duplication and promote program efficiency. For example, the Obama Administration supported the consolidation of dozens of surface transportation categorical grant programs into other surface transportation categorical grant programs in P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act of 2012 (MAP-21). The Obama Administration also advocated the merging of categorical grant programs in the Department of Homeland Security as a means to \"better target these funds.\" \nThe Trump Administration indicated in its FY2018 budget request that it intended to refocus federal grants on \"the highest priority areas,\" provide \"a greater role for state and local governments,\" \"slow the growth of grant spending over the 10-year budget window,\" and \"rein in the growth of Medicaid.\"\nThis budget proposes to cap federal funding for the Medicaid program, to establish a state matching requirement for the Supplemental Nutrition Assistance Program, to eliminate the Community Development Block Grant and Social Services Block Grant programs, and to make other reductions that reestablish an appropriate federal-state fiscal relationship and contribute to achieve a balanced federal budget by 2027. Among other grant initiatives, the budget proposes to establish a 25% non-federal cost match for FEMA [Federal Emergency Management Agency] preparedness grant awards that currently require no cost match \u2026 authorizes a new Federal Emergency Response Fund to rapidly respond to public health outbreaks \u2026 reforms the Centers for Disease Control and Prevention through a new $500 million block grant to increase state flexibility and focus on the leading public health challenges specific to each state \u2026 [and] includes $200 billion in budget authority related to the [Trump Administration's] infrastructure initiative.\nThe Trump Administration continued to advocate for these objectives in its FY2019 and FY2020 budget requests. For example, the Administration indicated in its FY2019 budget request that\nOver many decades, the increasing number of grants and size of grants has created overlap between programs, and complexity for grantees, and has made it difficult to compare program performance and conduct oversight. The multiple layers of grants administration can increase the cost of administration and create inefficiencies and duplication. Less Federal control gives State and local recipients more flexibility to use their knowledge of local conditions and need to administer programs and projects more efficiently. The 2019 Budget takes steps toward limiting the Federal role, and reducing spending.\nThis budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid ... The Budget provides $749 billion in outlays for aid to State and local governments in 2019, an increase of 3% from 2018. The increase is entirely due to spending for the Administration's infrastructure initiative; all grant spending other than Medicaid and the infrastructure initiative will decline by 11% in 2019.\nThe Trump Administration repeated its intent to slow the growth of federal aid to state and local governments in its FY2020 budget request:\nThis budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid, which accounts for 56 percent of total grant spending to State and local governments. The Budget provides $751 billion in outlays for aid to State and local governments in 2020, an increase of less than one percent from spending in 2019.\nAmong its proposals to slow the growth of federal aid to state and local governments and improve federal grant performance, the Administration recommended that\nMedicaid be converted to a block grant or be subject to a per capita spending cap indexed to the Consumer Price Index \"to support States as they transition to more sustainable health care programs and encourage them to pursue innovative ideas to that aim to curb costs moving forward.\" states be provided \"maximum flexibility over their Medicaid programs\" to place the program \"on a sound fiscal path.\" funding be eliminated for \"lower priority grant programs,\" such as the Sea Grant, Coastal Zone Management Grants, and the Pacific Coastal Salmon Recovery Fund. funding be eliminated for Community Development Block Grants and the Economic Development Administration.\nIn addition, the Trump Administration noted that its President's Management Agenda, released in March 2018, included a cross-agency priority goal of achieving results-oriented accountability for federal grants funding. The Administration's goal is to ensure that federal grants to state and local governments are \"delivered to intended recipients as efficiently as possible\" by standardizing the grants management process and data, building shared IT infrastructure, managing risk, and achieving program goals and objectives. The Administration also included proposals \"to require able-bodied adults participating in the Supplemental Nutrition Assistance Program (SNAP) enter and re-enter the job market and work toward self-sufficiency.\"\n\n\tCongressional Issues\n\nAs the data in Table 2 , Table 3 , and Table 4 attest, outlays for federal grants to state and local governments, in both nominal and constant dollars, and the number of federal grants to state and local governments have continued to increase since the mid-1980s. Given its increased size and cost, providing effective congressional oversight of federal grants to state and local governments can be a daunting task. Given the decentralized nature of the congressional committee system, Congress is well positioned to provide effective oversight of individual federal grants to state and local governments. However, it could be argued that the decentralized nature of the congressional committee system is not optimally conducive to providing effective oversight of the interactive effects of multiple federal grants to state and local governments, or of the potential interactive effects of federal grants to state and local governments and federal tax policy.\nIn the past, the independent, bipartisan ACIR, which operated from 1959 to 1996, provided Congress and others a series of authoritative reports on the status and operation of intergovernmental grants, both as individual programs and as a collective system. GAO has published several reports over the years on federal grants that have helped to fill the informational and analytic void left by ACIR's demise. However, it could be argued that Congress may wish to examine whether a reconstituted ACIR, perhaps one that focuses on the structure and operation of the intergovernmental system as a whole, might prove useful as an additional source of information and analysis as it conducts oversight of the federal grants to state and local governments. For example, such an organization could provide an accepted methodology for counting federal grants to state and local governments, and provide Congress periodic assessments of the intergovernmental grant system's overall performance.\n\n\tConcluding Remarks\n\nIt could be argued that the recent upward trend in outlays for federal grants to state and local governments is about to end because there is a general consensus that anticipated growth in federal discretionary spending, which includes outlays for federal grants to state and local governments, may be targeted for reductions as part of an effort to address the federal deficit and debt. However, Congress's historical tendency to use federal grants to state and local governments as a means to create jobs and promote national economic growth suggests that the upward trend in federal grant outlays and federal grant numbers that has been experienced over the past several decades may continue, although at a slower pace. President Trump's FY2020 budget request estimates that total outlays for federal grants to state and local governments will increase from $696.5 billion in FY2018 to an anticipated $749.5 billion in FY2019 and $750.7 billion in FY2020.\nIn retrospect, with the exception of the early 1980s, federal grant funding, the number of federal grants, and the issuance of federal mandates have increased under both Democratic and Republican Congresses and Presidents. Historically, there have been notable differences between the two parties' approaches toward federalism. Although both parties have generally opposed unfunded federal mandates, the Republican Party has done so more aggressively, as evidenced by its 1994 Contract With America, sponsorship of UMRA, and recent legislative efforts to broaden UMRA's coverage to include, when requested by the chair or ranking Member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. The Republican Party has also advocated the devolution of certain federal grant-in-aid programs to state and local governments while the Democratic Party has generally opposed devolution. The Republican Party has also been more aggressive in its support of the decentralization of grants-in-aid decisionmaking to state and local governments through the consolidation of categorical grants into block grants, for revenue sharing, and administrative relief from various grant conditions. But, overall, the historical record suggests that for most Members of both political parties, regardless of their personal ideological preferences, federalism principles are often subordinated to other policy goals, such as reducing the federal budget deficit, promoting social values or environmental protection, and guaranteeing equal treatment and opportunity for the disadvantaged. As long at this continues to be the case, and the public continues to express support for specific government programs \u0336 even if they generally oppose \"big\" government as a whole \u0336 there is little evidence to suggest that the general historical trends of increasing numbers of federal grants to state and local governments, increasing outlays for those grants, an emphasis on categorical grants, and continued enactment of federal mandates, both funded and unfunded, are likely to change.","output":null}
{"id":"gao_GAO-19-615","pid":"gao_GAO-19-615_0","input":"\tBackground\n\n\t\tLife Cycle of Oil and Gas Wells\n\nOil and gas exploration and production involves disturbing lands in  several ways. For example, when operators drill oil and gas wells, they  typically remove topsoil and construct a well pad, where the drilling rig will  be located. Other equipment on-site can include generators and fuel  tanks. In addition, reserve pits are often constructed to store or dispose of  water, mud, and other materials that are generated during drilling and  production, and roads and access ways are often built to move equipment  to and from the wells.\nOnce wells cease production, which may occur many decades after they  are drilled, they can become inactive. Inactive wells have the potential to  create physical and environmental hazards if operators do not properly  reclaim them, a process that may involve plugging the well, removing  structures, and reshaping and revegetating the land around the wells. For  example, inactive wells that are not properly plugged can leak methane  into the air or contaminate surface water and groundwater. Well sites that  are not properly reclaimed can contribute to habitat fragmentation and soil  erosion, and equipment left on-site can interfere with agricultural land use  and diminish wildlife habitat.\nCosts for well reclamation vary widely and are affected by factors such as  the depth of the well. Although BLM does not estimate reclamation costs  for all wells, it has estimated reclamation costs for thousands of wells  whose operators have filed for bankruptcy. Based on our analysis of  these estimates, we identified two cost scenarios: low-cost wells typically  cost about $20,000 to reclaim, and high-cost wells typically cost about  $145,000 to reclaim.\n\n\t\tBLM\u2019s Bonding Regulations and Policies\n\nAs shown in figure 1, BLM regulations or policies outline how BLM is to  initially collect bonds from operators, review bonds, and ultimately return  the bond to the operator or use it to cover costs of reclamation.\nBonds collected from operator. 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 and reclaiming  wells. 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;  statewide bonds, which cover all of an operator\u2019s leases and  operations in one state; or nationwide bonds, which cover all of an operator\u2019s leases and  operations nationwide. (See figure 2.)\nBLM 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 pays a premium to the surety company that 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  their wells, the surety company is responsible for paying BLM up to the  amount of the bond to help offset reclamation costs.\nA 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 full  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 of full authority  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 and that identify the Secretary of the Interior as sole  payee with full authority to demand immediate payment in case of  default in the performance of the lease\u2019s terms and conditions.\nBLM bond reviews. BLM regulations provide flexibility to increase bonds  above minimums and require increases above minimum amounts if  operators meet certain criteria. Specifically, BLM regulations require BLM  to increase the bond amount when an operator who applies for a new  drilling permit had previously failed to reclaim a well in a timely manner.  For such an operator, BLM must require a bond in an amount equal to its  cost estimate for reclaiming the new well if BLM\u2019s cost estimate is higher  than the regulatory minimum amount. BLM regulations also authorize  increases in the bond amount\u2014not to exceed the estimated cost of  reclamation and any royalties or penalties owed\u2014whenever the  authorized officer determines that the operator poses a risk due to factors  such as that the expected reclamation costs exceed the present bond.\nIn response to our previous recommendation in 2011 that BLM develop a  comprehensive strategy to revise its bond adequacy review policy to  more clearly define terms and conditions that warrant a bond increase,  BLM issued a bond adequacy review policy in July 2013, Instruction  Memorandum 2013-151. The policy contained directives for conducting  reviews when bonds meet certain criteria. Specifically, the 2013 bond  adequacy review policy called for field offices to, among other things,  review each bond at least every 5 years to determine whether the bond  value appropriately reflected the level of potential risk posed by the  operator. If it did not, authorized officers were to propose an increase (or  decrease) in the bond value.\nIn November 2018, BLM issued a revised bond adequacy review policy,  Instruction Memorandum 2019-014, which supersedes the 2013 policy.  The 2018 policy continues to call for field offices to review each bond at  least every 5 years, but it revised the point system worksheet that field  offices are to use when determining whether a bond increase (or  decrease) is warranted. Also, in response to our 2018 recommendation  that BLM ensure that the reviews of nationwide and statewide bonds  reflect the overall risk presented by operators, the 2018 policy calls for  additional coordination between BLM headquarters, state offices, and  field offices when reviewing nationwide and statewide bonds.\nBLM returns or uses bond. If operators reclaim their wells, BLM returns  the bond to the operator. Many decades may pass between when BLM  collects a bond and when it is returned. If operators do not reclaim their  wells, BLM may 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. Liability for reclaiming a well on onshore federal lands can fall to  either the lease holder or the operator, and BLM may also hold past  owners or operators liable. The liability for past owners or operators  extends only to reclamation obligations that accrued before BLM  approved the transfer of their lease to a subsequent lessee. They are not  liable for reclamation and lease obligations incurred after that transfer is  approved.\n\n\tAverage Bond Values Per Well Were Slightly Lower in 2018 as Compared to 2008\n\nBased on our review of BLM data, the value of bonds held by BLM for oil  and gas operations on a per-well basis were slightly lower in 2018 as  compared to 2008. Although the total value of bonds held by BLM for oil  and gas operations was higher in 2018 than in 2008 (about $204 million  compared to about $188 million, in 2018 dollars), the average bond value  per well was slightly lower because the number of wells on federal land  was also higher in 2018 than in 2008 (96,199 wells compared to 85,330).  Specifically, in 2008, BLM held bonds worth an average of $2,207 per  well in 2018 dollars.23,  BLM held bonds worth an average of $2,122 per  well in 2018, a decrease of 3.9 percent as compared to 2008 (see table  1).\nBLM bonds do not typically cover an individual well; however, we calculated the average  bond value on a per-well basis (bond amount divided by the number of wells covered by  the bond) to compare the value over time adjusted for the increased number of wells.  When reporting on all wells, we calculated the average bond value per well as the  aggregate value of all BLM bonds divided by the total number of producible well bores.  Appendix I provides additional information on our scope and methodology. category for bonds that were linked to wells in the data. We found that,  on average, as of 2018 an individual lease bond covered about 10 wells,  a statewide bond covered about 49 wells, and a nationwide bond covered  374 wells. However, some bonds cover more than the typical number of  wells and some fewer. As of 2018, individual lease bonds had the highest  average bond value per well at $2,691, and nationwide bonds had the  lowest average bond per well value at $890. Statewide bonds had an  average bond value per well of $1,592.\nThe share of the total value of bonds held by BLM that are individual  lease, statewide, or nationwide bonds differed in 2018 from 2008 (see  Figure 3). The share of individual lease bonds was slightly higher in 2018  as compared to 2008 (about 8 percent in 2008 and about 9 percent in  2018). In 2008, statewide bonds represented about 80 percent  (approximately $130 million) of the total value of bonds. In 2018,  statewide bonds represented about 59 percent of total bond value  (approximately $120 million), but this category still represented the largest  share of total bond value. In contrast, nationwide bonds were a lower  share of total bond value in 2008 (about 6 percent, approximately $10.2  million) than in 2018 (30 percent, approximately $61.8 million).\nBLM officials told us that changes in the composition of the oil and gas  industry may have contributed to these changes in the composition of  bonds. In particular, officials said some larger companies may have  expanded their operations in recent years, sometimes acquiring smaller  companies. Large companies with expansive operations are more likely  than small companies to have nationwide bonds because such bonds can  cover operations in multiple states, which statewide and individual lease  bonds do not. Therefore, an industry shift to larger companies would tend  to increase the share of nationwide bonds.\n\n\tBonds Held by BLM Are Insufficient to Prevent Orphaned Wells\n\n\t\tBonds Do Not Provide Sufficient Financial Assurance to Prevent Orphaned Wells\n\nBonds do not provide sufficient financial assurance to prevent orphaned  wells for several reasons. First, BLM has identified new orphaned wells\u2014 wells whose bonds were not sufficient to pay for needed reclamation  when operators or other parties failed to reclaim them. As we reported in  May 2018, BLM does not track the number of orphaned wells over time  and so cannot identify how many wells became orphaned over specific  time frames. However, our analyses of BLM\u2019s orphaned well lists from  different years have shown that BLM has continued to identify new  orphaned wells since 2009. We reported in January 2010 that BLM  identified 144 orphaned wells in 2009. Then, in May 2018, we reported  that BLM identified 219 orphaned wells in July 2017\u2014an increase of 75  orphaned wells. In April 2019, BLM provided a list of 296 orphaned  wells that included 89 new wells that were not identified on the July 2017  list.\nBonds are not sufficient to prevent orphaned wells in part because they  do not reflect full reclamation costs for the wells they cover. Bonds that  are high enough to cover all reclamation costs provide complete financial  assurance to prevent orphaned wells because, in the event that an  operator does not reclaim its wells, BLM can use the bond to pay for  reclamation. On the other hand, bonds that are less than reclamation  costs may not create an incentive for operators to promptly reclaim wells  after operations cease because it costs more to reclaim the wells than the  operator could collect from its bond. We analyzed bonds that are linked to  wells in BLM\u2019s data, and found that most of these bonds would not cover  reclamation costs for their wells. Specifically, we compared the average  bond coverage available for these wells to the two cost scenarios we  described above. About 84 percent of these bonds\u2014covering 99.5  percent of these wells\u2014would not fully cover reclamation costs under a  low-cost scenario (these bonds have an average value per well of less  than $20,000). Less than 1 percent of bonds\u2014covering less than 0.01  percent of these wells\u2014would be sufficient to reclaim all the wells they  cover if they were high cost (these bonds have an average value per well  of $145,000 or more). The remaining bonds\u2014about 16 percent\u2014have  average bond values per well of between $20,000 and less than  $145,000.\nThe majority of bond values do not reflect reclamation costs in large part  because most bonds\u201482 percent\u2014remain at their regulatory minimum  values. These regulatory minimums are not reflective of reclamation  costs for a number of reasons:\nRegulatory bond minimums have not been adjusted since the 1950s  and 1960s to account for inflation. As shown in figure 4, when  adjusted to 2018 dollars, the $10,000 individual lease bond minimum  would be about $66,000, the $25,000 statewide bond minimum would  be about $198,000, and the $150,000 nationwide bond minimum  would be about $1,187,000.\nBond minimums are based on the bond category and do not adjust  with the number of wells they cover, which can vary greatly. According  to BLM\u2019s data, in 2018 the number of wells covered by a single bond  ranged from one well to 6,654 wells. On average, a single bond  covered about 68 wells. As wells are added to a bond, the total  associated reclamation cost increases even if the bond value does  not. A bond that increases with each additional well it covers and then  decreases as wells are reclaimed could increase the financial  incentive for operators to reclaim their wells in a timely manner. This  is because operators would have to contribute additional bond value  or would recover some bond value when they add or reclaim a well,  respectively. Currently, bond minimums do not automatically adjust in  this manner and therefore provide limited financial incentives for an  operator to reclaim wells in a timely manner.\nBond minimums do not reflect characteristics of individual wells such  as depth or location, but such characteristics can affect reclamation  costs, according to BLM officials. Wells are being drilled deeper than  in the past; in 1950, well depth averaged about 3,700 feet, and in  2008, it averaged about 6,000 feet. Newer wells may be drilled 10,000  feet vertically. Officials from one BLM field office told us they assume  a cost of $10 per foot of well depth to plug a well, so as wells are  drilled deeper, plugging costs typically increase proportionally.  Additionally, the location of some wells makes them more expensive  to reclaim. For example, BLM officials told us about several wells that  may cost three times more to reclaim than other nearby wells because  they are located in the middle of a river, making them hard to reach.\nIn addition to BLM having identified orphaned wells over the last decade,  we identified inactive wells at increased risk of becoming orphaned and  found their bonds are often not sufficient to reclaim the wells. Our  analysis of BLM bond value data and Office of Natural Resources  Revenue production data showed a significant number of inactive wells  remain unplugged and could be at increased risk of becoming orphaned.  Specifically, we identified 2,294 wells that may be at increased risk of  becoming orphaned because they have not produced since June 2008  and have not been reclaimed. Further, for a majority of these at-risk  wells, their bonds are too low to cover typical reclamation costs for just  these at-risk wells. Our analysis of oil and gas production data showed these wells have not produced oil or gas or been used in other ways,  such as serving as injection wells, since at least June 2008, when oil and  gas prices were at or near record highs. Given that the Energy  Information Administration projects oil and natural gas prices will remain  at levels significantly below the 2008 highs through 2050, it is unlikely  price will motivate operators to reopen these wells. Some of these wells  have been inactive for far longer. Since these at-risk wells are unlikely  to produce again, an operator bankruptcy could lead to orphaned wells  unless bonds are adequate to reclaim them. If the number of at-risk wells  is multiplied by our low-cost reclamation scenario of $20,000, it implies a  cost of about $46 million to reclaim these wells. If the number of these  wells is multiplied by our high-cost reclamation scenario of $145,000, it  implies a cost of about $333 million. When we further analyzed the  available bonds for these at-risk wells, we found that most of these wells  (about 77 percent) had bonds that would be too low to fully reclaim the at- risk wells under our low-cost scenario. More than 97 percent of these at- risk wells have bonds that would not fully reclaim the wells under our  high-cost scenario.\nBLM has a policy for reviewing the adequacy of bonds but has not been  able to consistently secure bond increases when needed, and this policy  has not resulted in bonds that would be adequate to reclaim most wells.  BLM\u2019s bond adequacy review policy calls for field office staff to review oil  and gas bonds at least every 5 years to determine whether the bond  amount appropriately reflects the level of potential risk posed by the  operator. However, according to BLM documentation, its offices did not  secure about 84 percent of the proposed bond increases in fiscal years  2016 and 2017. BLM officials at one field office and one state office noted  it is difficult to secure increases from bond reviews when firms are already  in difficult financial situations. In November 2018, BLM updated its bond  adequacy review policy and called for the agency to focus on securing  bond increases from operators that show the highest risk factors. BLM\u2019s  updated policy more explicitly lays out steps to secure bond increases,  including that BLM should not approve new applications to drill from an  operator while waiting for a bond increase. The new policy also gives  BLM officials discretion to not pursue a bond increase after considering  other priorities demanding staff time and workload. It is unclear whether  the update will improve BLM\u2019s ability to secure bond increases, as it may  not address the underlying challenge of attempting to increase bonds  from operators who are already in a difficult financial position.\nWhile BLM\u2019s federal oil and gas bond minimums do not sufficiently reflect  the costs of well reclamation, requirements for bond amounts for other  federal mining and energy development activities account for potential  reclamation costs to some extent. For example, for bonds for surface coal  mining and hardrock mining on federal lands, the Department of the  Interior requires bond amounts based on the full estimated cost of  reclamation. For grants of federal rights-of-way for wind and solar  energy development in designated leasing areas, BLM requires bonds  based on a minimum amount per wind turbine or per acre of solar. For  such grants in all other areas, the bonds are based on the estimated cost  of reclamation but cannot be less than the per-turbine or per-acre  amounts previously mentioned.\nAdditionally, some states have minimum bond requirements for oil and  gas wells on lands in the state that, unlike federal bond minimums, adjust  with the number of wells they cover or the characteristics of the wells, or  both. For example, Texas and Louisiana offer operators with wells on  lands in those states the choice of a bond based on total well depth or  based on the number of wells. Specifically, the Texas Railroad  Commission lets operators choose bonds based on either the total depth  of all wells on lands in the state multiplied by $2 per foot, or minimums  based on the number of wells covered. If operators choose the latter, the  bond for 0 to 10 wells is $25,000; the bond for 11 to 99 wells is $50,000;  and the bond for 100 or more wells is $250,000. In Louisiana, the Office  of Conservation offers operators with wells on lands in the state the  choice of a bond based on total well depth or based on the number of  wells. Louisiana further specifies a multiplier that varies depending on the  total depth of the well. For example, the bond calculation is $2 per foot for  wells less than 3,000 feet deep, $5 per foot for wells from 3,001 to 10,000  feet deep, and $4 per foot for wells 10,001 feet deep or deeper.  Operators in Louisiana can alternatively choose to follow a system based  on number of wells, with a minimum bond for 10 or fewer wells set at  $50,000, a minimum bond for 11 to 99 wells set at $250,000, and a  minimum bond for 100 or more wells set at $500,000. Pennsylvania\u2019s  Department of Environmental Protection requires bonds for  unconventional wells that vary based on the number of wells and well  bore length.\nThe Mineral Leasing Act of 1920, as amended, requires federal  regulations to ensure that an adequate bond is established before  operators begin surface-disturbing activities on any lease, to ensure  complete and timely reclamation of the lease tract as well as land and  surface waters adversely affected by lease operations. The Mineral  Leasing Act of 1920 does not require that BLM set bonds at full  reclamation costs. However, the gap between expected reclamation costs  and minimum bond amounts has grown over time because the minimums  have not been adjusted since they were established in the 1950s and  1960s, whereas reclamation costs have increased due to inflation and the  changing characteristics of wells being drilled. In the absence of bond  levels that more closely reflect expected reclamation costs, such as by  increasing regulatory minimums and incorporating consideration of the  number of wells on each bond and their characteristics, BLM will continue  to face risks that its bonds will not provide sufficient financial assurance to  prevent orphaned wells. In particular, adjusting bond minimums so that  bonds more closely reflect expected reclamation costs up front could help  decrease the need for bond increases later when companies are  potentially in financial distress.\n\n\t\tBLM Does Not Currently Assess User Fees to Fund Orphaned Well Reclamation\n\nIn addition to fulfilling its responsibility to prevent new orphaned wells, it  falls to BLM to reclaim wells that are currently orphaned, and BLM has  encountered challenges in doing so. We reported in May 2018 that 13  BLM field offices identified about $46.2 million in estimated potential  reclamation costs associated with orphaned wells and with inactive wells  that officials deemed to be at risk of becoming orphaned. There is also a  risk more wells will become orphaned in coming years, as we described  above. Based on the most recent orphaned well lists we received from  BLM, 51 wells that BLM identified in 2009 as orphaned had not been  reclaimed as of April 2019.\nThe Energy Policy Act of 2005 (EPAct 2005) directs Interior to establish a  program that, among other things, provides for the identification and  recovery of reclamation costs from persons or other entities currently  providing a bond or other financial assurance for an oil or gas well that is  orphaned, abandoned, or idled. One way in which BLM may be able to  accomplish this is through the imposition of user fees. In 2008, we found  that well-designed user fees can reduce the burden on taxpayers to  finance those portions of activities that provide benefits to identifiable  users. Further, according to Office of Management and Budget  guidance, it may be appropriate for an agency to request authority to  retain the fee revenue if the user fees offset the expenses of a service  that is intended to be self-sustaining.\nThe volume of drilling applications and inactive wells provide an  opportunity to fund reclamation costs. According to BLM data, the agency  processes more than 3,500 applications to drill each year, on average,  and has over 14,000 inactive wells. Based on our calculations, a separate  fee of about $1,300 charged at the time a drilling application is submitted  (in addition to the current drilling application filing fee, which is $10,050),  or an annual fee of less than $350 for inactive wells could generate  enough revenue to cover, in a little over a decade, the entire $46 million  potential reclamation costs field offices identified to us. In commenting  on a draft of this report, BLM stated that it does not have the authority to  seek or collect fees from lease operators to reclaim orphaned wells.   Developing a mechanism to obtain funds from operators to cover the  costs of reclamation, consistent with EPAct 2005, could help ensure that  BLM can completely and timely reclaim wells without using taxpayer  dollars.\nOther federal programs, including other BLM programs, collect fees from  users to fund reclamation activities. For example, the federal government  collects fees from mining companies to reclaim abandoned mines.  Specifically, the federal abandoned mine reclamation program is funded  in part by fees on coal production. We reported in March 2018 that the  program had spent about $3.9 billion to reclaim abandoned mine lands  since the program\u2019s creation in 1977.\nAdditionally, some states with oil and gas development have dedicated  funds for reclaiming orphaned wells. In Wyoming, the state\u2019s Oil and Gas  Conservation Commission\u2019s Orphan Well Program reclaims orphaned  wells on state or private lands for which bonds and operator liability are  unavailable or insufficient to fund reclamation. The program is funded  through a conservation tax assessed on the sale of oil and natural gas  produced in Wyoming. Through this program, the Wyoming Oil and Gas  Conservation Commission has reclaimed approximately 2,215 wells since  2014, according to a Commission official. Similarly, in Arkansas,  operators make annual payments to its abandoned well plugging fund  based on the number of wells and permits they have, on a sliding scale.  For example, at the low end, operators with one to five wells or permits  pay $100 per well, and at the high end, operators with over 300 wells or  permits pay $4,000 per operator. The Arkansas fund was used to  reclaim 136 wells in fiscal years 2016 through 2018, according to an  official with the state\u2019s Oil and Gas Commission. Virginia\u2019s Orphaned Well  Fund is funded through a $200 surcharge on each permit application. The  fund is administered by the Virginia Division of Gas and Oil, which  prioritizes wells to reclaim according to their condition and potential threat  to public safety and the environment.\n\n\tConclusions\n\nBLM oversees private entities operating thousands of oil and gas wells on  leased federal lands and has taken steps over the years to strengthen its  management of the potential liability that oil and gas operations represent  should operators not fully reclaim wells and return lands to their original  condition when production ceases. For example, the agency\u2019s 2013 bond  adequacy review policy outlined how bonds were to be reviewed every 5  years and bond amounts adjusted depending on risks presented by  operators. However, we found average bond values were slightly lower in  2018 as compared to 2008 and BLM has not obtained bond increases for  the majority of instances in which its reviews identify that increases are  needed. Instead, most bonds are at their regulatory minimum values,  which are not sufficient to cover reclamation costs incurred by BLM.  Without adjusting bond levels to more closely reflect expected  reclamation costs\u2014such as by considering the effects of inflation, the  number of wells covered by a single bond, and the characteristics of  those wells\u2014BLM faces ongoing risks that not all wells will be completely  and timely reclaimed, resulting in additional orphaned wells.\nFurther, BLM faces a backlog of orphaned wells to reclaim\u2014with 51  dating back at least 10 years. Unlike some other federal and state  programs that obtain funds from industry through fees or dedicated funds,  BLM does not do so for reclaiming orphaned wells. According to BLM, it  does not have the authority to seek or collect fees from lease operators to  reclaim orphaned wells. Authorizing and requiring the implementation of a  mechanism to obtain funds from oil and gas operators to cover the costs  of reclamation could help ensure BLM can completely and timely reclaim  wells.\n\n\tMatter for Congressional Consideration\n\nCongress should consider giving BLM the authority to obtain funds from  operators to reclaim orphaned wells, and requiring BLM to implement a  mechanism to obtain sufficient funds from operators for reclaiming  orphaned wells. (Matter for Consideration 1)\n\n\tRecommendation for Executive Action\n\nThe Director of BLM should take steps to adjust bond levels to more  closely reflect expected reclamation costs, such as by increasing  regulatory minimums to reflect inflation and incorporating consideration of  the number of wells on each bond and their characteristics.   (Recommendation 1)\n\n\tAgency Comments and Our Evaluation\n\nWe provided a draft of this product to BLM for comment. In its written  comments, reproduced in appendix II, BLM concurred with the  recommendation. BLM stated that it is committed to ensuring that its field  offices continue to review oil and gas bonds at least every 5 years, or  earlier when warranted, and noted its November 2018 Instruction  Memorandum 2019-014 updated its bond review policy. BLM further  stated that, while the adjustment of bond values may not reflect the  inflation index, the policy is intended to increase bond amounts while  fostering an environment conducive to BLM\u2019s leasing operations. As we  point out in this report, BLM has historically had difficulties securing bond  increases through bond reviews, and so additional steps may be needed  to adjust bond levels to more closely reflect expected reclamation costs.\nIn the draft we provided to BLM for comment, we included a  recommendation that the Director of BLM should take steps to obtain  funds from operators for reclaiming orphaned wells. BLM did not concur  with this recommendation, saying it does not have the authority to seek or  collect fees from lease operators to reclaim orphaned wells. We continue  to believe a mechanism for BLM to obtain funds from oil and gas  operators to cover the costs of reclamation for orphaned wells could help  ensure BLM can completely and timely reclaim these wells, some of  which have been orphaned for at least 10 years. We have therefore  instead made a matter for Congressional consideration.\nBLM also provided technical comments, which we incorporated as  appropriate.\nWe 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.\nIf 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.\n\nAppendix I: Objectives, Scope, and Methodology\n\nThis report (1) describes the value of bonds for oil and gas wells in 2018  compared to 2008, and (2) examines the extent to which the Bureau of  Land Management\u2019s (BLM) bonds ensure complete and timely  reclamation and thus prevent orphaned wells.\nTo describe the value of bonds for oil and gas wells in 2018 compared to  2008, we analyzed oil and gas well data from BLM\u2019s Automated Fluid  Minerals Support System (AFMSS) as of May 2018 and data from BLM\u2019s  Legacy Rehost 2000 (LR2000) system on bonds as of May 2018. Bond  data we reviewed included the bond category (e.g., individual lease or  nationwide) and bond value. We compared these data to data obtained  from the same systems for 2008 and reported by GAO in 2010. We  matched the May 2018 data from the two systems based on the bond  number\u2014a variable in both systems\u2014to identify how many wells were  covered by each bond and to determine the average bond value per well  for each bond category. To assess the reliability of AFMSS and LR2000  data elements, we reviewed agency documents, met with relevant agency  officials, and performed electronic testing. We found these data to be  sufficiently reliable for our purposes. We also interviewed BLM  headquarters officials to understand why bond composition may have  changed over time. To report on the number of bonded wells held by  BLM, we used a published BLM value for producible well bores\u2014wells  capable of production\u2014which should represent a lower bound on the  number of bonded wells in September 2018 because some wells may be  plugged or temporarily incapable of production but would still require a  bond if the surrounding site had not been fully reclaimed. To determine  the average value of bonds per well in 2018, we divided the total value of  all bonds held by BLM by the total number of producible well bores.\nTo examine the extent to which BLM\u2019s bonds ensure complete and timely  reclamation and prevent orphaned wells, we conducted the following  analyses:\nReclamation cost scenarios: To determine whether bonds are  sufficient to cover potential reclamation costs for the wells they cover,  we identified typical high- and low-cost scenarios for well reclamation  (including plugging the well and reclaiming the surrounding well site)  and compared those scenarios to the average bond value available  per well. To determine high- and low-cost reclamation scenarios, we  analyzed BLM\u2019s well reclamation cost estimates on proofs of claim  submitted to the Department of Justice from calendar year 2016  through May 2018. These 59 proofs of claim listed estimated  reclamation costs for 8,664 well sites. We calculated the average  reclamation cost per well for each individual proof of claim by dividing  the total dollar value claimed for reclamation liability (actual liability  plus potential liability) by the total number of wells listed in each proof  of claim document. We found the average reclamation cost estimates  for each proof of claim have a bimodal distribution, meaning that data  are clustered around two distinct cost levels, rather than clustered  around a single average cost. As a result, we determined that using  two separate measures that indicate typical values for separate  groups of low-cost and high-cost wells would provide more meaningful  statistics about cost. We therefore selected reclamation costs of  $20,000 for the low-cost reclamation scenario and $145,000 for the  high-cost scenario based on the 25th and 75th percentiles of the  distribution of average estimated reclamation cost per proof of claim,  weighted by the number of wells on each proof of claim.\nBond value per well: To determine the average bond value available  per well, we analyzed bonds listed in LR2000 that were tied to wells  listed in AFMSS using the bond number\u2014a variable in both systems.  We found that 1,547 out of the 3,357 unique bond numbers in LR2000  had wells tied to them in AFMSS. These 1,547 bonds covered about  80 percent of the wells in AFMSS. The other 20 percent of wells in  AFMSS either did not list a bond number, or the bond number listed  was not in LR2000. For each bond in LR2000 covering wells in  AFMSS, we calculated the bond available per well as the bond value  divided by the number of wells it covers. We then compared the bond  values per well against both high ($145,000 per well) and low  ($20,000 per well) reclamation cost scenarios to identify which bonds  would be adequate to reclaim all the wells they covered under  different cost scenarios. If AFMSS bond information was incomplete, it  is possible that there are more wells covered by bonds than we were  able to identify\u2014and therefore the bond value per well would be lower  than we found.\nAt-risk wells: To identify wells that may be at greater risk of becoming  orphaned and determine whether their bonds are sufficient to cover  potential reclamation costs, we used well production data from the  Office of Natural Resources Revenue\u2019s Oil and Gas Operations  Report (OGOR) as of June 2017 and bond values from LR2000. First,  we defined wells as \u201cat risk of becoming orphaned\u201d if they met several  criteria. Specifically, we identified wells that (1) had recent OGOR  reports (on or after March 2017); (2) had not been used productively  from at least June 2008 through the most recent record (meaning the  well did not report producing any volume of oil or gas during this  timeframe, nor were any volume of water or materials injected into the  well during this timeframe); (3) were not being used as a monitoring  well in the most recent record, which we considered a productive use;  and (4) had not been plugged and abandoned. We selected June  2008 as the cutoff date for productivity because in June and July of  2008, oil and gas prices hit peaks that have not since been reached  again, and which the Energy Information Administration does not  expect prices to reach again through at least 2050. We believe our  analysis is a conservative estimate of wells at greater risk, in part  because we did not include wells that produced when prices were at  their peaks and stopped producing soon afterward and may be  unlikely to produce in the future unless prices reach the same peaks  again. In addition, our lower-bound estimate does not include some  coalbed methane wells that have been inactive for less than 9 years  but are unlikely to produce at current prices because of the relatively  higher cost of coalbed methane production. We also excluded wells  that reported any volume of oil or gas production or water injection  since June 2008, although some very low-producing wells may also  be at risk of becoming orphaned.\nBond value for at-risk wells: To calculate the average bond value per  at-risk well, we identified bonds listed in LR2000 that were tied to at- risk wells in AFMSS to determine the value of bonds available to  reclaim these at-risk wells if needed. We identified 2,041 of the 2,294  at-risk wells were linked to bonds. For each bond, we divided the  bond value by the number of at-risk wells it covered to determine the  bond amount per at-risk well. In cases in which an at-risk well was  linked to more than one bond, we additionally calculated the average  of the bond value per at-risk well for each bond linked to the well. To  determine the sufficiency of bonds for at-risk wells, we identified the  number of wells with an average bond value per at-risk well equal to  or greater than $20,000 (low cost reclamation scenario) or $145,000  (high cost reclamation scenario).\nOrphaned wells: We compared three lists of orphaned wells based on  data provided by BLM in 2009, July 2017, and April 2019. The 2009  data are from our January 2010 report, which used Orphaned Well  Scoring Checklists that list information such as the well\u2019s name and  location. The July 2017 data are from our May 2018 report, which  used an orphaned well list generated through a query of AFMSS by  BLM. The April 2019 list was generated through a query of an  updated version of AFMSS known as AFMSS 2. We compared the  lists to identify how many wells that were on the 2009 list remained on  the 2019 list, and how many wells that were on the 2017 list were on  the 2019 list.\nTo assess the reliability of the AFMSS, LR2000, and OGOR data  elements we used, we reviewed agency documents, met with relevant  agency officials, and performed electronic testing. We found these data  elements to be sufficiently reliable for our purposes. Similarly, to assess  the reliability of the 2019 orphaned well list, we reviewed agency  documents and met with relevant agency officials. Though we identified  shortcomings with data on orphaned wells, we nevertheless found these  data to be sufficiently reliable for the purpose of describing the orphaned  wells BLM has identified. To assess the reasonableness of proofs of  claim data, we interviewed relevant agency officials and reviewed agency  documents.\nTo understand how BLM manages bonds, we reviewed BLM\u2019s policies  and interviewed officials from four BLM state offices and four BLM field  offices. We selected these state and field offices because, according to  AFMSS data, they were responsible for managing the largest numbers of  wells on federal land. These BLM state offices were California, New  Mexico, Utah, and Wyoming. These BLM field offices were Bakersfield,  Buffalo, Carlsbad, and Farmington. We also interviewed officials from  BLM\u2019s headquarters office in Washington, D.C. Findings from the  selected BLM offices cannot be generalized to officials we did not  interview but provide a range of views. To understand how some states  with oil and gas development on state lands set minimum bonds and fund  orphaned well reclamation, we contacted officials from oil and gas  oversight agencies in Arkansas, Louisiana, Pennsylvania, Texas, Virginia,  and Wyoming.\nWe conducted this performance audit from January 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.\n\nAppendix II: Comments from the Department of the Interior\n\nAppendix III: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Quindi Franco (Assistant  Director), Marietta Mayfield Revesz (Analyst-in-Charge), Marie Bancroft,  William Gerard, Cindy Gilbert, Gwen Kirby, Joe Maher, Shaundra  Patterson, Dan Royer, and Jerry Sandau made key contributions to this  report.","output":null}
{"id":"gao_GAO-20-356","pid":"gao_GAO-20-356_0","input":"\tBackground\n\nThe Marine Corps\u2019 Marine Helicopter Squadron One (HMX-1) currently  uses a fleet of 23 helicopters to support the President in the national  capital region, the continental United States and overseas. In April 2002,  the Navy began developing a replacement helicopter later identified as  the VH-71. Schedule delays, performance issues, and a doubling of  estimated acquisition costs from $6.5 billion to $13 billion prompted the  Navy to terminate the VH-71 program in 2009. Our prior work found that  the VH-71 program\u2019s failure to follow acquisition best practices was a  critical factor in the program\u2019s poor performance that led to its ultimate  termination. In the case of the VH-71, the Navy had a faulty business  case, did not perform appropriate systems engineering analysis to gain  knowledge at the right times, and failed to make necessary trade-offs  between resources and requirements even after years of development.  Because of these failures, the program was unable to achieve a stable  design and experienced significant cost growth and schedule delays.\nAlthough the prior replacement program was terminated, the need for a  replacement helicopter remained. As a result, the Navy initiated a follow- on replacement program in 2010. In April 2012, the Secretary of Defense  approved the Navy\u2019s plan based on the modification of an in-production  helicopter to meet Navy requirements. The VH-92A is expected to provide  improved performance, survivability, and communications capabilities,  while offering increased passenger capacity when compared to legacy  helicopters.\nIn May 2014, the Navy competitively awarded a contract to Sikorsky to  develop the VH-92A, which included options for production. The $2.7  billion contract includes a fixed-price incentive (firm target) Engineering  and Manufacturing Development (EMD) phase and a firm-fixed price  production phase with options for three lots for 17 helicopters, spares and  support equipment. Under the EMD phase, Sikorsky has delivered two  development test helicopters which were used in an operational  assessment that was completed in April 2019. Additionally, Sikorsky has  delivered three of four System Demonstration Test Article (SDTA)  production representative helicopters that are being used in  developmental testing and that will also be used to evaluate the VH-92A\u2019s  operational effectiveness and suitability during the program\u2019s Initial  Operational Test and Evaluation (IOT&E). The fourth SDTA helicopter is  to be delivered in May 2020 and will also be used to conduct IOT&E.\nIn June 2019, the Assistant Secretary of the Navy, Research,  Development and Acquisition (RD&A) approved the program to begin  low-rate initial production of the helicopters and authorized the program to  exercise the contract options for the first two low-rate production lots.  Shortly thereafter, the Navy exercised the Lot l option for 6 helicopters,  initial spares, and support equipment for $542 million. Those helicopters,  initial spares and support equipment are all to be delivered in calendar  year 2021. In February 2020, the Navy exercised the Lot ll option for $471  million for 6 additional helicopters and associated support equipment. All  of these helicopters and support equipment will be delivered in calendar  year 2022.\nThe Navy had planned for two years of low-rate initial production of 6  helicopters each year followed by one year of full-rate production for the  remaining 5 helicopters. The Navy\u2019s acquisition strategy in support of the  production decision included a change in that plan with the re-designation  of full-rate production as a third lot of low-rate production. A key reason  for the change is that the planned full-rate production run of 5 helicopters  was too small to achieve the potential cost benefits of full-rate production,  which typically involves purchasing a sufficient number of helicopters to  decrease unit cost. This revised strategy would also enable the Navy to  award the third production lot seven months earlier than the originally  planned May 2021. Before obligating the funding available for the second  lot, the program office had to brief the Assistant Secretary of the Navy  (RD&A) on various elements of the VH-92A\u2019s performance. The program  office is required to obtain approval from the Assistant Secretary of the  Navy (RD&A) for the procurement of the last lot (Lot lll) with a decision  brief that includes, among other things, the status of IOT&E.\nBuilding a VH-92A helicopter involves work at three facilities. To begin the  production process, Sikorsky takes an S-92A helicopter from its  commercial production line in Coatesville, Pennsylvania and flies it to a  dedicated VH-92A modification facility in Stratford, Connecticut. Once  there, Sikorsky removes some components, such as circuit breaker  panels, engines, and main and tail rotor blades and replaces them with  VH-92A components. Additionally, Sikorsky modifies the helicopter to  accommodate VH-92A specific subsystems, including racks and wiring for  a Navy-developed mission communications system (MCS). Sikorsky then  flies the helicopter to a dedicated facility in Owego, New York where it  integrates the MCS, installs the executive cabin interior, paints the  helicopter, and conducts final testing before delivering the helicopter to  the government. See figure 1 for a depiction of modifications of the  commercial S-92A helicopter to the VH-92A presidential helicopter.\n\n\t\tPrior GAO Work on VH- 92A Acquisition\n\nWe have reported annually on the Navy\u2019s effort to replace the current  fleet of presidential helicopters since 2011. Our reports highlighted, in  part, the extent to which the Navy used the lessons learned from the  failed VH-71 program\u2014the need to balance requirements, costs, and  schedule and the importance of establishing a knowledge-based program  that is aligned with acquisition best practices\u2014in its new effort. For  example, our 2011 report found that while the replacement program was  early in its development cycle, the Navy\u2019s initial efforts appeared to reflect  the intent to pursue a best practices aligned knowledge-based  acquisition.\nFollowing the program\u2019s entry into the EMD phase of acquisition in April  2014, we found that the Navy\u2019s reliance on mature technologies, selection  of an existing helicopter for use in the program, and award of a fixed-price  incentive type contract reduced risk. As to be expected with a major  system development effort, however, we found the program still faced a  number of technical challenges. In four reports issued from 2016 to 2019,  we found that the Navy continued making progress in developing the VH- 92A helicopter while managing design, integration and technical  challenges. Some key technical risk and challenges that we previously  identified are summarized in table 1. We discuss the current status of the  Navy\u2019s efforts to address these challenges later in the report.\n\n\tEstimated Program Costs Have Decreased by 10 Percent\n\nIn April 2019, the Navy estimated that the VH-92A would cost about $4.9  billion to develop and produce and about $15.6 billion to operate and  support the helicopters through fiscal year 2062. Overall, the Navy\u2019s  $20.5 billion estimate reflects a 10-percent reduction from the program\u2019s  2014 baseline estimate (see table 2).\nThe Navy and contractor officials worked together to remain within the  program\u2019s April 2014 cost baseline, in part, by keeping requirements  stable, limiting the design changes, and taking advantage of cost saving  initiatives. For example, the Navy has not added any key performance  requirements to the fixed-price incentive contract since it was awarded in  2014. The Navy has, however, implemented a small number of design  changes to add an additional cockpit display and increase the height of  the upper portion of the forward aircraft door. Previously, we found that  cost saving initiatives included leveraging the Federal Aviation  Administration\u2019s airworthiness certification process, optimizing work  processes, and reducing the movement of helicopters between contractor  sites.\nIn addition, the Navy attributes the reduction in cost to support the VH- 92A fleet to using a planned maintenance interval concept as the basis  for its April 2019 cost estimate. Program officials explained that the April  2014 baseline estimate was based on the approach used to maintain the  current fleet of VH-3D and VH-60N presidential helicopters. For these  helicopters, the contractor carries out depot-level maintenance by  disassembling, inspecting, and reassembling them at its maintenance  depot. However, for the VH-92A, the Navy intends to perform depot-level  maintenance itself through scheduled inspections at its own presidential  helicopter support facility, which was designed to support this approach.  As a result, the Navy expects to be able to support the VH-92A fleet in a  more cost-effective manner while ensuring the availability of the  helicopter to perform its mission.\n\n\tUpcoming Initial Operational Test and Evaluation Will Demonstrate Extent to Which Technical Issues Have Been Addressed as Program Approaches End of Development\n\nThe program has made progress addressing technical risks and  performance challenges we discussed in prior reports and deficiencies  confirmed during the April 2019 operational assessment. According to  program officials, solutions for these performance shortfalls, except for  the landing zone suitability issue, have been developed and successfully  tested during integrated testing and will be evaluated during the 3-month  IOT&E test scheduled to begin in June 2020. The program is pursuing  options to achieve landing zone suitability that include possible changes  in operational procedures, helicopter design, and lawn surface  treatments. If design modifications are required, they will not be  implemented until after IOT&E. As a result, the Navy may not be able to  fully demonstrate that the VH-92A helicopter meets all its key  requirements until after the test program is complete. Further, IOT&E  results may also identify additional issues that may require additional  design or software changes. Depending on the severity of the issues, the  Navy may need additional time to test and incorporate changes into the  helicopter, including those helicopters currently in production.\n\n\t\tVH-92A Program Is Addressing Performance Shortfalls Previously Identified in Testing\n\nThe program office has mitigated or reduced risk on some technical  issues we discussed in prior reports. For example, according to program  documents, the program has mitigated the risk in the following areas:  helicopter start procedures, electromagnetic environment effects\/  electromagnetic pulse and cybersecurity. The Navy assessed these  capabilities during earlier developmental test and during the operational  assessment, which concluded in April 2019; subsequently, the Navy  approved the program to enter into production. However, the operational  assessment confirmed other known performance shortfalls\u2014specifically  those associated with the MCS\u2014that, if not corrected, could prevent the  program from meeting certain operational requirements.\nThe MCS replaces the communications suite currently used by the in- service fleet and provides VH-92A passengers, pilots, and crew with  simultaneous short- and long-range secure and non-secure voice and  data communications capabilities. As such, its performance is critical for  the VH-92A to meet its mission. To conduct its operational assessment,  the Navy used two development test helicopters and a developmental  version of MCS software with known performance and capability  limitations. The operational assessment confirmed these MCS-related  performance limitations, including dropped communication connections.  Navy officials noted that these and other MCS-related performance  shortfalls could, if not addressed, reduce the helicopter\u2019s availability to  perform its transport mission and lower overall reliability, among other  operational requirements.\nOverall, the operational assessment confirmed 24 MCS-related  performance limitations. According to program officials, they have  incorporated or identified fixes to 22 of the 24 issues, which they are now  testing on SDTA helicopters. In turn, these fixes are expected to be  incorporated into MCS software that will be tested during IOT&E.  According to program officials, the remaining two MCS issues are related  to bandwidth and an unreliable off-aircraft network configuration affecting  on-aircraft system performance. According to those officials, the VH-92A  is already equipped with a wide-band line-of-sight system that provides  high bandwidth, though with coverage limitations. The program is  conducting market research on how to provide the helicopter with  increased bandwidth with increased coverage.\nThe remaining two issues were assessed earlier as having a serious (but  not critical) impact to mission accomplishment. In addition to the MCS  deficiencies, the helicopter experienced problems with other components  during the April 2019 operational assessment. For example, the mission  and maintenance data computer repeatedly sent out false warning  alarms\/notifications, which affected the reliability and required the aircrew  to spend extra time troubleshooting or switch to a backup helicopter. A  software update to help address this issue is planned for the computer  prior to IOT&E.\nThe program is also still working to demonstrate the ability of the  helicopter to meet a key system capability requirement to land the  helicopter without damaging landing zones (including the White House  South Lawn). For landing zone suitability, the program\u2019s objective has  been to assess the downwash and exhaust effects on the landing zone.  In a September 2018 training event, the Navy found that VH-92A\u2019s  exhaust damaged a landing zone. Program officials stated that the  training event did not represent a typical operational scenario since the  lawn was exposed to the helicopter\u2019s exhaust for a longer period than it  would be under normal operating conditions. The program is studying  solutions to minimize risk of landing zone damage including possible  changes in operational procedures, helicopter design, and lawn surface  treatments. For example, the contractor developed a prototype design  change to the helicopter\u2019s auxiliary power unit to deflect exhaust. Flight  testing of the prototype design change was conducted in March 2020 with  analysis of the results expected in April 2020. Navy officials stated the  contractor is also conducting testing to determine if changes in helicopter  and\/or engine operating procedures can mitigate the risk of landing zone  damage. According to both program officials and contractor  representatives, a decision on potential solutions will be made prior to  IOT&E. If design modifications are required, they will not be implemented  until after IOT&E.\n\n\t\tProgram Schedule Has Slipped Further but Remains within the Original Approved Schedule Thresholds\n\nInitial operational testing of the VH-92A, which will be used to evaluate  operational effectiveness and suitability of the helicopter, training system,  support equipment, upgraded MCS software and other changes  implemented to address previously identified issues, is now scheduled to  be conducted between June and September 2020. As such, IOT&E will  be conducted about 3 months later than we reported in 2019, but is  expected to be completed by the threshold (latest acceptable) date in the  Navy\u2019s April 2014 baseline. Program officials attributed the 3-month delay  to the need to develop MCS hardware and software changes that are  currently being tested. Should IOT&E demonstrate that efforts to address  the MCS performance issues or other previously identified issues are  insufficient\u2014or if the testing identifies new issues that result in the  program being unable to meet its operational requirements\u2014then the  program may need to identify, test and incorporate changes into the VH- 92A\u2019s design and into the helicopters already in production, further  delaying the program and increasing associated costs. As previously  noted, the first delivery of the helicopters ordered under the first  production option is scheduled to begin in April 2021.\nAs a result of the revised IOT&E test schedule, the program office has  also delayed the initial operational capability (IOC) milestone, which  clears the helicopter to enter service, by 3 months to January 2021. This  new date represents a total delay of 6 months from the original date but  still remains within the IOC threshold date established in April 2014.  Figure 2 compares the program\u2019s 2019 schedule with the 2014 baseline  schedule and the 2018 schedule we reported on last year.\nProgram officials acknowledged that if there is a delay in the program that  results in the program breaching a schedule threshold established in its  acquisition baseline, they would need to submit a program deviation  report to the Assistant Secretary of the Navy (RD&A). In turn, the program  may need to keep certain staff in place longer than originally planned,  potentially increasing program costs. However, program officials told us  that the program can cover any additional costs with existing funding.  Further, Navy officials stated that should IOC be delayed, the Navy will  continue to use its existing fleet of presidential helicopters as the VH-92A  transitions into the HMX-1 fleet. Navy officials indicated that the transition  process will be gradual, and that the existing fleet is sufficiently funded  until HMX-1 completes the transition.\n\n\tAgency Comments\n\nWe are not making any recommendations in this report. We provided  DOD with a draft of this report. DOD provided technical comments, which  we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense and the Secretary of the Navy. In  addition, the report is available at no charge on the GAO website at  http:\/\/www.gao.gov.\nIf you or your staff have any questions about this report, please contact  me at (202) 512-4841 or DiNapoliT@gao.gov. Contacts points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix l.\n\nAppendix l: GAO Contact and Staff Acknowledgments\n\n\tGAO Contacts\n\n\tStaff Acknowledgments\n\nIn addition to the contact above, Bruce H. Thomas, Assistant Director;  Marvin E. Bonner; Bonita J.P. Oden; Alexander Webb; Peter Anderson;  Robin Wilson; and Marie Ahearn made key contributions to this report.\n\nRelated GAO Products\n\nPresidential Helicopter: Program Continues to Make Development  Progress While Addressing Challenges. GAO-19-329. Washington, D.C.:  April 11, 2019.*  Presidential Helicopter: VH-92A Program Is Stable and Making Progress  While Facing Challenges. GAO-18-359. Washington, D.C.: April 30,  2018.*  Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-17-333SP. Washington, D.C.: March 30, 2017.*  Presidential Helicopter: Program Progressing Largely as Planned.  GAO-16-395. Washington, D.C.: April 14, 2016.*  Presidential Helicopter Acquisition: Program Established Knowledge- Based Business Case and Entered System Development with Plans for  Managing Challenges. GAO-15-392R. Washington, D.C.: April 14, 2015.*  Presidential Helicopter Acquisition: Update on Program\u2019s Progress toward  Development Start. GAO-14-358R. Washington, D.C.: April 10, 2014.\nDepartment of Defense\u2019s Waiver of Competitive Prototyping Requirement  for the VXX Presidential Helicopter Replacement Program.  GAO-13-826R. Washington, D.C.: September 6, 2013.\nPresidential Helicopter Acquisition: Program Makes Progress in  Balancing Requirements, Costs, and Schedule. GAO-13-257.  Washington, D.C.: April 9, 2013.\nPresidential Helicopter Acquisition: Effort Delayed as DOD Adopts New  Approach to Balance Requirements, Costs, and Schedule.  GAO-12-381R. Washington, D.C.: February 27, 2012.\nDefense Acquisitions: Application of Lessons Learned and Best Practices  in the Presidential Helicopter Program. GAO-11-380R. Washington, D.C.:  March 25, 2011. *GAO issued these reports on the VH-92A program in response to a provision in National  Authorization Defense Act of 2014.","output":null}
{"id":"crs_R45970","pid":"crs_R45970_0","input":"\tIntroduction\n\nThe Federal Bureau of Investigation (FBI) administers a computer system of systems that is used to query federal, state, local, tribal, and territorial criminal history record information (CHRI) and other records to determine if an indiv idual is eligible to receive and possess a firearm. This FBI-administered system is the National Instant Criminal Background Check System (NICS). This system, or parallel state systems, must be checked and the transfer approved by an FBI NICS examiner or state point of contact (POC) before a federally licensed gun dealer may transfer a firearm to any customer who is not similarly licensed federally as a gun dealer. \nUnder current law, persons who buy and sell firearms repeatedly for profit and as a principal source of their livelihood must be licensed federally as gun dealers. Federally licensed gun dealers\u00e2\u0080\u0094otherwise known as federal firearms licensees (FFLs)\u00e2\u0080\u0094are permitted to engage in interstate and, by extension, intrastate (i.e., within a state) firearms commerce with certain restrictions. For example, they may not transfer a handgun to an unlicensed, out-of-state resident.\nConversely, persons who occasionally buy and sell firearms for personal use, or to enhance a personal collection, are not required to be licensed federally as a gun dealer. Those unlicensed persons, however, are prohibited generally from making interstate firearms transactions\u00e2\u0080\u0094that is, engaging in interstate firearms commerce\u00e2\u0080\u0094without engaging the services of a federally licensed gun dealer. On the other hand, current law does not require background checks for intrastate, private-party firearms transactions between nondealing, unlicensed persons, though such checks might be required under several state laws. Nevertheless, it is unlawful for anybody, FFLs or private parties, to transfer a firearm or ammunition to any person they have reasonable cause to believe is a prohibited person (e.g., a convicted felon, a fugitive from justice, or an unlawfully present alien).\nIn the 116 th Congress, the House of Representatives has passed three bills that would significantly expand the federal firearms background check requirements and the current prohibitions on the transfer or receipt and possession of firearms related to domestic violence. Those bills are the \nBipartisan Background Checks Act of 2019 ( H.R. 8 ), a bill to expand federal firearms recordkeeping and background check requirements to include private-party, intrastate firearms transfers; Enhanced Background Checks Act of 2019 ( H.R. 1112 ), a bill to extend the amount of time allowed to delay a firearms transfer, pending a completed background check to determine an individual's eligibility; and Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ), a bill to expand firearms transfer or receipt and possession prohibitions to include dating partners with histories of domestic violence and stalking misdemeanors.\nIn addition, several multiple-casualty shootings have highlighted possibly systemic vulnerabilities in the NICS-related federal background check procedures, particularly with regard to making records on prohibited persons accessible to federal data systems queried as part of the federal background check process. This report provides an overview of federal firearms statutes related to firearms transactions in interstate and intrastate commerce, dealer licensing, receipt and possession eligibility, NICS background check procedures, analysis of recent legislative action, and discussion about possible issues for Congress. \n\n\tFederal Firearms Statutes\n\nTwo major federal statutes regulate firearms commerce and possession in the United States. The Gun Control Act of 1968 (GCA; 18 U.S.C. \u00c2\u00a7921 et seq.) regulates all modern (nonantique) firearms. In addition, the National Firearms Act, enacted in 1934 (NFA; 26 U.S.C. \u00c2\u00a75801 et seq.), regulates certain other firearms and devices that Congress deemed to be particularly dangerous because they were often the weapons of choice of gangsters in the 1930s. Such weapons include machine guns, short-barreled rifles and shotguns, suppressors (silencers), a catch-all class of concealable firearms classified as \"any other weapon,\" and destructive devices (e.g., grenades, rocket launchers, mortars, other big-bore weapons, and related ordnance). \nCongress passed both the NFA and GCA to reduce violent crimes committed with firearms. More specifically, the purpose of the GCA is to assist federal, state, local, tribal, and territorial law enforcement in the ongoing effort to reduce crime and violence. It is not intended to place any undue or unnecessary federal restrictions or burdens on citizens in regard to lawful acquisition, possession, or use of firearms for hunting, trapshooting, target shooting, personal protection, or any other lawful activity.\nMany observers have long noted that the assassinations of President John F. Kennedy and his brother, Senator Robert F. Kennedy, and civil rights leader Martin Luther King provided the impetus to pass the GCA. Perhaps equally compelling were the August 1, 1966, University of Texas tower mass shooting and social unrest that accompanied the 1960s.\nUnder the Attorney General's delegation, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the principal agency that administers and enforces these statutes. In addition, ATF administers several provisions of the Arms Export Control Act of 1976 (AECA) with regard to the importation of certain firearms, firearms parts, and ammunition that are also regulated under the GCA and NFA.\nFor the most part, however, the FBI maintains NICS and administers the background check provisions of the GCA. Nonetheless, as discussed below, ATF is charged with investigating whether denied persons made false statements in connection with a firearms transfer; when filling out federal firearms transaction forms. In addition, ATF is also charged with firearms retrieval actions, whenever delayed transactions and incomplete background checks possibly result in prohibited persons acquiring firearms. \n\n\t\tFirearms and Ammunition Ineligibility\n\nThe GCA sets firearms eligibility age restrictions under certain circumstances, as well as prohibits various categories of persons from firearms receipt and possession, among other factors. For example, as enacted, the GCA prohibits federally licensed gun dealers (i.e., FFLs) from transferring\na long gun (shoulder-fired rifle or shotgun) or ammunition to anyone under 18 years of age; and a handgun or ammunition suitable for a handgun to anyone under 21 years of age.\nIn 1994, Congress amended the GCA to prohibit anyone from transferring a handgun to a juvenile, or anyone under 18 years of age. Congress also made it unlawful for a juvenile to possess a handgun. Congress also provided exceptions to these juvenile transfer and possession prohibitions. Exceptions include temporary transfers in the course of employment in ranching or farming, in target practice, or hunting, all with the written consent of the parents or guardians and in accordance with federal and state laws; for self- or household-defense; or in other specified situations. \nUnder the GCA, as amended, there are 10 categories of persons prohibited from receiving firearms. For 9 of those categories, those persons are also prohibited from possessing a firearm. More specifically, under 18 U.S.C. \u00c2\u00a7922(g), there are nine categories of persons prohibited from shipping, transporting, receiving, or possessing a firearm or ammunition, which has been shipped or transported in interstate or foreign commerce:\n1. persons convicted in any court of a felony crime punishable by imprisonment for a term exceeding one year and state misdemeanors punishable by imprisonment for a term exceeding two years; 2. fugitives from justice; 3. unlawful users or addicts of any controlled substance; 4. persons adjudicated as \"a mental defective,\" found not guilty by reason of insanity, or committed to mental institutions; 5. unauthorized immigrants and nonimmigrant visa holders (with exceptions in the latter case); 6. persons dishonorably discharged from the U.S. Armed Forces; 7. persons who have renounced their U.S. citizenship; 8. persons under court-order restraints related to harassing, stalking, or threatening an intimate partner or child of such intimate partner; and 9. persons convicted of a misdemeanor crime of domestic violence.\nUnder 18 U.S.C. \u00c2\u00a7922(n), there is a 10 th class of persons prohibited from shipping or transporting firearms or ammunition, or from receiving (but not possessing) firearms or ammunition that had been shipped or transported in interstate or foreign commerce:\n1. persons under indictment in any court of a crime punishable by imprisonment for a term exceeding one year.\nIt is unlawful for any person under any circumstances to sell or otherwise dispose of a firearm or ammunition to any of the prohibited persons enumerated above, if the transferor (seller, federally licensed or unlicensed) has reasonable cause to believe that the transferee (buyer\/recipient) is prohibited from receiving those items.\n\n\t\tFirearms Commerce as a Business\n\nUnder the GCA as enacted, persons who, or firms that, are \"engaged in the business\" of importing, manufacturing, or selling firearms must be federally licensed. In 1986, Congress amended the GCA to define the term \"engaged in the business.\" For dealers it means:\na person who devotes 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, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms.\nATF issues federal firearms licenses to firearms importers, manufacturers, dealers, pawnbrokers, and collectors. As summarized by ATF in January 2016 guidance:\nA person engaged in the business of dealing in firearms is a person who \"devotes 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.\"\nConducting business \"with the principal objective of livelihood and profit\" means that \"the intent underlying the sale or disposition of firearms is predominantly one of obtaining livelihood and pecuniary gain, as opposed to other intents, such as improving or liquidating a personal firearms collection.\"\nConsistent with this approach, federal law explicitly exempts persons \"who make occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms.\"\nUnder the GCA, only FFLs are allowed to transfer firearms commercially from one state to another, that is, to engage in interstate (or foreign) firearms commerce. At the same time, it would be highly improbable for any firearms business to compete successfully in the U.S. civilian gun market by only selling firearms manufactured in the state in which it does business; that is, to engage exclusively in intrastate commerce. As a practical matter, any person who deals in firearms as a business, either in interstate or intrastate commerce, needs to be federally licensed firearms manufacturer, importer, or dealer. \nFFLs may transfer a long gun\u00e2\u0080\u0094a shoulder-fired rifle or shotgun\u00e2\u0080\u0094to unlicensed persons from another state as long as such transfers are legal in both states and they meet in person to make the transfer. However, FFLs may not transfer a handgun to any unlicensed resident of another state. Since 1986 there have been no similar restrictions on the interstate transfer of ammunition, because Congress repealed those restrictions at the request of ATF. Furthermore, a federal firearms license is not required to sell ammunition; however, such a license is required to either manufacture or import ammunition.\nIn addition, FFLs are required to maintain bound logs of firearms acquisitions and dispositions to and from their business inventories by date, make, model, and serial number of individual firearms and transactions records for firearms sales to unlicensed, private persons. ATF periodically inspects these FFLs to monitor their compliance with federal and state law. \nUnder current law, there are statutory prohibitions against ATF, or any other federal agency, maintaining a registry of firearms or firearms owners. Nevertheless, the system of recordkeeping described above allows ATF agents to trace, potentially, the origins of a firearm from manufacturer or importer to a first retail sale and buyer. ATF agents assist other federal agencies, as well as state and local law enforcement, with criminal investigations. The ATF also makes technical judgements about firearms, including the appropriateness of manufacturing and importing certain makes and models of firearms and firearms parts.\nAs described in greater detail below, since November 30, 1998, all FFLs are required to initiate a background check for both handguns and long guns on any prospective firearms purchaser who is otherwise unlicensed federally to engage in firearms commerce as a business. The FBI facilitates these background checks nationwide through NICS. However, for some states, these FBI-facilitated background checks are routed to state or local authorities (points of contact, or POCs) for all firearms (handguns and long guns), or just for handgun transfers or permits for other states.\n\n\t\tPrivate Party Transfers\n\nFor the most part, the GCA does not regulate firearms transactions between two unlicensed persons, who reside in the same state; that is, private-party, intrastate firearms transfers. Such transfers are not covered under current federal law as long as the parties are:\nnot \"engaged in the business\" of dealing in firearms \"as a regular course of trade or business with the principal objective of livelihood and profit\"; residents of the same state, where the transfer is made; not prohibited from receiving or possessing firearms; and the recipients are of age (at least 18 years old). \nIt follows, therefore, that private firearms transactions between persons who are not \"engaged in the business\" of firearms dealing and, thus, who are not required to be federally licensed, are not covered by the recordkeeping or the background check provisions of the GCA if those parties reside in the same state. The meaning of \"state of residence\" is not defined in the GCA, but ATF has defined the term to mean:\nThe State in which an individual resides. An individual resides in a State if he or she is present in a State with the intention of making a home in that State. If an individual is on active duty as a Member of the Armed Forces, the individual's State of residence is the State in which his or her permanent duty station is located. An alien who is legally in the United States shall be considered to be a resident of a State only if the alien is residing in the State and has resided in the State for a period of at least 90 days prior to the date of sale or delivery of a firearm. \nHowever, these intrastate, private firearms transactions and other matters such as possession, registration, and the issuance of licenses to firearms owners may be covered by state laws or local ordinances. As noted above, unlicensed persons are prohibited generally from engaging in interstate and intrastate firearms commerce as a business; however, they are permitted to change state residences and take their privately owned non-NFA firearms with them under federal law, but they must comply with the laws of their new state of residence.\nThe GCA generally prohibits an unlicensed person from directly transferring any firearm\u00e2\u0080\u0094handgun or long gun\u00e2\u0080\u0094to any other unlicensed person who resides in another state. Similarly, it is unlawful for an unlicensed person to receive a firearm from any unlicensed person who resides in another state. On the other hand, the GCA does not prohibit an unlicensed person from transferring a firearm to an out-of-state FFL, who may be willing to serve as a proxy for an unlicensed person to transfer a firearm or firearms to another unlicensed person who resides in the state where the FFL is licensed federally to do business. The facilitating, out-of-state FFL, in turn, must treat that firearm as if it were part of his business inventory, triggering the recordkeeping and background check provisions of the GCA. Generally, the facilitating FFL will charge a fee for such transactions conducted on behalf of an unlicensed person, which would likely be passed on to the unlicensed buyer\/transferee in most cases.\nAccording to a 2015 survey, about one-in-five firearms transfers (22%) are conducted privately between unlicensed persons. In addition, a 2016 survey of state and federal prisoners\u00e2\u0080\u0094conducted by the Department of Justice (DOJ), Bureau of Justice Statistics (BJS)\u00e2\u0080\u0094who possessed a firearm during the offense for which they were serving time suggested that\nmore than half (56%) had either stolen the firearm (6%), found it at the scene of the crime (7%), or obtained it off the street or from the underground market (43%); most of the remainder (25%) had obtained the firearm from a family member or friend, or as a gift; and seven percent had purchased the firearm under their own name from a licensed firearm dealer, or FFL.\nBased on this survey data, private firearms sales at gun shows or any similar venue did not appear to be a significant source of guns carried by these offenders, while private transfers among family members, friends, and acquaintances did appear to account for a significant source of such firearms.\n\n\t\tATF Form 4473, Firearms Transaction Record\n\nThe ATF Form 4473 and bound log of firearms acquisitions and dispositions are the essential federal documents underlying the recordkeeping process mandated by the GCA. Both FFLs and prospective, federally unlicensed purchasers must truthfully and completely fill out, and sign, an ATF Form 4473. Prospective purchasers attest to three things:\n1. they are not prohibited persons, 2. they are who they say they are, and 3. they are the actual buyers.\nStraw purchases are a federal crime. It is illegal for anybody to pose as the actual buyer, when in fact he is buying the firearm for someone else. Making any materially false statement to an FFL is punishable by a fine and\/or up to 10 years imprisonment. There is also a lesser penalty for making any false statement or representation in any record (e.g., the Form 4473) that an FFL is required to maintain. Some straw purchases are also prosecuted under this provision. Violations are punishable by a fine and up to five years imprisonment.\nFor their part, FFLs must verify a prospective purchaser's name, date of birth, state residency, and other information by examining government-issued identification, which most often include a state-issued driver's license. \nFFLs must also file completed Form 4473s in their records. If a purchased firearm from FFLs should be recovered at any crime scene, ATF can trace a firearm from its original manufacturer or importer to the first-time FFL retail seller and the first-time private buyer (by the make, model, and serial number of the firearm). Successful firearms traces have generated leads in criminal investigations. In addition, aggregated firearms trace data provide criminal intelligence on illegal firearms trafficking patterns.\n\n\t1993 Brady Act and Background Checks\n\nAfter six years of debate, Congress passed the Brady Handgun Violence Prevention Act, 1993 (Brady Act). Sponsors of the Brady Act initially proposed requiring a seven-day waiting period for handgun transfers. Instead, Congress amended the GCA with the Brady Act to require electronic background checks on any federally unlicensed individual seeking to acquire a firearm from an FFL. The Brady Act included both interim and permanent provisions.\nUnder the interim provisions, FFLs were required to contact local chief law enforcement officers (CLEOs) to determine the eligibility of prospective customers to be transferred a handgun. CLEOs were given up to five business days to make such eligibility determinations. From February 28, 1994, to November 29, 1998, under the interim provisions, 12.7 million firearms background checks (for handguns) were completed, resulting in 312,000 denials.\nThe permanent provisions of the Brady Act became effective when the FBI activated the National Instant Criminal Background Check System (NICS) on November 30, 1998. Under these provisions, FFLs are required to initiate a background check through NICS on any prospective unlicensed customer, who seeks to acquire a firearm from them through a sale, trade, or redemption of firearms exchanged for collateral. Failure to conduct a NICS check is punishable by a fine of up to $1,000 and one year imprisonment, or both. FFLs may engage in firearms transfers among themselves without conducting background checks. \nThe Brady Act includes a provision that prohibits the establishment of a registration system of firearms, firearms owners, or firearms transactions or dispositions with NICS-generated records, except for records on NICS denials for persons who are prohibited from receiving or possessing firearms under the GCA. In addition, in the FY2012 Consolidated Appropriations Act, Congress included a permanent appropriations limitation that requires the FBI to destroy background check records within 24 hours on persons who are eligible to receive firearms.\nFrom November 30, 1998, through 2018, the FBI NICS Section facilitated nearly 305 million firearms-related background checks transactions. Corresponding data on individual background checks and denials under the permanent provisions of the Brady Act are given and discussed below for both the FBI and for point of contact states that have chosen to either fully or partially implement the Brady Act. \n\n\t\tNICS Process Under Federal Law\n\nBuilding on the GCA firearms transaction recordkeeping process, the completed and signed ATF Form 4473 serves as the authorization for an FFL to initiate a check through NICS. The FFL submits a prospective firearms transferee's name, sex, race (or ethnicity), complete date of birth, and state of residence to the FBI through NICS. Social security numbers and other numeric identifiers are optional, but the submission of these data could possibly increase the timeliness of the background check and reduce misidentifications. \n\n\t\t\tNICS Responses\n\nThe NICS Section is to respond to an FFL or POC state official with a NICS Transaction Number (NTN) and one of four outcomes as follows, as described in greater detail below: \n1. \"proceed\" with transfer or permit\/license issuance, because a prohibiting record was not found; 2. \"denied,\" indicating a prohibiting record was found; 3. \"delayed proceed,\" indicating that the system produced information that suggested the prospective purchaser could be prohibited; or 4. \"canceled\" for insufficient information provided.\nIn the case of a \"proceed,\" the background check record is purged from NICS within 24 hours; \"denied\" requests are kept indefinitely. Under the third outcome, \"delayed proceed,\" a firearms transfer may be \"delayed\" for up to three business days while NICS examiners or state designees (i.e., POCs) attempt to ascertain whether the person is prohibited. \n\"Delayed proceeds\" are often the result of partial, incomplete, and\/or even ambiguous criminal history records. The FBI NICS Section often must contact state and local authorities to make final firearms eligibility determinations. Under federal law, at the end of the three-business-day period following a \"delayed proceed,\" FFLs may proceed with the transfer at their discretion if they have not heard from the NICS Section about those matters. The NICS Section, meanwhile, will continue to work the NICS adjudications for up to 30 days, at which point the background checks will drop out of the NICS examiner's queue if unresolved. At 88 days, all pending background check records are purged from NICS, even when they remain unresolved. About two-thirds of FBI NICS Section-administered background checks are completed within hours, if not minutes. Nearly one-fifth are delayed, but are completed within the three-business-day delayed transfer period. \nIf the FBI ascertains that the person is not in a prohibited status at any time within this 88-day period, then the FBI contacts the FFL through NICS with a \"proceed\" response. If the person is subsequently found to be prohibited, the FBI also contacts the FFL to ascertain whether a firearms transfer had been completed following the three-business-day \"delayed transfer\" period. If so, the FBI makes a referral to ATF. In turn, ATF initiates a firearms retrieval process. Such circumstances are referred as a \"delayed denial,\" or more colloquially described as \"lying and buying.\" \nBy comparison, standard denials are known as \"lying and trying,\" under the supposition that most persons knew they were prohibited before they filled out the ATF Form 4473 and underwent a background check. ATF is also responsible for investigating standard denials based on FBI NICS Section referrals. As noted above, making any false statement to an FFL in connection with a firearms transfer is punishable under two GCA provisions.\nAs part of the NICS process, under no circumstances are FFLs informed about the prohibiting factor upon which denials are based. However, denied persons may challenge the accuracy of the underlying record(s) upon which their denials are based. They would initiate this process by requesting (usually in writing) the reason for their denial from the agency that initiated the NICS check (the FBI or POC). Under the Brady Act, the denying agency has five business days to respond to the request. Upon receipt of the reason and underlying record for their denials, the denied persons may challenge the accuracy of that record. If the records are found to be inaccurate, the denying agency is legally obligated under the Brady Act to correct that record. If the denials are overturned within 30 days, the transfers in question may proceed. Otherwise, FFLs must initiate another background check through NICS on the previously denied prospective purchaser.\n\n\t\t\tNICS-Queried Computer Systems and Files\n\nThe feasibility of establishing NICS was largely founded upon the interstate sharing of federal, state, local, tribal, and territorial criminal history record information (CHRI) electronically through FBI computer systems and wide area network (WAN). Based on the prospective customer's name and other biographical descriptors, NICS queries four national data systems for records that could disqualify a customer from receiving and possessing a firearm under federal or state law. Those systems include the:\nInterstate Identification Index (III) for records on persons convicted or under indictment for felonies and serious misdemeanors; National Crime Information Center (NCIC) for files on persons subject to civil protection orders and arrest warrants, immigration law violators, and known and suspected terrorists; NICS Indices for federal and state record files on persons prohibited from possessing firearms, which would not be included in either III or NCIC; and Immigration-related databases maintained by the Department of Homeland Security's Immigration and Customs Enforcement (ICE) for non-U.S. citizens.\nAn internal FBI inspections report found that access to N-DEx could have helped reveal that the individual, who later shot and killed nine people in a Charleston, SC, church, had an arrest record that was possibly sufficient grounds to deny him a firearms transfer. N-DEx is a repository of unclassified criminal justice files that can be shared, searched, and linked across jurisdictional boundaries. \nFor more information about these computer systems and files see Appendix B .\n\n\t\t\tNICS Participation: POCs and Non-POCs\n\nAs shown in Figure 1 , under the Brady Act, states may opt to conduct firearms-related background checks entirely or partially for themselves through state and local agencies serving as POCs, or they may opt to have such checks handled entirely by the FBI, through its NICS Section, which is part of the FBI's Criminal Justice Information Services (CJIS) Division. \nIn 13 full POC states, an FFL initiates a firearms-related background check under the Brady Act by contacting a state or local agency serving as a POC for both long gun- and handgun-related transfers. These states are CA, CO, CT, FL, HI, IL, NJ, NV, OR, PA, TN, UT, and VA. In four partial POC states, an FFL initiates a firearms-related background check by contacting the state and local agencies serving as POCs for handgun transfers, and by contacting the NICS Section through a call center for long gun transfers. These states are MD, NH, WA, and WI. In three partial POC states, an FFL initiates a firearms-related background check under the Brady Act by contacting the state and local agencies serving as POCs for handgun permits, and contacts the NICS Section through a call center for long gun transfers. These states include IA, NC, and NE. In 36 jurisdictions (30 states, the District of Columbia, and the five U.S. territories), an FFL initiates a firearms-related background check by contacting the NICS Section through a call center for all firearms-related background checks, both long gun and handgun transfers. These thirty states are AK, AL, AR, AZ, DE, GA, ID, IN, KS, KY, LA, MA, ME, MI, MN, MO, MS, MT, ND, NM, NY, OH, OK, RI, SC, SD, TX, VT, WY, and WV. The five territories are AS, GU, MP, PR, and VI. Twenty-five states are \"Brady exempt,\" meaning that certain valid, state-issued handgun and concealed carry weapons (CCW) permits may be presented to the FFL in lieu of a background check for firearms transfers through the NICS Section or state and local agencies serving as POCs. Those states are AK, AR, AZ, CA, GA, HI, IA, ID, KS, KY, LA, MI, MS, MT, NC, ND, NE, NV, OH, SC, SD, TX, UT, WV, and WY. For further information, see Appendix C .\n\n\t\tNICS Transactions, November 30, 1998, Through 2018\n\n Figure 2 shows annual NICS transactions from November 30, 1998, through 2018 (20 years and one month). FBI transactions are shown on the base of the columns and the state and local POC transactions are shown on the top of the columns. Over this period, the FBI NICS Section and state and local agencies serving as POCs made 304.6 million NICS transactions. The NICS Section handled 128.6 million of these transactions (42.2% of all NICS transactions), whereas POCs initiated 176 million transactions (57.8% of all NICS transactions). \nThere is a one-to-one correspondence between FBI NICS transactions and individual background checks, and the 128.6 million FBI transactions\u00e2\u0080\u0094that is, background checks\u00e2\u0080\u0094resulted in 1.6 million denials (1.24%). Some of these FBI NICS Section-administered background checks were for firearms transactions involving multiple firearms; consequently, NICS transactions\/background checks serve as an imperfect proxy for firearms sales.\nUnlike FBI NICS background checks, some state background checks involved more than one background check transaction. In some states, for example, there may be permitting or licensing processes that could take several weeks and administrators would run multiple NICS queries on a single applicant. In other cases, a background check administrator might be unclear about an applicant's first and last name and would run two NICS queries on the applicant, reversing both names as first and last names. More fundamentally, some states are running periodic NICS queries on concealed carry permit holders. These periodic rechecks are not considered individual background checks. \nThe FBI does not have the state data to report on how many state and local background checks correspond with those transactions. Nor does the FBI report the total number of state and local firearms transfer or license denials. The Bureau of Justice Statistics (BJS), however, collects and analyzes the data as part of its Firearm Inquiry Statistics Program and reports annually on the total number of firearms-related background checks and related denials conducted under the Brady Handgun Violence Prevention Act ( P.L. 103-159 ). \nIn June 2017, BJS reported that state and local POCs had conducted 81.7 million firearms-related background checks from November 30, 1998, through 2015. According to the FBI, these POC-conducted background checks corresponded with 123.3 million NICS transactions. About 54.9% of these state transactions involved background checks related to firearms permits\/licenses, an unreported percentage of which were for concealed carry permits. It is also noteworthy that some state-issued concealed-carry permits exempt the holder from any further background checks for non-NFA firearms. Hence, state and local NICS transactions also serve as an imperfect proxy for firearms sales. See Appendix C for a list of state permits that have been certified by ATF as Brady exempt. \nFrom 2006 through 2018, total NICS transactions more than doubled from 10 million to 26 million or more, peaking in 2016 at 27.5 million and then dropping to 25.2 million in 2017, and rising again to 26.2 million in 2018. For the same years, total NICS transactions\/checks handled entirely by the FBI NICS Section increased from 5.3 million to 9.4 million from 2006 to 2016, then dropped to 8.6 million in 2017, and dropped again to 8.2 million in 2018. In addition, NICS transactions handled by state and local agencies increased from 4.8 million to 18.2 million from 2006 to 2016, then dropped to 16.6 million in 2017, but rose again to 17.9 million in 2018. \nIn Figure 2 POC transactions account for an increasing proportion of all NICS transactions, but as discussed above some POC background checks involve more than one NICS transaction, whereas each NICS Section transaction corresponds with a single background check. As shown in Figure 3 , for the years 1999 through 2015, the FBI CJIS Division's NICS Section conducted as many or more background checks than state or local POC agencies. \n Figure 3 also shows the number of annual denials made pursuant to federal or state law. As noted above, over the 20 years and one month, the FBI CJIS Division's NICS Section conducted 128.7 million background checks, resulting in nearly 1.6 million denials, for an overall initial denial rate of 1.2%. As discussed below, about 2.7% of those denials were appealed and eventually overturned. \nBJS reported that state and local POC agencies conducted nearly 81.7 million background checks from November 30, 1998, through 2015 for firearms transfers and permits. To date, BJS has not published any data for state and local POC agencies for 2016, 2017, and 2018. Nevertheless, for those 17 years and one month, POC checks resulted in nearly 1.46 million denials, for an overall denial rate of 1.8%, according to BJS. For the same years (and one month), the FBI NICS Section processed 102.4 million background checks, resulting in 1.27 million denials of firearms transfers, for an overall denial rate of 1.2%. See Appendix A for the data shown in Figure 3 , as well as FBI and POC denials by prohibiting categories.\n\n\t\t\tFBI NICS Section Brady Denials Appealed and Overturned\n\nAs with other screening systems, particularly those that are largely name-based, false positives occur as part of the NICS process, but the frequency of these misidentifications is unreported. Nevertheless, the FBI has taken steps to mitigate false positives (i.e., denying a firearms transfer to an otherwise eligible person). In July 2004, DOJ issued a regulation that established the NICS Voluntary Appeal File (VAF), which is part of the NICS Indices (described above). DOJ was prompted to establish the VAF to minimize the inconvenience incurred by some prospective firearms transferees (purchasers) who have names or birth dates similar to those of prohibited persons. So as not to be misidentified in the future, these persons agree to authorize the FBI to maintain personally identifying information about them in the VAF as a means to avoid future delayed transfers. As noted above, current law requires that NICS records on approved firearm transfers, particularly information personally identifying the transferee, be destroyed within 24 hours.\n Figure 4 shows annual NICS Section denials, denials appealed but sustained, and denials overturned from November 30, 1998, through 2018. During this time, it appears that about one-fifth of NICS Section denials were appealed, and about one-tenth of those appealed denials were overturned, or an estimated 2.7% of NICS Section denials, according to the annual CJIS Division's NICS operations reports. The majority of these overturned denials were due to misidentifications. In any screening system, such as NICS, there is a balance between false positives and false negatives. Misidentifications and improperly interpreted criminal history and other records would constitute false positives. Allowing an otherwise prohibited person to acquire a firearm would constitute a false negative. \nUnder the GCA, there is also a provision that allows the Attorney General (previously, the Secretary of the Treasury) to consider petitions from a prohibited person for \"relief from disabilities\" and to have his firearms transfer and possession eligibility restored. Since FY1993, however, a limitation (or \"rider\") on the ATF annual appropriations for salaries and expenses has prohibited the expenditure of any appropriated funding for ATF to process such petitions from individuals.\nConversely, under the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ), any federal agency that submits any records on individuals considered to be too mentally incompetent to be trusted with a firearm under the GCA must provide an avenue of administrative relief to those individuals, so if their mental health or other related conditions improve, their firearms rights and privileges may be restored. As a condition of grant eligibility, as described below, states must provide similar administrative avenues of relief for those purposes, that is, \"disability relief.\" See Appendix D for a list of states that have enacted and implemented ATF-certified relief from disability programs under P.L. 110-180 .\n\n\t\t\tNICS Denials and Firearm Retrieval Actions\n\n Figure 5 shows annual NICS denials and firearm retrieval action from November 30, 1998, through 2018. For the 20 years and one month, the NICS section made an average of 3,600 firearm retrieval action referrals to the ATF annually for follow-up. In many of these cases, an otherwise prohibited person had been transferred a firearm. According to the Government Accountability Office (GAO), following up on these possibly illegal firearms receipts\u00e2\u0080\u0094or \"delayed denial investigations\"\u00e2\u0080\u0094consumes an increasing and considerable amount of ATF resources. For example, such investigations accounted for 32% of ATF investigations opened in FY2003 and 53% in FY2013. \nIt appears that in a relatively small percentage of cases the suspected offenders have been prosecuted federally for what is commonly known as either \"lying and buying\" or \"lying and trying.\" According to the Government Accountability Office (GAO), ATF processed 3,933 delayed denials in FY2017. Of those denials, 38 cases were referred to U.S. Attorney's Offices for prosecution. Nine of those cases were federally prosecuted.\nAlso in a relatively small percentage of cases, an FFL could potentially proceed with a firearms transfer after the three-business-day delayed transfer period has expired, but never receive a final NICS determination; or the FFL could potentially decline to transfer the firearm to an unlicensed customer until he received a definitive NICS Section response, which the FFL may not receive from the FBI. \n\n\t\tNICS Section Budget\n\nNICS is maintained and administered by the FBI Criminal Justice Information Services (CJIS) Division and its NICS Section, located in Clarksburg, WV. Recent increases in the volume of firearms-related commerce and attendant background checks have strained the NICS Section and additional staff and funding has been requested by the FBI, which Congress has provided through appropriated funding. For FY2016, the NICS Section program budget allocation was $81 million and 668 funded permanent positions. As described below, for FY2019, the FBI anticipated that the NICS Section program budget would be allocated $103 million and 679 positions, representing a $22 million and 11 position increase over FY2016. The Administration's FY2020 request would increase FY2020 NICS Section program budget to $115 million and 719 positions.\nFor FY2017, the Obama Administration requested $121.1 million for the NICS program, including an additional $35 million. Of this budget increase $15 million was requested to sustain 75 professional support positions funded for FY2016; and another $20 million was requested to hire 160 contractors to support NICS firearms background checks and related activities. The remaining $5.1 million was requested to annualize operational costs associated with the NICS base budget. Report language accompanying both the Senate- and House-reported FY2017 Commerce, Justice, Science, and Related Agencies appropriations bills ( S. 2837 and H.R. 5393 ) indicated that those bills would have provided the requested $35 million for NICS. The Explanatory Statement accompanying H.R. 244 , submitted by the House Committee on Appropriations Chair, Representative Rodney Frelinghuysen, indicated that P.L. 115-31 included $511.3 million for CJIS, and that this amount would fully support CJIS programs, including NICS. \nFor FY2018, the Trump Administration requested $79.2 million for the NICS program, including an additional $8.9 million to fund an additional 85 permanent positions. Such an increase would have brought the number of funded permanent positions for the NICS program to 676. According to the FBI, the enacted NICS budget allocation for FY2018 was $111.3 million and 679 positions. For FY2019, the Administration did not request any budget increases for the FBI or NICS. The FBI anticipated that the FY2019 NICS budget and staff allocation would be about $103 million and 679 positions. \nFor FY2020, the Administration has requested a NICS budget increase of $4.23 million and 40 positions and $7.8 million in base budget increases, which would bring the total FY2020 NICS budget to $115 million and 719 positions. House-report language accompanying the FY2020 Commerce, Justice, Science, and Related Agencies Appropriations Act ( H.R. 3055 ) indicates that this bill would fully support the NICS Section operations and activities for the upcoming fiscal year.\n\n\t\tImproving NICS Access to Prohibiting Records\n\nThe efficacy of NICS and firearms-related background checks is dependent in large part on state and local governments making criminal history record information (CHRI), as well as other disqualifying records (e.g., mental incompetency records), accessible electronically to several different national data sharing systems maintained by the FBI. As described above, those systems include principally the III, NCIC, and the NICS Indices. Congress, meanwhile, has authorized two grant programs to incentivize state and local governments to maintain CHRI and other disqualifying records and make them accessible to NICS in a timely manner.\nUnder the Brady Act, Congress authorized a grant program known as the National Criminal History Improvement Program (NCHIP), the initial goal of which was to improve electronic access to firearms-related disqualifying records, felony indictment, and conviction records, for the purposes of both criminal and noncriminal background checks. \nCongress passed the NICS Improvement Amendments Act (NIAA) of 2007 ( P.L. 110-180 ) following the April 16, 2007, Virginia Tech tragedy. Along the lines of the Brady Act, the NIAA included provisions designed to encourage states, tribes, and territories to make available to the Attorney General certain records related to persons who are disqualified from acquiring a firearm, particularly records related to domestic violence misdemeanor convictions and restraining orders, as well as mental health adjudications. As a framework of incentives and disincentives, the Attorney General was authorized to make grants, waive grant match requirements, or reduce law enforcement grant assistance depending upon a state's compliance with the act's goals of bringing firearms-related disqualifying records online.\nThe Attorney General was required to report annually to Congress on federal department and agency compliance with the act's provisions. The Attorney General, in turn, has delegated responsibility for grant-making and reporting to DOJ's Bureau of Justice Statistics (BJS). BJS designated the grant program under the act as the \"NICS Act Record Improvement Program (NARIP),\" although congressional appropriations documents generally referred to it as \"NICS improvement\" or the \"NICS Initiative\" program. \n Figure 6 shows annual congressional appropriations for NCHIP and NARIP for FY1995-FY2019. Over this 25-year period, Congress has appropriated nearly $859 million for NCHIP and $201 million for NARIP, for a total of $1.06 billion. During this time period, NCHIP grants were made available to states for purposes other than just identifying persons ineligible to receive firearms, such as identifying persons ineligible to hold positions involving vulnerable populations (e.g., children, disabled, and elderly). Nevertheless, the principal purpose of NCHIP was to improve the accuracy and timeliness of background checks, particularly those administered pursuant to the Brady Act. \nFor FY2009 through FY2013, Congress authorized $1.3 billion in appropriations for NARIP. Actual appropriations, however, fell short of such authorizations. For those fiscal years, Congress appropriated $63.6 million for NARIP, although neither the House nor Senate Committee on Appropriations adopted \"NARIP\" as a grant program designation. Instead, the appropriations statute provided such funding for the grant-making activities authorized under P.L. 110-180 .\nFor FY2014 through FY2019, Congress continued to appropriate funding for both NCHIP and the grant-making activities authorized under P.L. 110-180 (i.e., NARIP) under the \"NICS Initiative,\" even though the authorization for appropriations under P.L. 110-180 had lapsed. For those years, Congress appropriated $429.5 million for NCHIP and NARIP, or the \"NICS Initiative,\" of which $137 million was set aside for purposes authorized under NIAA, bringing total appropriated NARIP funding for FY2009 through FY2019 to $200.6 million. Under the NICS Initiative, BJS has awarded a total of $142 million in NARIP grants to 30 states and one Native American tribe from FY2009 through FY2018. To date, however, BJS has not levied any of the reward and penalty provisions of NIAA, possibly because of methodological difficulties in ascertaining state progress towards meeting the goals of this act.\nWith NICS Initiative grants (NCHIP and NARIP) in part, state and local governments have increased the availability of mental health- and domestic violence-related records to NICS Indices and other data systems queried by NICS. For example, from CY2007 to CY2018, the number of mental health records in the NICS Indices increased from 518,499 to 5,419,894, a 9.5-fold increase. The number of misdemeanor crime of domestic violence (MCDV) records in the NICS Indices increased from 46,286 to 175,376, nearly tripling (a 278.9% increase). Many instances domestic violence misdemeanor crimes are serious enough in nature that the records are deposited in the III, meaning the offenders were fingerprinted. \nA Department of Justice-sponsored report found that in many cases such criminal records are not adequately flagged in the III for firearms eligibility determination purposes, leading to NICS delayed transfers in some cases. Inadequately flagged records in the III increase the possibility that a prohibited person might be transferred a firearm after the NICS three-business-day delayed transfer period expires. Similarly, it was reported that domestic violence protection orders are increasingly being placed in the NICS Indices, even though the authors of the report argued that it would probably be most appropriate to place such records in the National Crime Information Center (NCIC), so that such records would be available to law enforcement for purposes besides firearms-related background checks.\nResponding to these issues in part, Congress passed the Fix NICS Act of 2018 ( P.L. 115-141 ). The act reauthorized NARIP, as well as authorized appropriations of $125 million annually for FY2018 through FY2022. It also reauthorized NCHIP itself, as well as authorized appropriations of $250 million annually for FY2018 through FY2022. For FY2018, Congress appropriated $75 million for the \"NICS Initiative,\" of which $25 million was set aside for purposes authorized under NIAA, as amended by the Fix NICS Act (or NARIP). For FY2019, Congress appropriated the same amount and set aside. \nFor FY2020, the Administration has requested $65 million for NCHIP and $10 million for NARIP. The House-reported Commerce, Justice, Science, and Related Agencies Appropriations bill ( H.R. 3055 ; H.Rept. 116-101 ) would provide $80 million for these grant programs under the \"NICS Initiative,\" of which $27.5 million would be set aside for purposes authorized under NIAA, as amended by the Fix NICS Act (or NARIP).\n\n\t116th Congress and NICS Operations-Related Legislation\n\nThis final section of the report briefly summarizes NICS-related legislative action to date in the 116 th Congress. It then provides a summary and some analysis of three bills that have passed the House and await Senate action.\nIn the 116 th Congress, the House has passed three bills that would expand federal firearms-related background check requirements. On January 8, 2019, Representative Mike Thompson introduced the Bipartisan Background Checks Bill of 2019 ( H.R. 8 ), a bill that would require a background check for most private-party, intrastate firearms sale, or \"universal\" background checks. On February 6, 2019, the House Committee on the Judiciary held a hearing on \"Preventing Gun Violence in America.\" On February 8, 2019, Representative James Clyburn introduced the Enhanced Background Checks Act of 2019 ( H.R. 1112 ), a bill to lengthen the number of days a firearms transfer could be delayed pending a final firearms eligibility determination. On February 13, 2019, the House Committee on the Judiciary amended and ordered reported both bills: H.R. 8 ( H.Rept. 116-11 ) and H.R. 1112 ( H.Rept. 116-12 ). On February 27 and 28, 2019, respectively, the House amended and passed H.R. 8 and H.R. 1112 .\nOn March 7, 2019, Representative Karen Bass introduced the Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ). On March 27, 2019, the House Committee on the Judiciary amended and reported H.R. 1585 . This bill includes provisions that would expand existing firearms transfer\/receipt and possession prohibitions to include dating partners with histories of domestic violence and persons convicted of stalking-related misdemeanor offenses. The House passed H.R. 1585 on April 4, 2019.\nAlso, of note, on March 13, 2019, the House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies held a hearing on \"Gun Violence Prevention and Enforcement.\" On March 18, 2019, the Federal Bureau of Investigation (FBI) released its FY2020 congressional budget request that includes a $4.2 million increase for the NICS, which would bring the total program budget to $114.7 million for FY2020. On the same date, the Office of Justice Programs (OJP) released its congressional budget request that includes $75 million for state, local, tribal, and territorial governments to upgrade criminal and mental incompetency records and make those records accessible to NICS for firearms eligibility determination purposes. \nOn June 3, 2019, the House Committee on Appropriations reported an FY2020 Commerce, Justice, Science, and Related Agencies (CJS) Appropriations bill ( H.R. 3055 , H.Rept. 116-101 ). House report language indicates that the bill would fully support the FBI request for increased NICS funding. The bill would also provide $80 million for OJP-administered NICS improvement grants under NCHIP and NARIP. \nOn September 26, 2019, Senate Committee on Appropriations reported an FY2020 CJS Appropriations bill ( S. 2584 ; S.Rept. 116-127 ). Senate report language indicates that the bill $131 million to increase NICS capacity and efficacy. This amount is $16.3 million above the Trump Administration's FY2020 request. The bill would also provide $78.3 million for OJP-administered NICS improvement grants under NCHIP and NARIP, of which $25 is for the latter program. \nIn addition, on March 26, 2019, the Senate Committee on the Judiciary held a hearing on \"Red Flag Laws: Examining Guidelines for State Action.\" Seventeen states and the District of Columbia have passed \"Red Flag\" laws. These laws essentially allow concerned persons, including family members in some cases, to petition a court to file an extreme risk protection order against an individual that would allow for the suspension of that individual's firearms eligibility under certain circumstances. These state laws vary considerably from state to state. Related proposals in the 116 th Congress would make subjects of such protective orders ineligible to receive or possess firearms under federal law in any state or would establish grant programs to encourage states to adopt such laws. \nOn September 10, 2019, the House Committee on the Judiciary ordered reported such a bill, the Extreme Risk Protection Order Act ( H.R. 1236 ). In addition, this Committee also ordered reported the Disarm Hate Act ( H.R. 2708 ), which make persons convicted of a misdemeanor hate crime ineligible to receive or possess a firearm or ammunition.\n\n\t\tThe Bipartisan Background Checks Act of 2019 (H.R. 8)\n\nThe Bipartisan Background Checks Act of 2019 ( H.R. 8 ), a \"universal\" background check bill, would expand federal firearms background checks and, hence, recordkeeping requirements under the Gun Control Act of 1968 (GCA; 18 U.S.C. \u00c2\u00a7921 et seq.) to include firearms transfers made in the same state (intrastate) between unlicensed persons. H.R. 8 would essentially prohibit unlicensed persons from transferring a firearm to any other unlicensed person, unless a federally licensed firearms dealer, or FFL, takes possession of such firearm and facilitates such a transaction by running a background check on the unlicensed prospective transferee (buyer).\nH.R. 8 includes exceptions for transfers between immediate family members; U.S. military, law enforcement members, or armed private security professionals in the course of official duties; temporary transfers under circumstances involving an imminent threat of bodily harm or death; and legitimate activities involving target shooting, hunting, trapping, or fishing.\nH.R. 8 would prohibit any implementing regulations that would (1) require FFLs to facilitate private firearms transactions; (2) require unlicensed sellers or buyers to maintain any records with regard to FFL-facilitated background checks; or (3) place a cap on the fee FFLs may charge for facilitating a private firearms transfer. H.R. 8 would also prohibit FFLs from transferring possession of, or title to, any firearm to any unlicensed person, unless the FFL provides notice of the proposed private firearm transfer prohibition under this bill. Further, H.R. 8 would extend a provision of current law that prohibits the DOJ from charging a fee for a NICS background check.\nUnder H.R. 8 , facilitating FFLs would be required to treat firearms to be transferred on behalf of any unlicensed persons as if they were part of their business inventory. Thus, they would be required to comply with the GCA recordkeeping and background check requirements. As part of this process, FFLs would enter the firearm(s) to be exchanged into their bound log of firearms acquisitions and dispositions. The FFLs and unlicensed prospective transferees would then complete and sign a firearms transaction forms (ATF Form 4473) under penalty of law that everything entered onto that form was truthful. FFLs would then initiate a background check on the intending transferee through NICS. And either the FBI NICS Section or a state or local authority\u00e2\u0080\u0094point of contact (POC)\u00e2\u0080\u0094would conduct a background check to determine an intending transferee's firearms eligibility. Such a requirement, if enacted, would close off what some have long characterized as the \"Gun Show loophole.\"\nFor the past two decades, many gun control advocates have viewed the legal circumstances that allow individuals to transfer firearms intrastate among themselves without being subject to the licensing, recordkeeping, and background check requirements of the GCA as a \"loophole\" in the law, particularly within the context of these intrastate, private transactions at gun shows and other public venues or through the internet. Gun control advocates also maintain that expanding background checks to cover intrastate, private-party firearms sales would help stem gun trafficking; that is, the illegal diversion of firearms from legal channels of commerce to the black market, where federal, state, local, tribal, and territorial laws could be evaded. They maintain that prohibited persons or their friends or acquaintances could easily buy a firearm at a gun show, from an online seller, or in a person-to-person \"private\" sale. They also point to studies that suggest that there is moderate evidence that expanded background checks might reduce firearms-related homicides and suicides. Gun control advocates underscore that 20 states and the District of Columbia (DC) currently have laws that require background checks for certain types of firearms transfers not currently covered by federal law. Although these laws vary considerably from state to state, 11 states and DC require background checks for nearly all firearms transfers.\nGun rights advocates contend that intrastate, private transfers are regulated already under federal law, in that it is a felony to transfer a firearm or ammunition knowingly to an underage or prohibited person. They contend further that most criminals would not submit to a background check. They ask, \"Why would anyone submit to a background check unless they believed they were not prohibited and would pass?\" \nMoreover, they argue that making private-party, intrastate transfers subject to the recordkeeping and background check provisions of the GCA could potentially criminalize firearms transfers under circumstances that could be characterized as legitimate and lawful. For example, it has been argued that H.R. 8 might prohibit a person from sharing a firearm with another person while target shooting on one's own property. Although H.R. 8 would provide exceptions for \"temporary transfers\" for target shooting and other related activities, some gun rights advocates argue that such exceptions are too narrow. For example, they argue further that H.R. 8 would prohibit a person from loaning a neighbor a firearm for a hunting trip with a background check being required for both the loan to the neighbor and the return of the firearm to its lawful owner. Perhaps more fundamentally, H.R. 8 would prohibit a person from loaning a firearm to another person\u00e2\u0080\u0094who may be facing some threat of death or serious bodily injury\u00e2\u0080\u0094for self-defense purposes, unless that threat were \"imminent.\" \nGun rights advocates might also see such a measure as a significant step towards a national\u00e2\u0080\u0094albeit decentralized\u00e2\u0080\u0094registry of firearms and firearms owners, since its practical implementation would likely necessitate recordkeeping on such transfers. Such advocates cite an Obama Administration, Department of Justice official who observed that \"universal background checks\" are unenforceable without a comprehensive registry of firearms.\nLegislation to expand federal recordkeeping and background check requirements to cover private, intrastate firearms transfers saw action in the 106 th and 108 th Congresses following the April 20, 1999, Columbine, CO, high school mass shooting; in the 113 th Congress following the December 14, 2012, Newtown, CT, elementary school mass shooting; and in the 114 th Congress following the December 2, 2015, San Bernardino, CA, social services center all-staff meeting and June 12, 2016, Orlando, FL, Pulse night club mass shootings.\nOver time, related legislative proposals have varied in the scope and type of intrastate, private party (nondealer) firearms exchanges between federally unlicensed persons that would fall under their respective background check provisions. Since the 113 th Congress, such proposals fall under two basic types that, respectively, have been labeled as either \"Universal\" or \"Comprehensive\" background check bills. \n\"Comprehensive\" background checks would cover transfers at gun shows and similar public venues (e.g., flea markets and public auctions) and firearms that are advertised via some public fora, including newspaper advertisements and the Internet. \n\"Universal\" background checks would cover private transfers under a much wider set of circumstances (sales, trades, barters, rentals, or loans), with more limited exceptions.\nIn the Senate, from the 113 th Congress forward, the principal sponsors of \"universal\" background check bills have been Senators Charles Schumer, Christopher Murphy, and Richard Blumenthal. The principal sponsors of \"comprehensive\" background check amendments have been Senators Joe Manchin and Pat Toomey. \"Universal\" background check bills were introduced in the House in the 113 th and 114 th Congresses. While Representatives Peter King and Mike Thompson introduced proposals that were similar to Manchin-Toomey \"comprehensive\" background check bills in the past three Congresses, they have sponsored and supported a \"universal\" background check proposal ( H.R. 8 ) in the 116 th Congress. \n\n\t\tEnhanced Background Checks Act of 2019 (H.R. 1112)\n\nThe House-passed Enhanced Background Checks Act of 2019 ( H.R. 1112 ) would revise the GCA background check provision to lengthen the delayed sale period, which is three business days under current law. Under H.R. 1112 , for background checks that do not result in a \"proceed with transfer\" or \"transfer denied,\" the FBI NICS Section and POC state officials would have 10 business days to place a hold on a firearms-related transaction. At the end of 10 business days, the prospective transferee could petition the Attorney General for a final firearms eligibility determination. If the FFL does not receive a final determination within 10 days of the date of the petition, he or she could proceed with the transfer. \nThe timeliness and accuracy of FBI-administered firearms background checks through NICS\u00e2\u0080\u0094particularly with regard to \"delayed proceeds\"\u00e2\u0080\u0094became a matter of controversy following the June 17, 2015, Charleston, SC, mass murder at the Emanuel African Methodist Episcopal Church. The assailant had acquired a handgun from an FFL in the Columbia, SC, area. According to press accounts, the NICS check on the assailant was initiated on April 11, 2015 (a Saturday). The FBI found an arrest record for him, but the arrest record was ambiguous with regard to the arrest's final disposition and the assailant's firearms receipt and possession eligibility. Therefore, the NICS response to the FFL was to delay the transfer for three business days as required under federal law. At his discretion, the FFL made the transfer on April 16, 2015 (a Thursday) as allowed under federal law. According to FBI, the NICS check would have remained active in the NICS examiner's queue for 30 days (until May 11, 2015), and would have remained in an \"active status\" in the NICS system for 88 days (until July 8, 2015). \nAccording to the assailant's arrest record, he had been processed for arrest by the Lexington County, SC, Sheriff's Department, so the FBI contacted the Lexington County court, sheriff's department, and prosecutor's office. The Lexington County Sheriff's Department responded that it did not have a record on the alleged assailant and advised the NICS examiner to contact the City of Columbia, SC, Police Department. However, the NICS examiner contacted the West Columbia, SC, Police Department, because it was listed on the NICS contact sheet for Lexington County. In turn, the West Columbia Police Department responded that it did not have a record on the alleged assailant either. The NICS examiner reportedly focused on Lexington County and missed the fact that the City of Columbia, SC, Police Department was listed as the contact for Richland County, the county in which most of the City of Columbia, SC, is located. Consequently, the NICS examiner did not contact the Columbia, SC, Police Department, the agency that actually held the arrest record for the assailant. \nIf the FBI had ascertained during the 88 days that this person was prohibited, the NICS examiner would have likely contacted the FFL to verify whether a firearms transfer had been made after the three-business-day delay, and then would have notified the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and a firearms retrieval action would have possibly been taken by that agency. In this case, the FBI did not ascertain that the assailant was possibly a prohibited person until after the June 17, 2015, mass shooting. Some gun control advocates have characterized these circumstances as the \"Charleston loophole.\" \nIn addition to the \"Charleston loophole,\" gun control advocates sometimes refer to \"delayed proceeds\" that could result in a possibly prohibited person acquiring a firearm after three business days have expired as \"default proceeds.\" They argue that extending the delayed proceed period would reduce the chance that an otherwise prohibited person might inadvertently be transferred a firearm, a circumstance that would likely necessitate an ATF firearms retrieval action had more time been allotted to complete the background check. \nAccording to data acquired by a gun control advocacy group, about 3.59% of FBI-administered background checks in 2017 were unresolved after a delayed proceed response and the three-business-day window had passed. To this advocacy group, this suggested that a relatively small number of people (310,232) would be affected, and any inconvenience to them would be outweighed by increasing the probability that a prohibited person might be prevented from acquiring a firearm. \nAccording to the FBI, it referred 6,004 \"delayed denial\" cases to the ATF in 2017 that could have possibly resulted in a finding of ineligibility and subsequent firearms retrieval action. In addition, the FBI reported that 4,864 of those cases involved individuals who were possibly prohibited and had probably acquired a firearm.\nGun rights advocates would counter that a large percentage (98.1%) of background checks that resulted in a delayed proceed response involved persons who were not actually ineligible, prompting them to refer to such default proceed responses as \"default infringements.\" They maintain that the \"delayed proceeds\" should be viewed as an indicator of understaffing and incomplete recordkeeping on prohibited persons. Gun rights advocates underscore further that if the overall timeliness and accuracy of FBI background checks were improved, the process would be less likely to inconvenience an otherwise eligible person and, at the same time, less likely to allow a firearm to be transferred to a prohibited person. \nAccording to the GAO, ATF processed 3,933 delayed denials in FY2017. Of those denials, 38 cases were referred to U.S. Attorney's Offices for prosecution. Nine of those cases were federally prosecuted.\n\n\t\tViolence Against Women Reauthorization Act of 2019 (H.R. 1585)\n\nThe House-passed Violence Against Women Reauthorization Act of 2019 ( H.R. 1585 ) includes several provisions that seek to reduce firearms-related intimate partner violence (homicides and injury) by amending federal law to prohibit persons convicted of misdemeanor stalking crimes from receiving or possessing a firearm or ammunition. This bill would also revise provisions related to domestic violence protection orders and a definition of \"intimate partner\" under current law. The bill also includes other provisions related to leveraging state, local, tribal, and territorial resources to increase federal investigations and prosecutions of firearms-related eligibility offenses related to domestic violence and stalking. \nAs discussed earlier, there are nine categories of persons prohibited under current law (18 U.S.C. \u00c2\u00a7922(g)) from receiving or possessing firearms or ammunition (e.g., convicted felons, fugitives from justice, and unlawfully present aliens). Under 18 U.S.C. \u00c2\u00a7922(n), a tenth category of prohibited persons\u00e2\u0080\u0094those under felony indictment\u00e2\u0080\u0094are prohibited from receiving, but not possessing firearms. In addition, under 18 U.S.C. \u00c2\u00a7922(d), it is unlawful for any person to transfer or otherwise dispose of a firearm or ammunition to any person, if the transferor has reasonable cause to believe the transferee would be prohibited under one of those 10 categories. Two of the categories speak directly to domestic violence:\npersons under court-order restraints related to harassing, stalking, or threatening an intimate partner or child of such intimate partner (18 U.S.C. \u00c2\u00a7\u00c2\u00a7922(d)(8) and (g)(8)); and\npersons convicted of a misdemeanor crime of domestic violence (MCDV) (18 U.S.C. \u00c2\u00a7\u00c2\u00a7922(d)(9) and (g)(9)).\n\n\t\t\tQualifying Domestic Violence Protection Order (DVPO)\n\nAccording to ATF, a qualifying DVPO order includes the following elements. The defendant\/respondent must receive actual notice and opportunity to participate in a hearing before a judge, magistrate, or other judicial official. After such hearing, a DVPO may be issued by a criminal or civil court, such as a divorce court, family court, magistrate, or general jurisdiction court. The plaintiff\/petitioner is an \"intimate partner\" of the defendant\/respondent (subject). An intimate partner includes:\n1. a spouse or former spouse of the subject; a person who cohabitates or cohabitated with the subject, who resides or resided in a sexual\/romantic relationship with the subject, or 2. a person with whom the subject has or had a child in common (regardless of whether they ever married or cohabitated). \nA qualifying court order must also restrain the subject from harassing, stalking, or threatening an intimate partner or child of that intimate partner, or engaging in conduct that would place either of them in reasonable fear of bodily injury. There must also be a finding that the subject is a credible threat to the physical safety of the intimate partner or child, or explicitly prohibit the use of physical force. \n\n\t\t\tQualifying Misdemeanor Conviction of Domestic Violence (MCDV)\n\nAccording to ATF, a qualifying misdemeanor conviction of domestic violence (MCDV) must include the following elements. Such offense is a misdemeanor crime under federal, state, or tribal law and involves the use or attempted use of physical force, or the threatened use of a deadly weapon. At the time of the offense, the offender must have been:\n1. A current or former spouse, parent, or guardian of the victim; 2. A person with who the victim shared a child in common; 3. A person who was cohabitating with or had cohabitated with the victim as a spouse, parent, or guardian; or 4. A person who was or had been similarly situated to a spouse, parent, or guardian of the victim.\n\n\t\t\t\"Intimate Partner\" Definition\n\nUnder current law, the term \"intimate partner\" means, with respect to a person, the spouse of the person, a former spouse of the person, an individual who is a parent of a child of the person, and an individual who cohabitates or has cohabitated with the person (18 U.S.C. \u00c2\u00a7921(a)(32)). H.R. 1585 would expand the \"intimate partner\" definition to include\na dating partner or former dating partner (as defined in section 2266 [of Title 18, United States Code]); and\nany other person similarly situated to a spouse who is protected by the domestic or family violence laws of the State or tribal jurisdiction in which the injury occurred or where the victim resides. \nUnder 18 U.S.C. \u00c2\u00a72266(a)(10), the term \"dating partner\" refers to a person who is or has been in a social relationship of a romantic or intimate nature with the abuser; and the existence of such a relationship is based on a consideration of (1) the length of the relationship; (2) the type of relationship; and (3) the frequency of interaction between the persons involved in the relationship.\n\n\t\t\t\"Misdemeanor Crime of Stalking\"\n\nH.R. 1585 would make any person convicted of a \"misdemeanor crime of stalking\" a tenth category of persons prohibited from receiving and possessing a firearm under 18 U.S.C. \u00c2\u00a7922(g). The bill would define such a crime as any misdemeanor stalking offense under federal, state, tribal, or municipal law; and one that in a course of harassment, intimidation, or surveillance of another person, places that person in reasonable fear of material harm to the health or safety of her- or himself, an immediate family member of that person, a household member of that person, or a spouse or intimate partner of that person; or that causes, attempts to cause, or would reasonably be expected to cause emotional distress to any of those persons.\nThe proposed definition is subject to certain mitigating factors. A person would not be considered to have been convicted of a misdemeanor crime of stalking unless (1) the person was represented by counsel in the case, or (2) they knowingly and intelligently waived the right to counsel in the case. In the case of a prosecution for a misdemeanor crime of stalking for which a person was entitled to a jury trial, a person would not be considered convicted in the jurisdiction in which the case was tried, unless (1) the case was tried by a jury; or (2) the person knowingly and intelligently waived the right to have the case tried by a jury, by guilty plea, or otherwise.\n\n\t\t\t\"Protection Orders\" or \"Court-Order Restraints\"\n\nH.R. 1585 would also expand the scope of \"protection orders\" or \"court-order restraints\" under 18 U.S.C. \u00c2\u00a7\u00c2\u00a7922(d)(8) and (g)(8). Under current law these provisions prohibit any person from firearms receipt, possession, or transfer, who is subject to a court order that:\n(A) was issued after a hearing of which such person received actual notice, and at which such person had an opportunity to participate;\n(B) restrains such person from harassing, stalking, or threatening an intimate partner of such person or child of such intimate partner or person, or engaging in other conduct that would place an intimate partner in reasonable fear of bodily injury to the partner or child; and\n(C) includes a finding that such person represents a credible threat to the physical safety of such intimate partner or child; or by its terms explicitly prohibits the use, attempted use, or threatened use of physical force against such intimate partner or child that would reasonably be expected to cause bodily injury.\nH.R. 1585 would substantively amend the domestic violence protection order prohibition (18 U.S.C. \u00c2\u00a7922(g)(8), and \u00c2\u00a7922(d)(8), by reference) to specifically include restraining orders under state, tribal, or territorial law that are issued after an \"ex parte\" hearing, and to expand it to include restraining orders related to \"witness intimidation.\" The legal term \"ex parte\" (\"for one party\") refers generally to court motions, hearings, or orders granted on the request of and for the benefit of one party only without the respondent\/defendant being present. H.R. 1585 would add the following at the end of 18 U.S.C. \u00c2\u00a7922(g)(8)(A):\nin the case of an ex parte order, relative to which notice and opportunity to be heard are provided\u00e2\u0080\u0094(I) within the time required by State, tribal, or territorial law; and (II) in any event within a reasonable time after the order is issued, sufficient to protect the due process rights of the person.\nNotwithstanding the reference to \"due process\" in the amending language, this language could potentially generate considerable debate about the balance between due process and public safety. In addition, at the end of clause 18 U.S.C. \u00c2\u00a7922(g)(8)(B), it would add, \"intimidating or dissuading a witness from testifying in court,\" which may appear less controversial, but critics might argue that such language has little to do with domestic violence.\nAs discussed in the body of this report, Congress has passed legislation to encourage states to make DVPO and MCDV records accessible promptly to NICS. Progress has been made, but many state, tribal, and territorial authorities still find such reporting challenging, if not daunting. Gun control advocates, meanwhile, have argued that the definition of \"intimate partner\" ought to be expanded under the DVPO and MCDV definitions of \"intimate partner\" to include current and former dating partners, as well as persons convicted of misdemeanor stalking offenses. Expanding the grounds for firearms transfer or receipt and possession ineligibility is one avenue along which intimate partner gun violence could be addressed, perhaps effectively, but such an expansion could also strain ongoing federal-state efforts to ensure that prohibiting records under current law are accurate and reported to NICS in a timely manner in order to be accessible electronically during background checks.\nAppendix A. FBI and POC Firearms-Related Background Checks Pursuant to the Brady Act\nFBI NICS Section Checks and Denials, November 30, 1998, Through 2018\nAs Table A-1 shows, from November 30, 1998, through 2018, the FBI CJIS Division's NICS Section conducted 128.7 million background checks, resulting in nearly 1.6 million denials, for an overall initial denial rate of 1.2%. About 2.7% of those denials were appealed and eventually overturned.\n Table A-2 shows FBI NICS Section denials by prohibiting category. Over the 20-year and one month period (November 30, 1998, through 2018) that NICS has been in operation, over half of FBI firearms transfer denials were based on a prior felony conviction. For 2018, by comparison, a smaller percentage (45.1%) were based on a felony conviction. This percentage decrease can be attributed to at least two factors. One, over time, persons with past felony convictions could be less likely to risk a background check through NICS. Two, since the establishment of NICS, state and local government submissions of prohibiting records\u00e2\u0080\u0094particularly those related to mental incompentency\u00e2\u0080\u0094have increased. As shown in Table A-2 , such records accounted for 2.5% of denials over the 20-year period, but accounted for 6.1% of denials for 2018. \nAs discussed below, Congress prioritized such reporting as part of the NICS Improvement Amendments Act of 2007 ( P.L. 110-180 ), in the aftermath of the April 20, 2007, VA Tech mass shooting. Ten years later, Congress passed the Fix NICS Act of 2017 in an effort to strengthen and streamline provisions previously enacted under P.L. 110-180 , and authorize future appropriations for grant and other programs designed to assist state, tribes, and territories with improving the quality of prohibiting records and increasing their accessibility to NICS ( P.L. 115-141 , Div. S, Title VI).\nState and Local POC Background Checks and Denials, November 30, 1998, Through 2015\nAs shown in the Table A-3 below, the Bureau of Justice Statistics (BJS) has reported that state and local POC agencies conducted nearly 81.7 million background checks from November 30, 1998, through 2015 for firearms transfers and permits. These checks resulted in nearly 1.46 million denials, for an overall denial rate of 1.8%, according to BJS. Over the same time period, the FBI NICS Section processed 102.4 background checks, resulting in 1.27 million denials of firearms transfers, for an overall denial rate of 1.2%.\nBJS also reports on the reasons (prohibitors) for some, but not all, state and local POC denials. For example, as shown in Table A-3 , while state and local POCs made 119,368 denials for firearms transfers and permits in 2015, BJS reported the reason for 84,199 (70.5%) of such denials. Similarly, state and local POCs made 102,468 denials in 2014, but BJS reported the reason for 57,001 (55.6%) of them.\nIn addition, over the years, BJS sometimes reported for both state and local POC agencies, and in other years only for state POC agencies. Moreover, BJS's methodology for making estimates about state and local POC background checks and denials over the years has been revised. Notwithstanding these data limitations, Table A-4 shows the BJS-reported reasons for some, but not all denials made by state and local POCs for 2014 and 2015.\nLooking at the data in Table A-4 , it is notable that there either appears to be no denials based upon dishonorable discharges or renounced U.S. citizenship, or such denials were not estimated by BJS based on data submitted by state and local POC agencies. In addition, the percentages of felony conviction denials for either year, 2014 or 2015, are roughly half of the percentages of federal denials made by the FBI NICS Section. As a percentage of the total, it could be that these percentages are based on incomplete data and, therefore, are not particularly comparable with the percentages for federal denials, which are based on complete data.\nAppendix B. NICS-Queried Computer Systems and Files\nAs part of a NICS check, the transferee's information is crosschecked against three computerized databases\/systems to determine firearms transfer and possession eligibility. Those systems are the Interstate Identification Index (III), the National Crime Information Center (NCIC), and the NICS Indices. If prospective transferees indicate that they are non-U.S. citizens, then their information is also checked against the immigration and naturalization databases maintained by the Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE).\nInterstate Identification Index (III)\nThe III, or \"Triple I,\" is a computerized criminal history index pointer system that the FBI maintains so that records on persons arrested and convicted of felonies and serious misdemeanors at either the federal or state level can be shared nationally. This criminal history records exchange system includes arrest and disposition information on individuals charged with felonies and certain misdemeanors. Felony crimes generally include any offense that is punishable by a term of imprisonment exceeding one year. Under state law, there are misdemeanor crimes that are punishable by a term of imprisonment exceeding two years, which are also shared nationally through the III. By virtue of this record sharing, other information accessible through III also includes records on persons under felony indictment, fugitives from justice, persons found not guilty by reason of insanity or adjudicated incompetent to stand trial, persons convicted of misdemeanor crimes of domestic violence, and persons subject to domestic violence protection orders. All records in III are supported by fingerprint records which are exchanged through the Interstate Automated Fingerprint Identification System (IAFIS), though NICS checks do not entail fingerprint-based background checks under current law.\nNational Crime Information Center (NCIC)\nThe NCIC is a database of documented criminal justice information that is made available to law enforcement and authorized agencies, with the goal of assisting law enforcement in apprehending fugitives, finding missing persons, locating stolen property, and further protecting law enforcement personnel and the public. NCIC includes 21 files, 10 of which are queried by NICS. Those 10 NCIC files include\nWanted Persons;\nProtection Orders;\nImmigration Violators;\nProtective Interest;\nForeign Fugitive;\nSupervised Release;\nNational Sex Offender Registry;\nGang File; \nKnown\/Appropriately Suspected Terrorist (KST); and\nViolent Person.\nNICS Indices\nThe NICS Indices contain records of persons prohibited from receiving or possessing firearms under federal, state, local, tribal, or territorial law that are not shared nationally in either the III or NCIC. Those records include\nfelony arrest and disposition records (not included in the III);\nfelony indictments;\nfugitives from justice;\naddicts and other unlawful users of controlled substances;\ninvoluntary commitments to mental institutions and other related adjudications;\nillegal or unlawful aliens;\ndishonorable discharges;\nrenunciations of U.S. citizenship;\ndomestic violence protection orders;\ndomestic violence misdemeanor convictions;\nprevious NICS denials under state laws (by POCs); and\nprevious NICS denials made federally (by NICS Section).\nAppendix C. ATF-Certified Permanent Brady Permits\nAppendix D. ATF-Certified State Relief from Disabilities Statutes","output":null}
{"id":"crs_R46237","pid":"crs_R46237_0","input":"\t1. What is a \"census\"?\n\nA census, as distinguished from a survey, is intended to be a complete count of the population. A scientifically designed and conducted survey covers a sample of the population, and the results are generalizable to the whole population. \n\n\t2. Why is a census necessary?\n\nThe U.S. decennial census is, foremost, a constitutional requirement. The Enumeration Clause of the Constitution (Article I, Section 2, clause 3, as modified by Section 2 of the Fourteenth Amendment) mandates \"counting the whole number of persons in each State\" every 10 years in order to apportion seats in the House of Representatives. The first census occurred in 1790; 2020 marks the 24 th time the national count has taken place.\nThe modern census is important for more than House apportionment. Decennial census data are used for within-state redistricting\u00e2\u0080\u0094the redrawing of legislative districts. Decennial census and related data are used in certain formulas that determine states' and localities' annual allocations of federal funds, estimated by the Census Bureau as of FY2015 at $689.3 billion and by an academic researcher as of FY2017 at $1.5 trillion. The decennial counts also are the foundation for estimates of current population size between censuses and projections of future size. Businesses, nonprofit organizations, researchers, and all levels of government are steady consumers of decennial and related data collected by the Census Bureau.\n\n\t3. When will the census happen?\n\nApril 1, 2020, is the official Census Day. The count starts before, and census activities continue beyond, April 1, however. On January 21, 2020, the Census Bureau began the enumeration by counting the population in remote Toksook Bay, Alaska. The bureau is to start making in-person visits to nonrespondents in May 2020. By law, the bureau must provide the official numbers for House apportionment to the President no later than December 31, 2020. Also by law, states that requested 2020 population counts for, as examples, American Indian areas, counties, cities, towns, census tracts, census block groups, census blocks, and \"state-specified congressional, legislative, and voting districts,\" must receive the data no later than March 31, 2021. The final design of the file containing these data remains to be specified, but the file will include data on \"voting age, race, ethnicity, occupancy status, and (new for the 2020 Census) group quarters.\" The rollout of other census products is scheduled to continue until 2023.\n\n\t4. What has the Census Bureau done to promote awareness of the census and build support for it?\n\n\t\tThe Census Barriers, Attitudes, and Motivators Study\n\nThe Census Bureau has researched ways to engage the people who likely will be hardest to count in 2020. For example, the Census Barriers, Attitudes, and Motivators Study (CBAMS), also called the \"2020 Census Planning Survey,\" was conducted from February 20 through April 17, 2018, with a nationwide sample of 50,000 households. It covered, according to the bureau, \"a range of topics related to census participation and completion.\" Respondents could complete the survey in English or Spanish, online or by mail. \"Approximately 17,500 people responded to the survey, which was then weighted to be representative of all householders in the United States ages 18 and older.\" The bureau focused on differences in responses \"across race, age, gender, education, and country of birth.\" Qualitative information gathered from 42 focus groups in 14 locations nationwide from March 14, 2018, through April 19, 2018, supplemented the survey results. The bureau reported that the use of focus groups was \"designed to help the research team understand the attitudes of small demographic groups or groups that were otherwise difficult to reach with the survey.\" The \"chief barrier\" to 2020 census participation identified in the survey and the focus groups was \"a lack of understanding of the purpose and process of the census.\" The focus groups showed this lack to be \"associated with several negative attitudes toward the census, including apathy, privacy concerns, fear of repercussions, and general distrust of government.\" The survey results indicated that \"certain demographic characteristics, including low levels of education, being young, and being of racial or ethnic minority groups,\" were related to \"low levels of intent\" to respond to the 2020 census. The survey and the qualitative findings, however, \"revealed common motivators\" for answering the census. Despite \"important differences\" among demographic groups, \"funding for public services\u00e2\u0080\u0094such as hospitals, schools, and roads\u00e2\u0080\u0094is a key motivator across groups.\" The bureau observed that respondents resembling the people in the focus groups, especially, might understand \"the importance and purpose of the census if they make the connection between completing a census form and the possibility of an increase in funding or support\" for their communities.\n\n\t\tCommunications Strategy\n\nThe bureau used information such as gained from CBAMS to inform its $500 million communications strategy, developed by the bureau and its communications contractor, VMLY&R.\n\n\t\t\tAdvertising\n\nAs the bureau has explained, VMLY&R includes \"multicultural advertising agencies, seasoned in reaching diverse audiences.\" An advertising campaign \"in English and 12 other languages\" will be part of the communications strategy. The languages are Arabic, Chinese (Mandarin and Cantonese), French, Haitian Creole, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Tagalog, and Vietnamese. As discussed under question 11, below, online questionnaires are to be available in the same languages. The bureau's schedule calls for paid advertising to begin running in January 2020, \"across multiple platforms, including print and digital outlets, television and radio, billboards,\" and ads \"at transit stations, grocery stores, and movie theaters.\" The two largest shares of the total paid media campaign budget are 39.0% for television and 29.1% for digital media. The campaign is expected to reach \"99% of all households\" nationwide, \"particularly in multicultural and hard-to-count populations.\"\n\n\t\t\tThe Partnership Program\n\nAnother part of the communications strategy is the partnership program, which, in the bureau's explanation, \"integrates two essential programs.\" The Community Partnership Engagement Program \"employs the strengths of tribal, state, and local governments, as well as community-based organizations, faith-based organizations, schools, media, businesses, social services, ethnic organizations, and others.\" Much of the community partnership work is being \"conducted by partnership specialists who are employed in the field leading up to and during\" the census. The National Partnership Program \"builds and strengthens relationships with businesses, industries and organizations with national reach.\" The two programs \"are intended to be complementary\" and draw on \"the expertise of various Census Bureau employees to help maximize\" census participation.\nThe community partnership effort has, among other goals, the formation of Complete Count Committees (CCCs) in all 50 states, tribal areas, the District of Columbia, Puerto Rico, and cities with at least 200,000 residents. A CCC, according to the Census Bureau, comprises \"a broad spectrum of government and community leaders from education, business, healthcare,\" and other organizations. CCC members are to develop census awareness and encourage cooperation with the census \"based upon their knowledge of the local community.\" Still being formed, CCCs are \"identifying budget resources and establishing local work plans\" for implementation in 2020. The bureau has compiled and posted on its website a guide for those interested in forming CCCs and an alphabetized list of existing committees, with any available contact information.\nAn additional component of the partnership program is Statistics in Schools, which, in general, promotes statistical literacy for students from kindergarten through high school and, specifically, explains to students why the census is important. One goal is for students to bring this message home. A related goal is to make school-age children and the adults in their households aware of the need to count all children in a household, being sure not to miss any babies or other children under age five. They sometimes can be erroneously omitted from the list of household residents, as has happened in past censuses.\n\n\t\tThe Response Outreach Area Mapper\n\nThe Census Bureau has developed an application, the Response Outreach Area Mapper (ROAM), to facilitate identifying hard-to-count areas and provide socioeconomic and demographic profiles of these areas using American Community Survey (ACS) estimates. ROAM has helped the bureau, in its words, \"create a tailored communications and partnership campaign\" and inform \"outreach activities and hiring practices across the country,\" in order to hire \"an adequate number of staff and staff with the necessary language skills for a given area.\" One advantage of ROAM for census partners is that they can use it to identify specific areas most needing their attention.\n\n\t5. How and when will people know that the census is underway?\n\nAs the Census Bureau has explained, it will let most people know by mail. In March 2020, about 95% of U.S. households are to receive mailed \"invitations\" from the bureau to answer the census online. A household that does not respond is to receive reminders in the mail, then, in April, a paper questionnaire to complete. Almost 5% of households\u00e2\u0080\u0094including those who receive their mail at post office boxes and those recently displaced by natural disasters\u00e2\u0080\u0094are to have an invitation delivered by census workers. Not quite 1% of households are to be enumerated in person during the initial phase of the census. These households are in remote areas, like parts of Alaska and northern Maine and certain American Indian areas that have asked to be counted in person.\n\n\t6. What questions will the census ask?\n\nThe census form asks for the following basic information: the number of people living or staying in the respondent's home as of April 1, 2020; whether any additional people living or staying in the home were not counted; whether anyone in the home usually lives or stays somewhere else; whether the home is owned, with or without a mortgage, or rented; the respondent's telephone number (in case the Census Bureau needs to contact the person to clarify any responses); the name of each person in the household and the person's relationship to the respondent; each person's sex; the person's age and birthdate; whether the person is \"of Hispanic, Latino, or Spanish origin\"; and the person's race. The bureau has emphasized that the census never asks a person for his or her Social Security number or bank or credit card account information, for any \"money or donations,\" or for \"anything on behalf of a political party.\" A form purporting to be a census form that requests such information is not from the Census Bureau and is not legitimate.\n\n\t7. Some people expected the census form to include a Middle Eastern or North African (MENA) racial or ethnic category. Why\u00c2 doesn't it?\n\nThe Census Bureau announced on January 26, 2018, that the form would not have a separate MENA category. A study the bureau released in 2017 noted that the \"inclusion of a MENA category\" in the 2015 National Content Test helped MENA respondents \"more accurately report their MENA identities\" and characterized the use of this category as \"optimal.\" Later feedback, however, reportedly indicated the opinion of \"a large segment\" of the MENA population \"that MENA should be treated as a category not for race but ethnicity,\" which \"the bureau so far has not specifically tested.\" People of MENA background may continue to report themselves as \"White.\" Two examples of \"White\" shown on the census form are Lebanese and Egyptian, both in the MENA category. The current Office of Management and Budget standards for federal reporting of race and ethnicity, which apply to the Census Bureau, designate \"White\" as \"A person having origins in any of the original peoples of Europe, the Middle East, or North Africa.\"\n\n\t8. The census form does not have a question about citizenship, despite the widespread public perception that it might. What happened?\n\nThe 2020 census will collect only the basic data described under question 6, above. It will not ask people for detailed social, demographic, economic, or housing information, including about their legal, immigration, or citizenship status. A citizenship question was proposed, challenged, and ultimately not retained on the census form.\nSecretary of Commerce Wilbur Ross announced on March 26, 2018, that the 2020 census form would include the current American Community Survey question on citizenship. The question is, as it has been in the ACS since before 2010, \"Is this person a citizen of the United States?\" A checkbox appears beside each of the following possible answers: \"Yes, born in the United States\"; \"Yes, born in Puerto Rico, Guam, the U.S. Virgin Islands, or Northern Marianas\"; \"Yes, born abroad of U.S. citizen parent or parents\"; \"Yes, U.S. citizen by naturalization\u00e2\u0080\u0094Print year of naturalization\"; and \"No, not a U.S. citizen.\"\nThe Department of Justice maintained that the census, not a survey like the ACS, was \"the most appropriate vehicle for collecting\" citizenship data \"critical to the Department's enforcement of Section 2 of the Voting Rights Act\" and its \"protections against racial discrimination in voting.\"\nOpponents of the citizenship question expressed concern that it might depress immigrants' census response rates or cause them to falsify data, especially if their status in the United States, or that of their friends or families, was illegal. Census Bureau fieldworkers in 2017 noted heightened anxiety about data confidentiality among certain foreign-born respondents and reluctance to answer questions, particularly about citizenship status. Six former bureau directors signed a January 26, 2018, letter to Secretary Ross, opposing the late-date introduction of a citizenship question that, at the time, had not been tested for the 2020 census.\nMultiple lawsuits were filed to block the question. Judge Jesse Furman, U.S. District Court for the Southern District of New York, ruled on July 26, 2018, that a consolidated suit by the State of New York and others could proceed. The U.S. Supreme Court heard the case as Department of Commerce et al. v. New York et al. on April 23, 2019. The Court's decision, written by Chief Justice John Roberts and issued on June 27, 2019, found that the addition of a citizenship question did not violate the Enumeration Clause of the Constitution or the Census Act (Title 13, U.S. Code , Census ), but the Court held that Secretary Ross's decision violated the Administrative Procedure Act because his sole stated reason for adding the citizenship question was not the real reason for his decision. On July 11, 2019, the President issued an executive order stating that the ruling had \"made it impossible, as a practical matter, to include a citizenship question on the 2020 decennial census questionnaire.\" The order, instead, directed \"all executive departments and agencies\" to give the department \"the maximum assistance permissible, consistent with law, in determining the number of citizens and non-citizens in the country, including by providing any access\" requested by the department to relevant administrative records. This action, the order continued, \"will ensure that the Department will have access to all available records in time for use in conjunction with the census.\" On September 13, 2019, the organization LUPE and others filed a suit in the U.S. District Court for the District of Maryland against the Commerce Secretary, the Director of the Census Bureau, the Commerce Department, and the Census Bureau, seeking to block implementation of the executive order. The outcome of the suit remains to be determined.\n\n\t9. Where are all the detailed socioeconomic and housing questions that some people say the census asks?\n\nThe American Community Survey is occasionally confused with the decennial census. In past decades, through the 2000 census, the census consisted of a short form, with questions that applied to all U.S. residents, and a long form, which included the short form questions plus many more questions covering social, demographic, economic, and housing topics. The long form went to a representative sample of all U.S. residents, a 17% sample in 2000, and the results could be generalized to the whole resident population. The bureau discontinued the long form after 2000 and launched its replacement, the ACS, in 2005 and 2006. The bureau considers the ACS a part of the decennial census program but conducts it separately from the census. Although the census is administered once a decade, the ACS goes to a small sample of the population every month and, as did the long form, collects myriad data. ACS results are aggregated over time to produce one-year and five-year estimates. For the most populous areas, those with at least 65,000 people, sample data collected over just 12 months can be generalized to an area's whole population. For less populous areas, down to below 20,000 people, data have to be collected over five years to generate representative samples. All areas, however, receive new sets of estimates (either one-year or five-year estimates) every year.\n\n\t10. What options will people have for responding?\n\nIn 2020, for the first time, people will be able to answer the census online. Some people have heard or assumed that because they can answer online, they must answer online or the census will miss them. This concern is based on inaccurate perceptions. The bureau is emphasizing online responses because they can be quick and easy and because they can help control the cost of the census. Anyone who lacks internet access or simply prefers not to respond online, however, can fill out a paper questionnaire. People also will be able to submit their census answers by telephone, by calling Census Questionnaire Assistance centers.\n\n\t11. How can people answer the census if they are not proficient in English or need language support?\n\nThe Census Bureau will make the 2020 census questionnaire available online in 12 non-English languages: Arabic, Chinese (Mandarin and Cantonese), French, Haitian Creole, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Tagalog, and Vietnamese. The bureau will provide Census Questionnaire Assistance in the same languages and through a telecommunications device for the deaf. In addition, the bureau will make field enumeration materials available in Spanish and will provide bilingual (English and Spanish) paper questionnaires and related mailings. It also will provide language guides, language glossaries, and language identification cards in 59 non-English languages. The language guides will be available in video and print, including large print, and braille, as well as American Sign Language.\n\n\t12. Can people ignore the census or refuse to answer it if they\u00c2 wish?\n\nRefusing or willfully neglecting to answer the census is illegal. Title 13, U.S. Code , Section 141, \"Population and other census information,\" specifies that a decennial census is to be conducted. Section 221, \"Refusal or neglect to answer questions; false answers,\" states, in full\n(a) Whoever, being over eighteen years of age, refuses or willfully neglects, when requested by the Secretary, or by any other authorized officer or employee of the Department of Commerce or bureau or agency thereof acting under the instructions of the Secretary or authorized officer, to answer, to the best of his knowledge, any of the questions on any schedule submitted to him in connection with any census or survey provided for by subchapters I, II, IV, and V of chapter 5 of this title, applying to himself or to the family to which he belongs or is related, or to the farm or farms of which he or his family is the occupant, shall be fined not more than $100.\n(b) Whoever, when answering questions described in subsection (a) of this section, and under the conditions or circumstances described in such subsection, willfully gives any answer that is false, shall be fined not more than $500.\n(c) Not withstanding any other provision of this title, no person shall be compelled to disclose information relative to his religious beliefs or to membership in a religious body.\nTitle 18, U.S. Code , Crimes and Criminal Procedure , Sections 3559 \"Sentencing Classification of Offenses,\" and 3571, \"Sentence of Fine,\" effectively update the penalties for certain broad classes of offenses, without any specific mention of the census. Under this title and these sections, the possible penalty for the type of offense constituted by refusing or willfully neglecting to answer the census (13 U.S.C. 221(a)) is a fine of not more than $5,000. The possible penalty for providing any false census answer (13 U.S.C. 221(b)) is also $5,000.\n\n\t13. Some people say that they filled out a census form in 2018 or 2019. Do they still have to answer the 2020 census?\n\nYes. The Census Bureau did conduct limited 2020 census tests in 2018 and 2019. The 2018 test was the so-called dress rehearsal for the 2020 census, which the bureau described as \"the last operational field test\" before the actual census. The test was designed to \"assess the readiness and integration of planned\" 2020 \"operations, procedures, systems and field infrastructure.\" It began in 2017 with address canvassing (explained under question 14. How will the Census Bureau know where people live so that it can contact them in 2020? , below) in Bluefield-Beckley-Oak Hill, West Virginia; Pierce County, Washington; and Providence County, Rhode Island. The enumeration phase of the test occurred in 2018 in Providence County only. As the bureau marked the \"successful completion\" of the test, a bureau official noted that work would continue through 2019 \"to refine and scale\" census systems \"to ensure the best possible performance\" in 2020. In 2019, the bureau selected a nationally representative sample of about 480,000 housing unit addresses to test how a proposed citizenship question might affect census response rates. The test did not involve nonresponse follow-up in the field. Although respondents' cooperation with these tests was helpful to the Census Bureau, the tests were not the actual decennial census. The 2020 census, the complete count of the U.S. resident population, is to occur only in 2020. Even if a person participated in a census test, the person still is obligated to answer the 2020 census questions and can be part of the census count only by doing so.\n\n\t14. How will the Census Bureau know where people live so that it can contact them in 2020?\n\nEven though people will be able to answer the census online, an accurate Master Address File, with the addresses, geocodes, and other attributes of living quarters, will be, as in past decades, the foundation for contacting the public and conducting a good census. It will enable the bureau to notify the public about the census and, as necessary, send census forms and enumerators to nonresponding households. For the 2010 census, the bureau hired about 150,000 \"address canvassers\" to walk 11 million census blocks, updating addresses and maps as they went. In preparation for 2020, the bureau created Block Assessment, Research, and Classification Application software to compare satellite images of the United States at successive times. Using this software, the bureau could identify new housing developments, changes in existing houses, and other houses that were built after 2010. The bureau could compare, too, \"the number of housing units in current imagery with the number of addresses on file for each block.\" Satellite imagery enabled the bureau to verify 65% of addresses without going into the field, leaving 35% for field verification. The bureau recruited and trained about 32,000 temporary workers to verify more than 50,000 addresses nationwide, covering about 1.1 million census blocks. On August 12, 2019, the bureau announced the start of this work, the first major field operation of the 2020 census. The operation ended on October 11, 2019.\n\n\t15. What other census jobs are still available?\n\nThe bureau expects to hire up to 500,000 temporary census field workers. Enumerators for the nonresponse follow-up operation, beginning in May 2020 and continuing through early July, are the main example. They will go door-to-door, collecting data from households that have not yet answered the census online, by mail, or by phone. Additionally, in certain remote areas, such as northern Maine and Alaska, visits from census-takers may be the only way for residents to report their census data.\n\n\t16. Who can apply for these jobs, and when?\n\nAccording to a bureau official, \"Recent high school graduates, veterans, retirees, military spouses, seasonal workers,\" and people who are bilingual are \"highly encouraged to apply.\" Others are welcome, too. \"It's important we hire people in every community in order to have a complete and accurate census,\" the official said. People are encouraged to apply now to be considered for positions in the spring of 2020. Recruitment has begun; paid training is to occur in March and April.\n\n\t17. What are the requirements for temporary census workers?\n\nTo qualify for temporary census employment, a person must be at least age 18, generally must be a U.S. citizen, must be proficient in English, must have a valid email address, and must complete an application that includes the applicant's Social Security number and answers to a set of assessment questions. For some positions, the applicant has to fill out a background questionnaire. Applicants must be fingerprinted, and their fingerprint images will go to the FBI to be processed and checked for criminal records, although a criminal record will not invariably disqualify an applicant.\n\n\t18. What are the benefits of being a temporary census worker?\n\nPay rates, which will vary according to where census jobs are located, will range from $13.50 to $30.00 an hour. Workers will receive paid training. They will be paid weekly, and their hours of work will be flexible. Veterans may be eligible for veterans' preference in hiring, and census employment has no upper age limit.\n\n\t19. How can the public know that authorized census workers, not impostors or criminals, are in their neighborhoods and knocking on their doors?\n\nEvery census field worker should have an identification badge (ID) that shows the worker's photograph, an expiration date for the ID, and a U.S. Department of Commerce watermark. Every respondent can check this identification and, if unsure about its authenticity, contact a regional census center to talk to a bureau representative.\n\n\t20. The census form asks people to report sensitive personal information. How can they be sure that the confidentiality of these data will be protected?\n\nLegal protections for census data exist, and the Census Bureau also continues working to address cybersecurity vulnerabilities that have been, or are being, identified.\n\n\t\tLegal Protections\n\nTitle 13, U.S. Code , both requires respondents to provide their data and provides for maintaining the confidentiality of data on individuals.\nTitle 13, Section 9, \"Information as confidential; exception,\" states, in part\n(a) Neither the Secretary, nor any other officer of employee of the Department of Commerce or bureau or agency thereof, or local government census liaison, may, except as provided in section 8 or 16 or chapter 10 of this title or section 210 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998 or section 2(f) of the Census of Agriculture Act of 1997\u00e2\u0080\u0094\n(1) use the information furnished under the provisions of this title for any purpose other than the statistical purposes for which it is supplied; or\n(2) make any publication whereby the data furnished by any particular establishment or individual under this title can be identified; or\n(3) permit anyone other than the sworn officers and employees of the Department or bureau or agency thereof to examine the individual reports.\nNo department, bureau, agency, officer, or employee of the Government, except the Secretary in carrying out the purposes of this title, shall require, for any reason, copies of census reports which have been retained by any such establishment or individual. Copies of census reports which have been so retained shall be immune from legal process, and shall not, without the consent of the individual or establishment concerned, be admitted as evidence or used for any purpose in any action, suit, or other judicial or administrative proceeding.\nTitle 13, Section 214, \"Wrongful Disclosure of Information,\" states, in full\nWhoever, being or having been an employee or staff member referred to in subchapter II of chapter 1 of this title, having taken and subscribed to the oath of office, or having sworn to observe the limitations imposed by section 9 of this title, or whoever, being or having been a census liaison within the meaning of section 16 of this title, publishes or communicates any information, the disclosure of which is prohibited under the provisions of section 9 of this title, and which comes into his possession by reason of his being employed (or otherwise providing services) under the provisions of this title, shall be fined not more than $5,000 or imprisoned not more than 5 years, or both.\nUnder Title 18, Sections 3559 and 3571, the possible penalty for disclosing \"any information, the disclosure of which is prohibited\" (13 U.S.C. 214) is a substantially increased fine of not more than $250,000 or imprisonment of less than five years, or both.\n\n\t\tCybersecurity\n\nThe Census Bureau's operational plan has acknowledged the risk that \"cybersecurity incidents,\" including data breaches and denial-of-service attacks, could affect its information technology (IT) systems, such as the online census questionnaires, \"mobile devices used for fieldwork, and data processing and storage systems.\" Under the plan, \"IT security controls will be put in place to protect the confidentiality, integrity, and availability of the IT systems and data,\" with the goal of preventing any such incidents from negatively affecting census operations.\nAt a July 24, 2019, congressional hearing, Census Bureau Director Steven Dillingham summarized the bureau's cybersecurity efforts for the 2020 census. He stated, in part\nA key feature of the security is encryption of data at every stage\u00e2\u0080\u0094in transit over the internet, at rest within our systems, and on the enumeration devices. Also, enumeration devices are secured with multiple credentials, and if a device is lost, it will be remotely disabled and have all its contents wiped.\nOur cybersecurity program is designed to adapt and respond to a changing threat landscape. We incorporate protections in our technology, have processes to continuously monitor systems, and have a team ready to respond immediately to any potential threat.\nThe Census Bureau works with the Department of Homeland Security, the federal intelligence community, and industry experts to share threat intelligence, giving us the most visibility possible to enable immediate action to protect data. With this cooperation, we identify threats early so that we may proactively respond and improve security.\nOur developers and security engineers work together to integrate security into systems design and development. Our systems are independently assessed for cybersecurity before deployment, and ongoing testing of cybersecurity capabilities is conducted throughout the time systems are operational.\nSecurity staff monitor our systems for cybersecurity vulnerabilities with industry-leading tools. We continuously test for more than 100,000 known vulnerabilities, with thousands of new potential vulnerabilities added to the list on a regular basis. If a vulnerability is identified, or security enhancement required, the security team will act quickly to ensure the most effective security posture.\nAt the same hearing, the Government Accountability Office (GAO) noted delays or gaps in the bureau's progress toward cybersecurity for 2020:\nThe Bureau has established a risk management framework that requires it to conduct a full security assessment for nearly all the systems expected to be used for the 2020 Census and, if deficiencies are identified, to determine the corrective actions needed to remediate those deficiencies. As of the end of May 2019, the Bureau had over 330 corrective actions from its security assessments that needed to be addressed, including 217 that were considered \"high-risk\" or \"very high-risk.\" However, of these 217 corrective actions, the Bureau identified 104 as being delayed. Further, 74 of the 104 were delayed by 60 or more days. According to the Bureau, these corrective actions were delayed due to technical challenges or resource constraints. GAO recently recommended that the Bureau take steps to ensure that identified corrective actions for cybersecurity weaknesses are implemented within prescribed time frames.\nGAO commended the bureau for working with the Department of Homeland Security (DHS) \"to support\" its \"cybersecurity efforts.\" During the past two years,\nas a result of these activities, the Bureau has received 42 recommendations from DHS to improve its cybersecurity posture. GAO recently recommended that the Bureau implement a formal process for tracking and executing appropriate corrective actions to remediate cybersecurity findings identified by DHS. Implementing the recommendation would help better ensure that DHS's efforts result in improvements to the Bureau's cybersecurity posture.\nThe GAO testimony also called attention to a Commerce Department Office of Inspector General (IG) report identifying challenges in the bureau's \"cloud based systems\" supporting the census. The bureau \"agreed with all eight\" of the IG's recommendations concerning these systems and \"identified actions taken to address them.\"\nIn addition, recognizing that \"many of the same digital and social channels\" being used to promote the census can work against it as well, the bureau established a \"trust and safety team\" to combat \"the spread of misinformation (incorrect information spread unintentionally) and disinformation (incorrect information spread intentionally).\" According to the bureau, the team comprises \"more than a dozen communications and social media experts under the executive leadership of career senior officials.\" It is coordinating the bureau's \"efforts with external technology and social media platforms, partner and stakeholder organizations, and cybersecurity officials.\" Drawing on \"best practices from the public and private sectors,\" the team is monitoring \"all available channels and open platforms for misinformation and disinformation about the census.\" The bureau also has launched a \"Fighting 2020 Census Rumors\" page on its website and has asked members of the public to email [email address scrubbed] if they see any \"resources,\" social media postings, or websites that they think contain incorrect information about the census.\nNoteworthy in this context is a December 19, 2019, press report of an announcement by the social media company Facebook that, starting in 2020, it \"will remove posts, photos,\" and other contents \"that mislead people\" about the census, \"aiming to prevent malicious actors from interfering\" with the process. \"Under the new rules, Facebook will ban posts from misrepresenting when and how the census occurs, who can participate and what happens to the personal information people submit to the government, company executives said.\" According to the article, \"Facebook and other tech giants, including Google and Twitter, have huddled with government officials in recent months to prevent census disinformation.\" Other companies \"have unveiled their own defensive measures: Google in December said it prohibited ads and YouTube videos that aim to misinform about the 2020 count. Twitter's rules, meanwhile, prohibit 'misleading information about how to participate in an election or other civic event',\" which presumably could include the census.","output":null}
{"id":"gao_GAO-20-535","pid":"gao_GAO-20-535_0","input":"\tBackground\n\n\t\tInternet Service Types and Technologies\n\nConsumers receive broadband service from telephone, cable, mobile,  satellite, and utility companies that own and operate the  telecommunications infrastructure. Fixed technologies, like cable or fiber,  can provide broadband to single locations like customers\u2019 homes or  businesses. Mobile technologies provide internet access wherever a  customer has access to a signal. Customers connect to a mobile wireless  network through a mobile device, such as a smartphone. Internet service  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,  is commonly referred to as \u201cbroadband.\u201d FCC\u2019s benchmark speed for  what constitutes \u201cadvanced telecommunications capability,\u201d a subset of  broadband, has increased over time as consumers use the internet for an  expanding range of purposes that requires faster speeds. In 2015, FCC  set a benchmark speed for fixed advanced telecommunications capability  to 25 megabits per second when downloading and 3 megabits per second  when uploading (25 Mbps\/3 Mbps). Internet service at various speeds  allows for a variety of online activities, such as those shown in figure 1. In  addition to fixed providers, satellite providers have begun meeting this  benchmark, and FCC has recognized them as a viable source of  advanced telecommunications capability. FCC has not set a similar  benchmark for mobile services.\n\n\tThe Federal Role in Rural Broadband Access\n\nThe federal government has emphasized the importance of ensuring  Americans have access to broadband, and a number of agencies provide  funding to subsidize broadband deployment in areas, such as rural areas,  in which the return on investment has not attracted private investment. As  we have previously reported, rural areas may have features that increase  costs of deploying and maintaining broadband networks. For instance,  low population density, low broadband adoption rates, or mountainous or  rugged terrain can make it especially costly for fixed and mobile providers  to deploy infrastructure to rural areas with an expectation of getting a  return on their 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  telecommunications and information services at rates that are  \u201creasonably comparable\u201d to rates charged for similar services in urban  areas. Consequently, federal programs exist to support investment in  broadband deployment for high-cost areas through federal grants, loans,  and other subsidies.\nThe largest share of federal support comes from FCC\u2019s Universal Service  Fund, which includes four component programs designed to ensure  access to affordable communications for schools, libraries, rural health  care providers, low-income consumers, and those in rural and high-cost  areas. The largest component of the Universal Service Fund is the high- cost program\u2014which includes the Connect America Fund and the Rural  Digital Opportunity Fund\u2014that targets financial support to rural high-cost  areas for the deployment and maintenance of voice and broadband- capable networks. Table 1 shows selected federal programs funding the  deployment of broadband infrastructure.\nFCC has other roles and responsibilities in regulating nationwide  communications activities in addition to those identified above. FCC  collects deployment data twice a year from broadband providers in order  to better identify areas where broadband service is available. FCC,  RUS, and NTIA have used and continue to use these data to inform their  broadband programs. Furthermore, FCC and NTIA jointly determine the  amount of spectrum\u2014a finite natural resource that makes a variety of  wireless communications possible\u2014allocated for federal, nonfederal, and  shared use. FCC also regulates the use of licensed and unlicensed  spectrum through its regulatory process.\n\n\t\tGAO Reports on Broadband Programs\n\nThis report\u2019s broad view of a decade of federal efforts to advance  broadband access builds on our prior work.\nFCC Universal Service Fund. In 2014, we examined FCC efforts to  increase broadband deployment in unserved areas and identified  legal, policy, and economic concerns\u2014for example, low returns on  investment\u2014in deploying broadband in unserved and underserved  areas. We also examined varying approaches for financing  broadband deployment in high-cost areas, including local funding  sources and a variety of ownership structures over the infrastructure.\nFCC deployment data. In 2014, we examined FCC\u2019s efforts to reform  its high-cost program and the extent to which FCC was collecting data  to determine the effectiveness of these reforms, among other  objectives. We identified gaps in FCC\u2019s data analysis and reporting,  including a lack of transparency and accountability of spending. We  recommended that FCC analyze how it uses its high-cost program  funding and make that analysis publicly available at least annually.  FCC has taken action to implement our recommendation to address  the lack of transparency and accountability of spending. In 2018, we  reviewed data that FCC collected from providers to describe the  locations of existing broadband infrastructure and help federal  programs identify unserved and underserved areas to target for  federal funding. We found that these data overstated broadband  access, especially in tribal lands, and recommended that FCC take  actions to improve these data. FCC concurred with the  recommendations and has begun taking action, but the agency has  not yet fully implemented any of the report\u2019s three recommendations.\nBroadband adoption. In 2015, we stated that adopting broadband at  home can provide a number of benefits, including access to  employment opportunities (searching for and applying to jobs);  education (research, web-based learning, and homework); and  services for economic and social gain (such as telemedicine and  entertainment). We reviewed federal efforts to address broadband  adoption barriers that consumers face and recommended that FCC  revise its strategic plan to more clearly state if broadband adoption is  a priority, and if so, what outcomes FCC intends to achieve, action  that the agency took the following year. We also recommended that  NTIA include performance metrics for the agency\u2019s broadband  adoption efforts in its annual performance plan. Both FCC and NTIA  implemented these recommendations.\nRUS grant and loan programs. In 2017, we assessed whether  RUS\u2019s procedures and activities related to its broadband grant and  loan programs are consistent with leading management practices. We  found that its activities and procedures were consistent with four  leading practices and partially consistent with six leading practices.  We made five recommendations to RUS to improve management  practices for specific programs, like the Community Connect  Program. In response, RUS implemented two of the  recommendations to develop and document clear goals and  performance measures for its broadband loan and grant programs  and to establish and implement procedures to conduct a risk  assessment of each program. RUS agreed with, but has not yet  implemented, the report\u2019s other three recommendations to: (1)  conduct periodic evaluations of completed grant projects to determine  the outcomes associated with these projects; (2) establish a timeline  for implementing a centralized internal data system for staff to use in  managing and monitoring loans and grant awards; and (3) develop,  update, and maintain complete written policies and procedures for  RUS\u2019s programs as a way to retain and communicate organizational  knowledge internally among agency staff.\nBroadband competition. In 2017, we found that infrastructure costs  and other factors can affect competition among broadband providers.  Such costs can limit competition in urban areas but more significantly  limit competition in non-urban and less populated areas. We made  two recommendations to FCC to solicit and report on the views of  stakeholders regarding: (1) how well FCC\u2019s programs promote  broadband competition and (2) how varying levels of broadband  deployment affect broadband prices and service quality. In  response, FCC implemented these recommendations by soliciting  public comments in July 2018 to seek feedback on the effectiveness  of its actions addressing competition among broadband providers and  on how varying levels of broadband deployment affect prices and  service quality. In December 2018, FCC reported comments that it  had received from this solicitation in the first version of a biennial  report on the broadband market. In May 2019, FCC also reported  stakeholder comments related to the agency\u2019s broadband deployment  data, including service quality data.\nTribal broadband access. In 2018, we examined challenges that  tribes face in accessing broadband services, focusing on two  particular areas: (1) tribes\u2019 ability to obtain and access spectrum for  providing broadband and (2) tribes\u2019 partnerships with private sector  companies and others, and the ability to obtain funding to deploy  broadband infrastructure on tribal lands. We found that tribes cited a  number of barriers to obtaining licenses for spectrum. We also found  that although tribes said partnerships with the private sector improved  access to broadband, there are few such partnerships, and that tribes  face regulatory barriers in applying for funding from RUS grant  programs. We made three recommendations to FCC to collect data  on tribal access to spectrum, analyze unused spectrum over tribal  areas, and make information about available spectrum more  accessible. We also made one recommendation to RUS to identify  and address any regulatory barriers that may impede efforts by tribes  to obtain RUS funding. FCC agreed with the recommendations, and  RUS neither agreed nor disagreed with its recommendation. The  agencies have not yet implemented these recommendations.\n\n\tIndustry and Federal Investments Have Reduced Broadband Deployment Gaps and Improved How Progress Is Measured, Although Some Challenges Persist\n\n\t\tIndustry Invested Billions of Dollars in Broadband\n\nAccording to the U.S. Census Bureau\u2019s Annual Capital Expenditures  Survey data, the telecommunications industry that provides various types  of broadband services\u2014fixed, mobile, or satellite (and other)\u2014spent an  estimated $795 billion (2018 dollars) in total capital expenditures from  2009 through 2017. Selected broadband providers that we contacted  stated that they used the majority of their capital expenditures to improve  the capability and reliability of their existing broadband infrastructure or  expand infrastructure into new areas. For instance, one provider said it  expanded wireless broadband service in Iowa and another provider  constructed new towers to transmit fixed-wireless broadband signals  across parts of Oklahoma. Some providers we contacted said that their  capital expenditures may include funds from federal broadband programs  or other items not related to broadband, such as the purchase of real or  personal property or the acquisition of other broadband companies.  Providers that we contacted offered few, if any, details about their  investments. Instead, they said that their detailed expenditures were  proprietary or they referred us to their annual reports, which contain  limited information on capital expenditures. Census data showed that  annual total capital expenditures increased from about $78 billion in 2009  to about $97 billion in 2017 (an increase of about 24 percent), with an  average annual growth rate of about 2.8 percent. See figure 2. Industry  capital expenditures for specific telecommunications sectors varied. For  example, estimated expenditures for fixed services consistently exceeded  estimated expenditures for mobile services, although mobile services  experienced a greater increase\u201455 percent compared to an 8 percent  increase in estimated expenditures for fixed services from 2009 through  2017.\n\n\t\tFederal Agencies Targeted Investment for Rural Deployment and Improved Their Ability to Measure Impact\n\nIn comparison to industry spending, federal investment is much smaller,  representing about 6 percent of total industry capital expenditures.  However, this investment is critical to supporting deployment of  broadband in rural areas where industry might not otherwise invest, due  to potentially higher costs and lower investment returns. According to  FCC, RUS, and NTIA data, federal program investments totaled about  $47.3 billion (2018 dollars) to target broadband infrastructure in unserved  or underserved areas from 2009 through 2017. Of these three federal  agencies, FCC provided the largest share of support through the  Universal Service Fund\u2019s high-cost program\u2014which is an ongoing  program. A second agency, RUS, offered loans and grants. And NTIA  primarily funded broadband deployment through the Recovery Act,  which provided one-time funding for projects that are largely complete  and are no longer active. To illustrate:\nFCC\u2019s high-cost program. The high-cost program disbursed about  $41.7 billion (2018 dollars) in support of both deployment and  maintenance of voice and broadband-capable networks from 2009  through 2017.\nRUS\u2019s programs. RUS provided grants or loans, or a combination of  both, through a variety of funding programs. The Broadband Initiatives  Program\u2014a Recovery Act program\u2014awarded about $2.2 billion  (2018 dollars) in grants to industry for infrastructure projects in fiscal  year 2010. RUS\u2019s Community Connect Grant Program\u2014a grant  program designed to fund broadband deployment in rural areas where  such service did not exist\u2014awarded $95 million (2018 dollars) in  grants from fiscal year 2009 through fiscal year 2017. In addition to  these grants, RUS provided infrastructure loans that recipients must  repay to the government with interest. Specifically, RUS provided  about $4.0 billion (2018 dollars) in loans to private providers through  the Broadband Initiatives Program, the Telecommunications  Infrastructure Loan Program, and the Broadband Loan Program.\nNTIA\u2019s Broadband Technology Opportunities Program,  Comprehensive Community Infrastructure projects. This  Recovery Act program awarded a one-time $3.3 billion in competitive  grants to states, municipalities, and non-profit and commercial  organizations in fiscal year 2010. Nearly all of the 116 broadband  infrastructure projects have been completed.\nAll three programs have used metrics to show progress in closing  deployment gaps. Specifically, FCC has a metric for locations served,  whereas RUS and NTIA measure miles of fiber-optic cable deployed, in  addition to having metrics that count particular types of locations served  or reported number of new subscribers.\nFCC collects data from providers about new locations to which they  deployed broadband using high-cost program support. Deployment  data submitted by providers that receive support from FCC\u2019s high-cost  program showed that they used those funds to make broadband  available to about 2.3-million new residential and small business  locations, mostly from 2015 through 2017. In commenting on a draft  of this report, FCC stated that this figure has increased to about 4.2- million new locations. This updated figure is based on data through  2019 that are not yet publicly available; they are expected to be  released later in 2020. Providers report these data to FCC, which are  subject to verification by the Universal Service Administrative  Company\u2014the not-for-profit corporation designated by the FCC as  the administrator of the Universal Service Fund, including the high- cost program. As of May 2020, FCC officials said that FCC has  authorized Connect America Fund Phase II support to deploy  broadband at 25 Mbps\/3 Mbps or higher to more than 631,000  locations by 2025 or sooner.\nIn December 2016, RUS released the final Broadband Initiatives  Program progress report, which noted that the program deployed  66,521 miles of fiber-optic cable, added 5,468 wireless access points,  and resulted in 334,830 subscribers receiving new or improved  broadband.\nIn December 2016, NTIA reported that the Broadband Technology  Opportunities Program resulted in the deployment of 117,072 miles of  new or upgraded broadband infrastructure. NTIA also reported that  awardees connected nearly 26,000 community anchor institutions\u2014  such as schools, libraries, and hospitals\u2014to broadband and provided  access to nearly 14,149 homes and businesses.\nAlthough the agencies used metrics to show progress, the metrics used  were not always the same, making it difficult to draw comparisons among  programs.\nThe impact of these federal programs goes beyond the number of miles  of fiber or the number of subscribers. Although these programs promoted  the availability and use of broadband throughout the country, our prior  work found that they also stimulated economic development and created  new jobs. For example, we reported in 2012 that NTIA\u2019s and RUS\u2019s  Recovery Act programs had created about 9,000 full-time jobs.  Recovery Act grantees we interviewed for our prior work gave examples  of the types of economic development broadband enabled, such as  tourism-oriented businesses being better able to provide web sites and  online reservation systems. They also reported that broadband  infrastructure improved broadband speed for schools, community  colleges, and health care providers.\nSeveral studies have attempted to measure the economic benefits of  broadband. A 2006 study prepared for the Department of Commerce  claimed to be the first attempt to quantify the impact of broadband on  economic growth. The study found that, between 1998 and 2002,  communities in which broadband was available experienced more rapid  growth in employment, the number of businesses, and businesses in  information technology sectors, relative to comparable communities  without broadband. Subsequently, other studies have attempted to  assess the economic impact of broadband. For example, a 2016 study  from the Hudson Institute found that rural broadband providers directly  and indirectly added $24.1 billion to the U.S. economy and the rural  broadband industry supported about 70,000 jobs in 2015, both through its  own employment and the employment that its purchases of goods and  services generated. About the same time, a 2016 broadband forum  sponsored by the National Science Foundation and NTIA concluded that  during the past decade, research has deepened the understanding of the  potential impacts of broadband on the economy and society. The study  made clear the need for more research on the impact of broadband. On  December 11, 2018, FCC opened the new Office of Economics and  Analytics, consisting of economists, attorneys, and data professionals to,  among other things, provide economic analysis, including cost-benefit  analysis, for FCC proceedings.\n\n\t\tBroadband Availability Has Increased, but Measuring Deployment Has Limitations\n\nFCC\u2019s annual Broadband Deployment Report, which reports on  broadband deployment generally and not just deployments made with  FCC funding, states that broadband availability has increased both  nationally and for specific segments of the population, as shown in figure  3.\nNational: About 94.4 percent of the U.S. population had fixed  broadband service available at customer premises, such as  residences, with minimum speed of 25 Mbps\/3 Mbps in 2018, up from  81.2 percent of the population in 2012.\nRural: About 77.7 percent of the rural population had fixed broadband  service available with minimum speed of 25 Mbps\/3 Mbps in 2018, up  from 45.7 percent of the rural population in 2012.\nTribal: About 72.3 percent of tribal lands had fixed broadband service  available at the same speeds in 2018, up from 32.2 percent of the  tribal population in 2012.\nAlthough these data show broadband availability increasing in a variety of  ways, the data also demonstrate that fixed broadband is still much more  readily available to urban consumers than it is available to consumers in  rural areas. FCC\u2019s Broadband Deployment Report shows that as of 2018,  about 22.3 percent of the rural population and 27.7 percent of tribal  population did not have fixed broadband service available with minimum  speed of 25 Mbps\/3 Mbps; whereas, only about 1.5 percent of the urban  population did not have fixed broadband service available at the same  speed. As we will discuss later in this report, limitations with how FCC  collects and uses deployment data from providers to measure broadband  access overstate the extent to which broadband is available, a weakness  we have pointed out and that FCC has taken steps to address.\nAs the availability of broadband service has increased over time, some  segments of the population continue to lag behind others in adopting  broadband, even if it is available, and therefore are unable to benefit from  it. Our prior work has shown that several factors have been, and continue  to be, barriers to broadband adoption\u2014specifically, affordability, lack of  perceived relevance, and lack of computer skills. FCC identified these  barriers in its National Broadband Plan of 2010, and our more recent work  in 2015 showed that these three barriers persist. We found that:  the cost of a subscription for internet service and the purchase of  computer equipment was the most frequently identified barrier;  the perception that broadband does not provide enough utility relative  to its cost acted as another barrier; and  the lack of exposure to or knowledge about computers, such as by  those aged 65 or older and those with low levels of income and  education, was another barrier.\nCompounding the effect of these adoption barriers is the lack of  competition. FCC has reported that competition could result in lower  prices and higher quality services from broadband providers. However,  our prior work from 2017 found that 51 percent of the U.S. population had  only one fixed broadband provider offering minimum speed of 25 Mbps\/3  Mbps. According to the FCC\u2019s 2018 Communications Marketplace  Report, that percentage has decreased to about 27 percent of the U.S.  population who had only one fixed terrestrial broadband provider offering  minimum speed of 25 Mbps\/3 Mbps. In addition, FCC\u2019s report stated  that 68 percent of the population had at least two providers and  approximately 95 percent had at least one provider. Competition in rural  areas can be particularly challenging as rural areas generally do not have  enough demand to support multiple carriers.\n\n\tFederal Agencies Have Taken Action to Help Close Broadband Gaps by Modifying Funding Programs and Reforming Deployment Data\n\n\t\tFederal Agencies Have Modified Programs to Increase Broadband Support\n\nOver time, the types of technologies that provide access to broadband  have evolved. Federal agencies have responded by making changes to  their programs that support broadband. Specifically, FCC and RUS have  expanded which types of broadband providers are eligible to receive  support from their programs, allowing increased participation by satellite  and wireless broadband providers. Satellite and mobile broadband may  be able to overcome some impediments to access faced by other  services, such as high deployment costs and geographical barriers that  pose challenges for deploying broadband over fixed networks using fiber  or cable. In turn, this expansion of eligibility corresponds with the  shrinking gap in broadband deployment discussed previously.\nIn the case of FCC, the agency has taken action since the 1990s to  address technological changes related to broadband deployment. For  example, changes in communications technology and competition in the  communications marketplace led FCC to reform the high-cost program for  purposes beyond maintaining telephone service, including supporting  broadband deployment. In 2011, FCC adopted new rules that  fundamentally changed the high-cost program and expanded the program  to support broadband capable networks. Under these rules, FCC  established new funding streams within the high-cost program, such as  the Connect America Fund, which addresses fixed broadband availability  gaps in underserved and unserved areas, and the Mobility Fund, which  supports deployment of wireless networks to provide mobile broadband.\nFCC also updated its regulatory framework to recognize changes in  existing technology and potential technologies in delivery of broadband.  For example, in 2016, FCC deemed geostationary satellites eligible to  participate in the second phase of the Connect America Fund.  Additionally, since 2017, FCC also recognized low and medium earth  orbiting satellites as broadband-capable technologies that may be eligible  to participate in programs after deployment. According to FCC officials,  prior to these changes, they did not consider satellite as broadband- capable due to its high signal latency and internet speeds that were  below the FCC benchmark speed, issues that recent technological  advances have improved. Similar to FCC, RUS funding programs used  to focus funding on telephone service but over time, RUS has reformed  them to provide funding for broadband infrastructure and deployment. For  example, according to RUS officials, since 1995 the RUS  Telecommunications program has only funded systems that were capable  of providing high-speed internet and now supports broadband services.\nIn addition to past program transformation efforts, both FCC and RUS  have proposed actions to further reform or expand their programs that  provide funding for broadband deployment. For example, in August 2019,  FCC started the rulemaking process for the new Rural Digital Opportunity  Fund. In January 2020, FCC adopted a Report and Order establishing a  framework for the fund, providing up to $20.4 billion through two funding  rounds, each providing support over overlapping 10-year periods. This  fund is the next iteration of the high-cost program, and it continues the  overarching goals of prior high-cost programs to expand service into rural  areas. The Rural Digital Opportunity Fund will focus its first round of  funding on census blocks that FCC deployment data have marked as  completely unserved, and per the FCC order will incentivize parties  participating in the program to serve tribal census blocks. Similarly, in  April 2020, FCC initiated a rulemaking to establish the 5G Fund\u2014which  would replace the Universal Service Mobility Fund Phase II\u2014and make  up to $9 billion available to carriers to aid in deployment of advanced 5G  mobile wireless services in rural America. In addition to FCC\u2019s actions,  RUS officials said they are planning for future funding rounds for the  ReConnect Program after they have awarded the initial phase of funding.  As of April 15, 2020, RUS had closed the application phase for a second  round of funding under the program.\nDespite federal efforts to address broadband gaps, there are still limits on  participation in some programs. For example, RUS\u2019s ReConnect Program  offers a mix of grants and loans to incentivize broadband infrastructure in  areas not currently served by existing service providers. However, the  ReConnect Program limits eligibility to fixed and satellite broadband  providers, with mobile wireless networks ineligible for funding. In order to  participate in FCC\u2019s high-cost program, a provider must meet FCC\u2019s  definition of an eligible telecommunication carrier (ETC). However, our  prior work and stakeholders we interviewed for this review identified  barriers to attaining ETC status. As we previously reported, tribal entities  cited the statutory requirements applicable to ETC designation as a  primary barrier to accessing federal funds. Additionally, cable providers  we spoke with for this review also said they viewed the ETC designation  as a potential barrier to entry into the high-cost program. At present, FCC  and states have complementary authority to make ETC designation  decisions. During our 2018 review of barriers that tribes face in  supporting broadband investment, FCC officials said that most of the  carriers that were eligible for ETC designation at that time were the  telephone companies that were in existence when the 1996 Act was  enacted into law. Further, FCC officials said they determined that the  statute is clear that only ETCs may receive program support, and  therefore the agency does not have the authority to allow non-ETCs to  receive high-cost support payments. More recently, greater numbers of  companies that are not traditional telephone companies have received  ETC designation, particularly in connection with the Connect America  Fund Phase II.\nIn addition to the ETC designation matter described above, industry  stakeholders highlighted several other issues that can affect access to  federal support, noting that these issues may require further action by  relevant federal agencies or possible legislative action. The issues cited  included:\nTechnology Neutral Federal Programs: Most federal broadband  programs focused on fixed technology over other technologies, but as  described above, there have been reforms to broaden eligibility to  other providers. Even with those reforms, industry stakeholders  representing satellite and mobile service providers noted that there  are program requirements that affect one technology more than  another technology. For example, satellite providers that sought  funding through FCC\u2019s Connect America Fund said that, after they  sought funding in 2018, FCC changed how it planned to measure  latency, a change affecting only satellite providers.\nSpectrum Availability: Availability of adequate spectrum was cited  by a range of stakeholder groups we spoke with as an issue that  could affect providers\u2019 ability to deploy services. Spectrum availability  affects many broadband services. For example, in addition to satellite  and mobile providers, fixed-wireless\u2014a point-to-point or point-to- multipoint broadband service delivery option\u2014is a type of fixed  broadband service often utilized in rural areas that needs spectrum to  deliver service. In its comments, FCC noted that the changes it made  to the exact testing conditions were in response to requests by satellite  providers and that the agency balanced changing expectations with the  benefits of minimizing unnecessary burdens on carriers and their  customers imposed by the testing regime.\nFederal Funding Mechanisms: Some industry stakeholders we  spoke with noted that the programs\u2019 funding requirements and the  type of federal funding mechanism utilized\u2014such as grants, loans, or  hybrids of grants and loans\u2014could affect a provider\u2019s ability to access  federal funds. For example, RUS awards its Reconnect Program  funding through grants, loans, or both. Providers we spoke with noted  that for all of the funding options, the Reconnect Program requires a  lien on the funded assets. For some providers, allowing a lien against  an asset would violate stockholder agreements or other aspects of  their business. Additionally, representatives from an association  representing state public service commissions we spoke with also  stated that the FCC high-cost fund and its various funding programs  should be reviewed periodically to ensure that both the contributions  and funding outcomes are in the best interests of consumers and  providers.\nAlthough agencies have modified their broadband funding programs to  keep up with changes in broadband services, other changes that could be  beneficial to the public would require statutory changes. The last major  overhaul to telecommunications law occurred under the 1996 Act, which  established many of the telecommunications programs that now fund  broadband deployment and established statutory constructs like ETCs,  which, as discussed above, can affect provider eligibility. Given the  significant and ongoing changes in how Americans use the internet and  the technologies that provide access to it, members of Congress have  proposed legislative actions in recent years to sustain progress in closing  the broadband deployment gap. Among the proposals were a range of  federal funding and incentives aimed at improving funding to rural areas  and addressing issues related to deployment.\n\n\t\tFCC Has Proposed Mapping Data Reforms Aimed at Improving Federal Broadband Program Administration\n\nAs we previously reported, FCC\u2019s definition of broadband availability can  lead to overstatements of fixed broadband availability. For instance, in  2013 FCC began collecting broadband availability data by census blocks.  The agency counts an entire census block as served if a provider reports  that it does offer\u2014or could offer without an extraordinary commitment of  resources\u2014service some, but not necessarily all, of the locations in the  census block. FCC has recognized that by measuring availability at the  census block level, not every person may have access to broadband in a  block that the data show as served. FCC has noted that census blocks in  rural areas tend to cover larger geographic areas than in urban areas and  providers may only deploy service to a portion of the census block.  Deployment reporting in this manner does not allow FCC to answer with  certainty questions like how many Americans have broadband available  to their homes or where it needs to target its resources. Several selected  providers and industry associations we contacted also expressed  concerns about how deployment is measured, and said the measurement  approach could make it difficult for them to make informed investment  and deployment decisions. In 2013, FCC declined to gather fixed  broadband data at a level more granular than the census block\u2014such as  address-level data\u2014because the agency concluded that the complexity  and filing burden on the industry would outweigh the benefit. In 2018,  we recommended, among other things, that FCC 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. Subsequently in 2019, FCC began to address this  recommendation by establishing the Digital Opportunity Data Collection\u2014 a more granular, nationwide data broadband deployment collection  effort.\nFCC issued a Report and Order, and Second Further Notice of Proposed  Rulemaking, on this new initiative to improve the accuracy of broadband  deployment mapping data in August 2019. This new initiative requires  fixed broadband providers to identify their service areas using free-form  geographic shapes called polygons. The polygons would identify the  presence of service with more geographic precision than the current  census-block method affords. Officials from FCC and USTelecom stated  this new mapping effort was informed in part by a 2019 USTelecom  mapping and data-collection pilot project. According to USTelecom  officials, this pilot project combined several data sources to determine  \u201cserviceable locations,\u201d which refers to specific locations or structures that  could need broadband. With these serviceable locations, USTelecom\u2019s  pilot project sought to distinguish between buildings not typically needing  broadband service\u2014such as a barn or storage shed\u2014from a primary  residence or small business. According to USTelecom representatives, a  combination of polygons and serviceable locations data would yield a  better picture of where to target new investments in deployment to  achieve the greatest increase in access to broadband. FCC officials noted  that the impact of the polygon approach may vary depending on the  service features of each census block. Figure 4 below shows an example  of how the new polygon approach may result in improved data compared  to the census block approach currently used by FCC.\nAs part of the rulemaking, FCC has requested comments on several  issues, including how providers should define their polygons, and the  procedures that fixed providers should follow if their polygons are  disputed. At the time it issued the report and order, FCC had ongoing  investigations into the coverage maps of some wireless providers, and  therefore limited the new data collection obligations to fixed broadband  providers while seeking comment on how best to incorporate mobile  wireless coverage data into the effort in the future. FCC also proposed  the use of public input to help verify the accuracy of the polygons and  sought comment on whether it should discontinue the collection of census  block data if the polygon-based deployment data prove to be gathering  better deployment data once it is established. Additionally, on March 23,  2020, the Broadband Deployment Accuracy and Technological  Availability Act was enacted. The act directs FCC to issue final rules on  data collection for both fixed and wireless deployment within 180 days.  In commenting on a draft of this report, FCC noted that it is in the process  of implementing the statute, and that the statute largely affirms rules that  FCC adopted in August 2019 but differs in some respects. FCC also noted  that, while it is working to implement the requirements of the act, it is  unable to comply with all of the requirements without a further  appropriation.\nThis change has the potential to improve how both FCC and RUS target  deployment gaps by providing more accurate and granular information  that could better identify truly unserved areas and results in better  targeting of federal funds to those areas. As we discussed above, our  prior work has found that FCC\u2019s current deployment data lack accuracy in  a manner that overstates where consumers have access to broadband,  which, in turn, limits federal agencies\u2019 efforts to effectively target their  broadband funds. Specifically, our 2018 report noted that overstating  access increases the risk that unserved areas remain unserved, since  areas that deployment data show as served are not eligible for funding.  Although that report specifically looked at this risk for tribal areas, it is  potentially a concern for other unserved areas. FCC officials noted that  improved data would help inform future funding under the high-cost  program by more accurately targeting unserved areas. RUS officials told  us that they use FCC deployment data as a source for RUS mapping and  program eligibility requirements for the ReConnect Program. RUS officials  also believe that their program would benefit from more accurate  deployment data.\n\n\t\tFCC and RUS Continue to Provide Funding while Coordinating to Avoid Overlap\n\nWhile efforts are under way to improve deployment data and mapping  efforts, both FCC and RUS are continuing to move forward with their  programs for funding broadband infrastructure in underserved and  unserved areas. The lack of accurate data regarding locations that are  not served by broadband may affect the ability of these agencies\u2019  programs to target federal funds. In particular, providers and industry  associations noted there was a risk of federal programs subsidizing  deployment into areas that already have service, at the expense of an  unserved area that does not have any service. Given this risk, FCC and  RUS each have \u201celigible area\u201d validation processes that they use to  determine if areas are already being served and therefore ineligible for  federal support. Additionally, FCC and RUS have engaged in interagency  coordination efforts to keep each agency\u2019s program staff apprised of key  dates and issues in an effort to avoid overlap between the programs.\nOfficials from both FCC and RUS have stated that their programs are  complementary and noted that their eligibility validation processes  reduced the likelihood of service overlaps. The agencies use different  processes to determine which geographic areas are eligible for funding,  and they share information about the results of these processes as they  are able. According to FCC officials, the agency has used a process for  validating unserved areas in connection with its support of the Universal  Service high-cost program. This validation process primarily relies on  providers verifying the Form 477 data they self-report, and then using that  data to create and publish a list of unserved census blocks prior to  awarding funding. Results from this process have informed how FCC  establishes eligible areas, such as those eligible to receive funds in the  Connect America Fund\u2019s second phase of awards.  A similar process is  under way in connection with the Rural Digital Opportunity Fund. In an  additional step to address concerns regarding program overlap, FCC  officials noted that the Rural Digital Opportunity Fund would exclude  census blocks that have been awarded funding through the RUS  ReConnect Program.\nRUS\u2019s process to verify eligible areas includes provider participation in  the verification, as well as onsite testing and research by field staff, to  independently verify eligibility of the geographic areas in each ReConnect  grant or loan application. RUS officials said they use the publicly  available FCC data on unserved areas as a key factor in eligibility  decisions. Specifically, RUS officials said that they focus ReConnect  eligibility on areas FCC reported as unserved as of 2015 when the first  round of FCC\u2019s Connect America Fund program was started. They also  noted that throughout the application and funding process, they seek  input from providers through public notices and emails to solicit feedback  on whether areas selected for proposed funding are already served. After  receiving provider feedback on eligible areas, RUS then deploys field staff to conduct on-location tests and other reviews as necessary to determine  if the area was unserved prior to funding.\nIn addition to their eligibility validation steps, FCC and RUS officials told  us they share information about where their broadband deployment  programs are funding new deployments, as well as other relevant  information related to program activity, such as the timing of program  applications and awards. FCC and RUS officials told us that they share  program information through participation in interagency meetings and  working groups that focus on broadband deployment issues and through  posting relevant program information\u2014such as funding decisions\u2014online.  For example, the Chief of the FCC\u2019s Wireline Competition Bureau and the  RUS Administrator, along with other FCC and RUS staff, met in July  2019, January 2020, and February 2020 to discuss issues related to their  respective broadband funding programs, including the roll out of the Rural  Digital Opportunity Fund and second round of the ReConnect Program.  FCC officials told us that at these meetings agency representatives  discussed the anticipated timing of elements of their respective programs  and ways in which to maximize coordination and avoid overlap. Officials  from both agencies also noted there has been ongoing communication  between FCC and RUS at the staff level concerning program status and  developments through phone calls and meetings. In addition to this  ongoing coordination between RUS and FCC, representatives of FCC  and RUS also said they participate in relevant working groups through the  American Broadband Initiative, such as the Initiative\u2019s Federal Funding  Workstream, which meets bi-weekly to discuss broadband funding and  deployment.\nThe range of collaboration activities undertaken by RUS and FCC staff is  especially important because both agencies have similar goals but  different timelines for moving forward with their programs. For example,  as of March 2020, FCC had the eligible area validation process under  way for the Rural Digital Opportunity Fund. Although some timelines are  still to be determined, FCC plans to start bidding on the program\u2019s auction  phase in October 2020. At the same time, RUS was in the midst of  announcing approved projects for the first funding round of the  ReConnect Program, and it had applications open for the second round  with applications due by April 15, 2020. FCC officials noted that they plan  to maintain close coordination with RUS to reduce the likelihood of  overlap with any areas that may be deemed eligible to receive ReConnect  funding in the program\u2019s second round. Through prior reforms of their  respective broadband programs, FCC and RUS have taken steps to try  and effectively target federal dollars to support broadband deployment  while avoiding the potential to duplicate funding in an area. Continuing  to improve collaboration and information sharing regarding eligibility and  program timelines will be critical for both agencies to achieve greater  efficiency in their program\u2019s ability to target funds to unserved areas and  thus make progress toward closing the deployment gap.\n\n\tAgency Comments\n\nWe provided a draft of this report to the Federal Communications  Commission, the Department of Agriculture\u2019s Rural Utilities Service, and  the Department of Commerce\u2019s National Telecommunications and  Information Administration for comment. FCC and RUS provided  technical comments, which we incorporated as appropriate. NTIA had no  comments.\nWe are sending copies of this report to the appropriate congressional  committees, the Chairman of the Federal Communications Commission,  the Secretary of the Department of Agriculture, the Secretary of the  Department of Commerce, and other interested parties. In addition, the  report is available at no charge on the GAO website at  https:\/\/www.gao.gov.\nIf 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 report. GAO staff who made key contributions to this report  are listed in appendix II.\n\nAppendix I: U.S. Broadband Providers\u2019 Capital Expenditures\n\nAnother estimate of capital expenditures by USTelecom\u2014a broadband  industry association\u2014uses a different scope and methodology than the  U.S. Census Bureau\u2019s Annual Capital Expenditures Survey. The  association reports total capital expenditures for U.S. broadband  providers, as shown in table 2.\nUSTelecom\u2019s data include expenditures from fixed (wireline), mobile  (wireless), and cable companies. Its primary source of data are publicly  traded companies\u2019 financial statements filed with the Securities and  Exchange Commission. USTelecom also makes estimates for companies  that do not report financial information publicly. Its data exclude some  companies, such as satellite providers, telecommunication resellers, and  electric utilities. USTelecom publishes estimates annually for advocacy or  research purposes. Its capital expenditures data differ from the Census  Bureau\u2019s Annual Capital Expenditures Survey estimates for  telecommunications industry in scope, methodology, and timing, among  other things. For instance, the Census Bureau\u2019s survey is broader in  scope. Specifically, in addition to the types of companies USTelecom  includes in its data, the Census Bureau\u2019s survey data include satellite  providers, resellers, and other telecommunications providers.\nIn addition, the Census Bureau collects data through a survey instrument  from both publicly traded and privately held companies across the United  States. It makes statistical inferences about the capital expenditures for  the entire telecommunications industry, whereas USTelecom collects  data mainly from financial reports for a defined set of providers and  makes estimates for companies that do not report financial information  publicly. Moreover, USTelecom typically releases its capital expenditure  data within a year after companies release their financial data while  preliminary survey results from the Census Bureau are made public about  2 years after companies report and data reliability assessments occur and  the final revised results are made public about 3 years after companies  report. In addition to the USTelecom and Census Bureau estimates,  investment firms, such as Goldman Sachs and UBS, also estimate or  may report industry capital expenditures for selected publicly traded  companies providing broadband service.\n\nAppendix II: GAO Contact and Staff Acknowledgments\n\n\tGAO Contact\n\n\tStaff Acknowledgments\n\nIn addition to the contact named above, Andrew Huddleston (Assistant  Director); Steve Martinez (Analyst in Charge); Oluwaseun Ajayi; Michelle  Bacon; Carl Barden; Melissa Bodeau; Hannah Laufe; Dan Luo; Malika  Rice; Sandra Sokol; and Betsey Ward-Jenks made key contributions to  this report.","output":null}
{"id":"crs_R46132","pid":"crs_R46132_0","input":"\tIntroduction\n\nThe U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. \nAnnual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy.\n\n\tUSDA's November 2019 Farm Income Forecast\n\nIn the third of three official U.S. farm income outlook releases scheduled for 2019 (see shaded box below), ERS projects that U.S. net farm income will rise 10.2% in 2019 to $92.5 billion, up $8.5 billion from last year. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+15.0%) at $119.0 billion. The November forecast of $92.5 billion is 6.3% above the 10-year average of $87.0 billion but is well below 2013's record high of $123.7 billion. \nThe November 2019 net farm income forecast represents an increase from both USDA's preliminary March 2019 forecast of $69.4 billion, and the August 2019 forecast of $88.0 billion ( Table A-1 ). The initial March forecast did not anticipate the second round of MFP payments (valued at up to $14.5 billion). The increase in government support in 2019, projected at $22.4 billion and up 64.0% from 2018, is the principal driver behind the rise in net farm income\u00e2\u0080\u0094both year-to-year and from the previous two forecasts. Support from traditional farm programs is expected to be bolstered by large direct government payments in response to trade retaliation under the trade war with China. Direct government payments of $22.4 billion in 2019, if realized, would represent 24.2% of net farm income\u00e2\u0080\u0094the largest share since a 27.6% share in 2006.\n\n\t\tHighlights\n\nFor historical perspective, both net cash income and net farm income achieved record highs in 2013 but fell to recent lows in 2016 ( Figure 1 ) before trending higher in each of the past three years (2017, 2018, and 2019). When adjusted for inflation and represented in 2019 dollars ( Figure 2 ), the net farm income for 2019 is projected to be on par with the average of $86.8 billion for net farm income since 1940. Global demand for U.S. agricultural exports ( Figure 18 ) is projected at $134.5 billion in 2019, down from 2018 (-6.2%), due largely to a decline in sales to China. Farm asset values and debt levels are projected to reach record levels in 2019\u00e2\u0080\u0094asset values at $3.1 trillion (+2.1%) and farm debt at $415.5 billion (+3.4%)\u00e2\u0080\u0094pushing the projected debt-to-asset ratio up to 13.5%, the highest level since 2003 ( Figure 23 ). For 2019, USDA forecasts that prices for most major commodities\u00e2\u0080\u0094barley, soybeans, sorghum, oats, rice, hogs, and milk\u00e2\u0080\u0094will be up slightly from 2018, while cotton, wheat, choice steers, broilers, and eggs are expected to be lower ( Table A-4 ). However, these projections are subject to substantial uncertainty associated with international commodity markets.\n\n\t\tThree Major Factors Dominate the 2019 Farm Income Outlook\n\nAbundant domestic and international supplies of grains and oilseeds contributed to a fifth straight year of relatively weak commodity prices in 2019 ( Figure A-1 through Figure A-4 , and Table A-4 ). Furthermore, prospects for market conditions heading into 2020 remain uncertain. Three major factors have dominated U.S. agricultural markets during 2019, and have contributed to uncertainty over both supply and demand prospects, as well as market prices, heading into 2020.\nFirst, large domestic supplies of corn, soybeans, wheat, and cotton were carried over into 2019 ( Figure 3 ). Large corn and soybean stocks have kept pressure on commodity prices throughout the grain and feed complex in 2019.\nSecond, adverse weather conditions during the spring planting and fall harvesting periods have contributed to market uncertainty regarding the size of the 2019 corn and soybean crops.\nThird, the U.S.-China trade dispute has led to declines in U.S. exports to China\u00e2\u0080\u0094a major market for U.S. agricultural products\u00e2\u0080\u0094and added to market uncertainty. In particular, the United States lost its dominant role in the world's preeminent market for soybeans\u00e2\u0080\u0094China. It is unclear how soon, if at all, the United States may resolve its trade dispute with China or how international demand may evolve heading into 2020.\n\n\t\t\tLarge Corn and Soybean Stocks Continue to Dominate Commodity Markets\n\nCorn and soybeans are the two largest U.S. commercial crops in terms of both value and acreage. For the past several years, U.S. corn and soybean crops have experienced strong growth in both productivity and output, thus helping to build stockpiles at the end of the marketing year. \nIn 2018, U.S. farmers produced a record U.S. soybean harvest of 4.5 billion bushels and record ending stocks (913 million bushels or a 23.0% stocks-to-use ratio) that year ( Figure 3 ). The record soybean harvest in 2018, combined with the sudden loss of the Chinese soybean market (as discussed in the \" Agricultural Trade Outlook \" section of this report), kept downward pressure on U.S. soybean prices. A smaller crop and lower stocks are projected for 2019; however, the reduction in volume of U.S. soybean exports to China has prevented a major price recovery.\nSimilarly, several consecutive years of bumper U.S. corn crops have built domestic corn supplies. U.S. corn ending stocks in 2019 are projected to approach or surpass 2 billion bushels for the fourth consecutive year. U.S. wheat and cotton supplies are also projected to remain high relative to use, thus keeping downward pressure on farm prices.\n\n\t\t\tPoor Weather for Planting, Harvesting U.S. Corn and Soybean Crops\n\nU.S. agricultural production activity got off to a late start in 2019 due to prolonged cool, wet conditions throughout the major growing regions, particularly in states across the eastern Corn Belt and the Dakotas. This resulted in record large \"prevented plant\" acres (reported at 19.6 million acres by the Farm Service Agency) and delays in the planting of the corn and soybean crops, especially in Illinois, Michigan, Ohio, Wisconsin, and North and South Dakota. \nTraditionally, 96% of the U.S. corn crop is planted by June 2, but in 2019 67% of the crop had been planted by that date. Similarly, the U.S. soybean crop was planted with substantial delays. By June 16, 77% of the U.S. soybean crop was planted, whereas an average of 93% of the crop has been planted by that date during the past five years. These planting delays have significant implications for crop development because they push both crops' growing cycle into hotter, drier periods of the summer than usual and increase the risk of plant growth being shut off by an early freeze, thus preventing the plants from achieving their maximum yield potential.\nThen, in the fall, early bouts of cold, wet conditions delayed corn and soybean harvests in the Western Corn Belt and produced high-moisture crops, requiring costly drying prior to storage. Many farmers left crops in the field unharvested due to wet fields or the lack of access to sufficient propane to dry wet crops. As of December 2, 2019, nearly 11% of the corn crop remained unharvested.\n\n\t\t\tDiminished Trade Prospects Contribute to Market Uncertainty\n\nThe United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean products\u00e2\u0080\u0094vegetable oil and meal. During the recent five-year period from marketing year 2013\/2014 to 2017\/2018, the United States exported 49% of its soybean production and 15% of its corn crop. Thus, the export outlook for both of these crops is critical to farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. However, the tariff-related trade dispute between the United States and China (as well as several other major trading partners) has resulted in lower purchases of U.S. agricultural products by China in calendar years 2018 and 2019, and has cast uncertainty over the outlook for the U.S. agricultural sector, including the corn and soybean markets.\n\n\t\tLivestock Outlook for 2019 and 2020\n\nBecause the livestock sectors (particularly dairy and cattle, but hogs and poultry to a lesser degree) have longer biological lags and often require large capital investments up front, they are slower to adjust to changing market conditions than is the crop sector. As a result, USDA projects livestock and dairy production and prices an extra year into the future (compared with the crop sector) through 2020, and market participants consider this expanded outlook when deciding their market interactions\u00e2\u0080\u0094buy, sell, invest, etc. \n\n\t\t\tBackground on the U.S. Cattle-Beef Sector\n\nDuring the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plains\u00e2\u0080\u0094the largest U.S. cattle production region\u00e2\u0080\u0094resulted in an 8% contraction of the U.S. cattle inventory. Reduced beef supplies led to higher producer and consumer prices and record profitability among cow-calf producers in 2014. This was coupled with then-improved forage conditions, all of which helped to trigger the slow rebuilding phase in the cattle cycle that started in 2014 ( Figure 4 ). \nThe expansion continued through 2018, despite weakening profitability, primarily due to the lag in the biological response to the strong market price signals of late 2014. The cattle expansion appears to have levelled off in 2019, with the estimated cattle and calf population unchanged from a year earlier at 103 million. Another factor working against continued expansion in cattle numbers is that producers are now producing more beef with fewer cattle as a result of heavier weights for marketed cattle.\n\n\t\t\tRobust Production Growth Projected Across the Livestock Sector\n\nSimilar to the cattle sector, U.S. hog and poultry flocks have been growing in recent years and are expected to continue to expand in 2019. For 2019, USDA projects production of beef (+0.6%), pork (+5.0%), broilers (+2.7%), and eggs (+2.5%) to expand robustly heading into 2020. This growth in protein production is expected to be followed by continued positive growth rates in 2020: beef (+1.9%), pork (+3.8%), broilers (+1.8%), and eggs (+0.8%). A key uncertainty for the meat-producing sector is whether demand will expand rapidly enough to absorb the continued growth in output or whether surplus production will begin to pressure prices lower. USDA projects that combined domestic and export demand for 2019 will continue to grow for red meat (+6.2%)\u00e2\u0080\u0094driven primarily by demand for pork products\u00e2\u0080\u0094but flatten for poultry (+0.0%).\n\n\t\t\tLivestock-Price-to-Feed-Cost Ratios Signal Profitability Outlook\n\nThe changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 5 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins have all exhibited significant volatility during the 2017-2019 period. The hog, broiler, and cattle feed ratios have trended downward during 2018 and 2019, suggesting eroding profitability. The milk-to-feed price ratio has trended upward from mid-2018 into 2019. While this result varies widely across the United States, many small or marginally profitable cattle, hog, broiler, and milk producers face continued financial difficulties. \nContinued production growth of between 1% and 4% for red meat and poultry suggests that prices are vulnerable to weakness in demand. However, USDA projects that the price outlook for cattle, hogs, and poultry is expected to turn upward in 2020 ( Table A-4 ). Similarly, U.S. milk production is projected to continue growing in 2019 (+0.5%) and 2020 (+1.7%). Despite this growth, USDA projects U.S. milk prices up in both 2019 (+14.4%) and 2020 (1.3%). \n\n\t\tGross Cash Income Highlights\n\nProjected farm-sector revenue sources in 2019 include crop revenues (46% of sector revenues), livestock receipts (41%), government payments (5%), and other farm-related income (8%), including crop insurance indemnities, machine hire, and custom work. Total farm sector gross cash income for 2019 is projected to be up (+3.9%) to $431.0 billion, driven by increases in both direct government payments (+64.0%) and other farm-related income (+18.1%). Cash receipts from crop receipts (+1.0%) and livestock product (+0.1%) are up (+0.6%) in the aggregate ( Figure 6 ). \n\n\t\t\tCrop Receipts\n\nTotal crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2019, crop sales are projected at $197.4 billion, up 1.0% from 2018 ( Figure 7 ). Projections for 2019 and percentage changes from 2018 include \nFeed crops\u00e2\u0080\u0094corn, barley, oats, sorghum, and hay: $59.6 billion (+4.5%); Oil crops\u00e2\u0080\u0094soybeans, peanuts, and other oilseeds: $37.6 billion (-5.2%); Fruits and nuts: $29.4 billion (+1.3%); Vegetables and melons: $20.4 billion (+10.0%); Food grains\u00e2\u0080\u0094wheat and rice: $11.3 billion (-7.2%); Cotton: $7.4 billion (-8.5%); and Other crops including tobacco, sugar, greenhouse, and nursery: $31.3 billion (+3.4%).\n\n\t\t\tLivestock Receipts\n\nThe livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.3 billion. However, the sector turned downward in 2015 (-10.7%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 and Figure 9 ). \nIn 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $175.6 billion. In 2018, cash receipts increased slightly (+0.6%). In 2019, cash receipts are projected up slightly (+0.1%) for the sector at $176.8 billion as increased hog and dairy sales offset declines in poultry and cattle. Projections for 2019 (and percentage changes from 2018) include\nCattle and calf sales: $66.5 billion (-0.9%); Poultry and egg sales: $40.0 billion (-13.6%); Dairy sales: valued at $39.9 billion (+13.2%); Hog sales: $23.5 billion (+11.2%); and Miscellaneous livestock: valued at $7.0 billion (+2.1%).\n\n\t\t\tGovernment Payments\n\nHistorically, government payments have included \nDirect payments (decoupled payments based on historical planted acres), Price-contingent payments (program outlays linked to market conditions), Conservation payments (including the Conservation Reserve Program and other environmental-based outlays), Ad hoc and emergency disaster assistance payments (including emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices), and Other miscellaneous outlays (including market facilitation payments, cotton ginning cost-share, biomass crop assistance program, peanut quota buyout, milk income loss, tobacco transition, and other miscellaneous payments).\nProjected government payments of $22.4 billion in 2019 would be up 64.0% from 2018 and would be the largest taxpayer transfer to the agriculture sector (in absolute dollars) since 2005 ( Figure 11 and Table A-1 ). The projected surge in federal subsidies is driven by large \"trade-damage\" payments made under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments (reported to be $14.3 billion) in 2019 include outlays from the 2018 MFP program that were not received by producers until 2019, as well as expected payments under the first and second tranches of the 2019 MFP program. \nUSDA ad hoc disaster assistance is projected higher year-over-year at $1.7 billion (+90.7%). Most of the $1.7 billion comes from a new, temporary program, the Wildfire and Hurricane Indemnity Program Plus (WHIP+) enacted through the Disaster Relief Act of 2019 ( P.L. 116-20 ). Payments under the Agricultural Risk Coverage and Price Loss Coverage programs are projected lower (-19.0%) in 2019 at a combined $2.6 billion compared with an estimated $3.2 billion in 2018 (see \"Price Contingent\" in Figure 11 ). \nConservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $3.5 billion are forecast for 2019, down (-11.3%) from $4.0 billion in 2018.\nTotal government payments of $22.4 billion represents a 5% share of projected gross cash income of $425.3 billion in 2019 ( Figure 6 ). In contrast, government payments are expected to represent 24% of the projected net farm income of $92.5 billion. If realized, this would be the largest share since 2006 ( Figure 12 ). The government share of net farm income reached a peak of 65.2% in 1984 during the height of the farm crisis of the 1980s. The importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region.\n\n\t\t\tDairy Margin Coverage Program Outlook\n\nThe 2018 farm bill ( P.L. 115-334 ) made several changes to the previous Margin Protection Program (MPP), including a new name\u00e2\u0080\u0094the Dairy Margin Coverage (DMC) program\u00e2\u0080\u0094and expanded margin coverage choices from the original range of $4.00-$8.00 per hundredweight (cwt.). Under the 2018 farm bill, milk producers have the option of covering the milk-to-feed margin up to a threshold of $9.50\/cwt. on the first 5 million pounds of milk coverage. \nThe DMC margin differs from the USDA-reported milk-to-feed ratio (shown in Figure 5 ), but reflects the same market forces. As of October 2019, the formula-based milk-to-feed margin used to determine government payments had risen to $10.88\/cwt., above the newly instituted $9.50\/cwt. payment threshold ( Figure 13 ), thus decreasing the likelihood that DMC payments might be available in the second half of 2019. In total, the DMC program is expected to make $214 million in payments in 2019, down from $250 million under the previous MPP in 2018.\n\n\t\tProduction Expenses\n\nTotal production expenses for 2019 for the U.S. agricultural sector are projected to be up slightly (+0.2%) from 2018 in nominal dollars at $344.6 billion ( Figure 14 ). Production expenses peaked in both nominal and inflation-adjusted dollars in 2014, then declined for five consecutive years in inflation-adjusted dollars. However, in nominal dollars production expenses are projected to turn upward in 2019. \nProduction expenses affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. Feed costs, labor expenses, and property taxes are all projected up in 2019 ( Figure 15 ). In contrast, fuel, seed, pesticides, interest, and fertilizer costs\u00e2\u0080\u0094all major crop production expenses\u00e2\u0080\u0094are projected lower. \nBut how have production expenses moved relative to revenues? A comparison of the indexes of prices paid (an indicator of expenses) versus prices received (an indicator of revenues) reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then declined again in 2019 ( Figure 16 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a smaller decline from their 2014 peak and have climbed steadily since mid-2016, suggesting that farm sector profit margins have been squeezed since 2016.\n\n\t\t\tCash Rental Rates\n\nRenting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 39% of agricultural land used in U.S. farming operations has been rented. \nThe majority of rented land in farms is rented from nonoperating landlords. Nationally in 2017, 29% of all land in farms was rented from someone other than a farm operator. Some farmland is rented from other farm operations\u00e2\u0080\u0094nationally about 8% of all land in farms in 2017 (the most recent year for which data are available)\u00e2\u0080\u0094and thus constitutes a source of income for some operator landlords. Total net rent to nonoperator landlords is projected to be down (-1.2%) to $12.7 billion in 2019.\nAverage cash rental rates for 2019 were up (+1.4%) year-over-year ($140 per acre versus $138 in 2018). Farm rental rates are generally set during the preceding fall or in early spring prior to field work. National average rental rates dipped in 2016, but continue to reflect the high crop prices and large net returns of the preceding several years, especially the 2011-2014 period ( Figure 17 ). The national rental rate for cropland peaked at $144 per acre in 2015. \n\n\tAgricultural Trade Outlook\n\nU.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the financial success of the U.S. agricultural sector is strongly linked to international demand for U.S. products. Because of this strong linkage, the downturn in U.S. agricultural exports that started in 2015 ( Figure 18 ) deepened the downturn in farm income that ran from 2013 through 2016 ( Figure 1 ). Since 2018, the U.S. agricultural sector's trade outlook has been vulnerable to several international trade disputes, particularly the ongoing dispute between the United States and China. A return to market-based farm income growth for the U.S. agricultural sector would likely need improved international trade prospects.\n\n\t\tKey U.S. Agricultural Trade Highlights\n\nUSDA projects U.S. agricultural exports at $135.5 billion in FY2019, down (-5.5%) from $143.4 billion in FY2018. Export data include processed and unprocessed agricultural products. This aggregate downturn masks larger country-level changes that have occurred as a result of ongoing trade disputes (discussed below). In FY2019, U.S. agricultural imports are projected up at $113.0 billion (+2.7%), and the resultant agricultural trade surplus of $7.0 billion would be the lowest since 2006.\nA substantial portion of the surge in U.S. agricultural exports that occurred between 2010 and 2014 was due to higher-priced grain and feed shipments, including record oilseed exports to China and growing animal product exports to East Asia. As commodity prices have leveled off, so too have export values (see the commodity price indexes in Figure A-1 and Figure A-2 ). In FY2017, the top three markets for U.S. agricultural exports were China, Canada, and Mexico, in that order. Together, these three countries accounted for 47% of total U.S. agricultural exports during the five-year period FY2013-FY2017 ( Figure 19 ). However, in FY2019 the combined share of U.S. exports taken by China, Canada, and Mexico is projected down to 40% largely due to lower exports to China. The ordering of the top markets in 2019 is projected to be Canada, Mexico, the European Union (EU), Japan, and China, as China is projected to decline as a destination for U.S. agricultural exports. From FY2013 through FY2017, China imported an average of $26.4 billion of U.S. agricultural products. However, USDA reported that China's imports of U.S. agricultural products declined to $20.5 billion in FY2018, and are projected to decline further to $13.6 billion in FY2019 as a result of the U.S.-China trade dispute. The fourth- and fifth-largest U.S. export markets have traditionally been the EU and Japan, which accounted for a combined 17% of U.S. agricultural exports during the FY2014 to FY2018 period. These two markets have shown limited growth in recent years when compared with the rest of the world. However, their combined share is projected to grow slightly to 18% in FY2019 ( Figure 19 ). The \"Rest of World\" (ROW) component of U.S. agricultural trade\u00e2\u0080\u0094South and Central America, the Middle East, Africa, and Southeast Asia\u00e2\u0080\u0094has shown strong import growth in recent years. ROW is expected to account for 42% of U.S. agricultural exports in FY2019. ROW import growth is being driven in part by both population and GDP growth but also from shifting trade patterns as some U.S. products previously targeting China have been diverted to new ROW markets. Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value products\u00e2\u0080\u0094including horticultural products, livestock, poultry, and dairy. High-valued exports are forecast at $100.1 billion for a 73.8% share of U.S. agricultural exports in FY2019 ( Figure 20 ). In contrast, bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a record low 26.2% share of total U.S. agricultural exports in FY2019 at $35.5 billion. This compares with an average share of over 60% during the 1970s and into the 1980s. As grain and oilseed prices decline, so will the bulk value share of U.S. exports.\n\n\tFarm Asset Values and Debt\n\nThe U.S. farm income and asset-value situation and outlook suggest a slowly eroding financial situation heading into 2019 for the agriculture sector as a whole. Considerable uncertainty clouds the economic outlook for the sector, reflecting the downward outlook for prices and market conditions, an increasing dependency on international markets to absorb domestic surpluses, and an increasing dependency on federal support to offset lost trade opportunities due to ongoing trade disputes.\nFarm asset values\u00e2\u0080\u0094which reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments\u00e2\u0080\u0094are projected to be up 2.3% in 2019 to a nominal $3.1 trillion ( Table A-3 ). In inflation-adjusted terms (using 2018 dollars), farm asset values peaked in 2014 ( Figure 21 ). Nominally higher farm asset values are expected in 2019 due to increases in both real estate values (+2.1%) and nonreal-estate values (+3.4%). Real estate is projected to account for 83% of total farm sector asset value. Crop land values are closely linked to commodity prices. The leveling off of crop land values since 2015 reflects stagnant commodity prices ( Figure 22 ).\n Total farm debt is forecast to rise to a record $415.5 billion in 2019 (+3.4%) ( Table A-3 ). Farm equity\u00e2\u0080\u0094or net worth, defined as asset value minus debt\u00e2\u0080\u0094is projected to be up slightly (+2.2%) at $2.7 trillion in 2019 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2019 at 13.4%, the highest level since 2003 but still relatively low by historical standards ( Figure 23 ). If realized, this would be the seventh consecutive year of increase in the debt-to-asset ratio.\n\n\tAverage Farm Household Income\n\nA farm can have both an on-farm and an off-farm component to its income statement and balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of nonfarm investments, jobs, and other links to the nonfarm economy. \nAverage farm household income (sum of on- and off-farm income) is projected at $120,082 in 2019 ( Table A-2 ), up 7.0% from 2018 but 10.5% below the record of $134,165 in 2014. About 20% ($24,106) of total farm household income in 2019 is projected to be from farm production activities, and the remaining 80% ($95,976) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 24 ). Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. \n\n\t\tTotal vs. Farm Household Average Income\n\nSince the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 25 ). In 2018 (the last year for which comparable data were available), the average farm household income of $112,211 was about 25% higher than the average U.S. household income of $90,021 ( Table A-2 ).\n\n\t\t\tAppendix. Supporting Charts and Tables\n\n Figure A-1 to Figure A-4 present USDA data on monthly farm prices received for several major farm commodities\u00e2\u0080\u0094corn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons.\nUSDA Farm Income Data Tables\n Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2019-2020 marketing year.","output":null}
{"id":"crs_R45743","pid":"crs_R45743_0","input":"T he Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) was enacted on February 15, 2019.This omnibus bill included appropriations for the U.S. Department of Agriculture (USDA), of which USDA's domestic food assistance is a part. Prior to its enactment, the government had continued to operate for the first six months of the fiscal year under continuing resolutions (CRs). USDA experienced a 35-day lapse in FY2019 funding and partial government shutdown prior to the enactment of the Further Additional Continuing Appropriations Act, 2019 ( P.L. 116-5 ), a continuing resolution enacted prior to the Omnibus bill. (See the Appendix .)\nThis report focuses on USDA's domestic food assistance programs; their funding; and, in some instances, policy changes provided by the enacted FY2018 appropriations law. USDA's domestic food assistance programs include the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and the child nutrition programs (such as the National School Lunch Program). The domestic food assistance funding is, for the most part, administered by USDA's Food and Nutrition Service (FNS). CRS Report R45230, Agriculture and Related Agencies: FY2019 Appropriations provides an overview of the entire FY2019 Agriculture and Related Agencies appropriations law as well as a review of the reported bills and CRs preceding its enactment.\nWith its focus on appropriations, this report discusses programs' eligibility requirements and operations minimally. See CRS Report R42353, Domestic Food Assistance: Summary of Programs for more background.\n\n\tOverview of FY2019 USDA-FNS Funding\n\nDomestic food assistance\u2014SNAP and child nutrition programs in the mandatory spending accounts, and WIC and other programs in the discretionary spending accounts\u2014represents over two-thirds of the FY2018 Agriculture appropriations act ( Figure 1 ). \nThe federal budget process treats discretionary and mandatory spending differently. \nDiscretionary spending is controlled by annual appropriations acts and receives most of the attention during the appropriations process. The annual budget resolution process sets spending limits for discretionary appropriations. Agency operations (salaries and expenses) and many grant programs are discretionary. Mandatory spending \u2014though carried in the appropriation\u2014is controlled by budget rules during the authorization process. Appropriations acts then provide funding to match the parameters required by the mandatory programs' authorizing laws. For the domestic food assistance programs, these laws are typically reauthorized in farm bill and child nutrition reauthorizations. \nDomestic food assistance funding ( Table 1 ) largely consists of open-ended, appropriated mandatory programs\u2014that is, it varies with program participation (and in some cases inflation) under the terms of the underlying authorization law. The largest mandatory programs include SNAP and the child nutrition programs (including the National School Lunch Program and School Breakfast Program). Though their funding levels are dictated by the authorizing law, in most cases appropriations are needed to make funds available.\nThe three largest discretionary budget items are WIC, the Commodity Supplemental Food Program (CSFP), and federal nutrition program administration.\nThe enacted FY2019 appropriation would provide over $103 billion for domestic food assistance ( Table 1 ). This is a decrease of approximately $1.7 billion from FY2018. Declining participation in SNAP is responsible for most of the difference. Over 95% of the FY2019 appropriations are for mandatory spending.\n Table 1 summarizes funding for the domestic food assistance programs, comparing FY2019 levels to those of prior years. In addition to the accounts' appropriations language, the enacted appropriation's general provisions include additional funding, rescissions, and\/or policy changes. These are summarized in this report. \n\n\t\tPresident's FY2019 Budget Request\n\n Table 1 compares the enacted funding to the House- and Senate-reported bills, prior years' enacted funding, and the President's FY2019 budget request. The President's budget request includes the Administration's forecast for programs with open-ended funding such as SNAP and the child nutrition programs; this assists the appropriations committees in providing funding levels expected to meet obligations. The budget also includes the Administration's requests for discretionary programs. Additionally, it is a place for the Administration to include legislative requests. The FY2019 request did include SNAP legislative proposals.\nMost significantly for the FNS programs, the President's FY2019 budget request did the following: \nIt included 14 legislative proposals pertaining to SNAP. The majority of these would have restricted SNAP eligibility and made changes to the benefit calculation. This request also proposed to replace a portion of the SNAP benefit with a box of USDA-purchased foods and to limit federal funding for states' administrative costs, nutrition education, and performance bonuses. Together, these proposals were estimated by both the Administration and Congressional Budget Office (CBO) to reduce program spending in FY2019 and over the 10-year budget window. None of these policies were enacted as part of the FY2019 appropriation. Some of these policies were debated in the formulation of the 2018 farm bill (Agriculture Improvement Act of 2018, P.L. 115-334 ), but ultimately only the elimination of performance bonus funding was enacted in the December 2018 law. It requested no funding for a number of discretionary spending programs, including the following: school meals equipment grants, which have received discretionary funding since FY2009; the WIC Farmers' Market Nutrition Program (FMNP), which has received annual discretionary funding since 1992; and the Commodity Supplemental Food Program (CSFP), which has received annual discretionary funding since 1969.\n\n\tDomestic Food Assistance Appropriations Accounts and Related General Provisions\n\n\t\tOffice of the Under Secretary for Food, Nutrition, and Consumer Services\n\nFor the Under Secretary's office, the enacted FY2019 appropriation provides approximately $0.8 million. This office received approximately equal funding in FY2018.\nThe enacted appropriation (\u00a7734) continues to require the coordination of FNS research efforts with USDA's Research, Education and Economics mission area. This is to include a research and evaluation plan submitted to Congress.\n\n\t\tSNAP and Other Programs under the Food and Nutrition Act\n\nAppropriations under the Food and Nutrition Act (formerly the Food Stamp Act) support (1) SNAP (and related grants); (2) a nutrition assistance block grant for Puerto Rico and nutrition assistance block grants to American Samoa and the Commonwealth of the Northern Mariana Islands (all in lieu of SNAP); (3) the cost of food commodities as well as administrative and distribution expenses under the Food Distribution Program on Indian Reservations (FDPIR); (4) the cost of commodities for TEFAP, but not administrative\/distribution expenses, which are covered under the Commodity Assistance Program budget account; and (5) Community Food Projects. \nThe enacted appropriation provides approximately $73.5 billion for programs under the Food and Nutrition Act. This FY2019 level is approximately $540 million less than FY2018 appropriations. This difference is largely due to a forecasted reduction in SNAP participation. The enacted appropriation provides $3 billion for the SNAP contingency reserve fund. \nThe SNAP account also includes mandatory funding for TEFAP commodities. The enacted appropriation provides nearly $295 million, according to the terms of the Food and Nutrition Act. This is an increase ($5.0 million, 1.7%) over $289.5 million provided in FY2018. (TEFAP also receives discretionary funding for storage and distribution costs, as discussed later in \" Commodity Assistance Program .\")\n\n\t\t\tSNAP Account: Other General Provisions and Committee Report Language\n\nSNAP-Authorized Retailers. The FY2017 and FY2018 appropriations law limited USDA's implementation of December 2016 regulations regarding SNAP retailers' inventory requirements, and the enacted FY2019 appropriation (\u00a7727) continues those limits. \nOnly SNAP-authorized retailers may accept SNAP benefits. On December 15, 2016, FNS published a final rule to change retailer requirements for SNAP authorization. The final rule would have implemented the 2014 farm bill's changes to inventory requirements for SNAP-authorized retailers ( P.L. 113-79 , \u00a74002). Namely, the 2014 farm bill increased both the varieties of \"staple foods\" and the perishable items within those varieties that SNAP retailers must stock. In addition to codifying the farm bill's changes, the final rule would have changed how staple foods are defined, clarified limitations on retailers' sale of hot foods, and increased the minimum number of stocking units. \nSection 727 in the enacted appropriation continues to require that USDA amend its final rule to define \"variety\" more expansively and that USDA \"apply the requirements regarding acceptable varieties and breadth of stock\" that were in place prior to P.L. 113-79 until such regulatory amendments are made. In the meantime, USDA-FNS implemented other aspects of the 2016 final rule, such as increased stocking units. On April 5, 2019, USDA did publish a proposed rule, proposing amendments to the definition of \"variety\".\n\n\t\tChild Nutrition Programs16\n\nAppropriations under the child nutrition account fund a number of programs and activities authorized by the Richard B. Russell National School Lunch Act and the Child Nutrition Act. These include the National School Lunch Program (NSLP), School Breakfast Program (SBP), Child and Adult Care Food Program (CACFP), Summer Food Service Program (SFSP), Special Milk Program (SMP), assistance for state administrative expenses, procurement of commodities (in addition to transfers from separate budget accounts within USDA), state-federal reviews of the integrity of school meal operations (\"Administrative Reviews\"), \"Team Nutrition\" and education initiatives to improve meal quality and food safety, and support activities such as technical assistance to providers and studies\/evaluations. (Child nutrition efforts are also supported by permanent mandatory appropriations and other funding sources discussed in the section \" Other Nutrition Funding Support .\")\nThe enacted FY2019 appropriation provides approximately $23.1 billion for child nutrition programs. This is approximately $1.1 billion less (-4.6%) than the amount provided in FY2018, and reflects a transfer of more than $9.1 billion from the Section 32 account. \nThe enacted appropriation funds certain child nutrition discretionary grants. These include the following: \nSchool Meals Equipment Grants. The law provides $30 million, the same amount as FY2018. Summer EBT (Electronic Benefit Transfer) Demonstration Projects. These projects provide electronic food benefits over summer months to households with children in order to make up for school meals that children miss when school is out of session and as an alternative to Summer Food Service Program meals. The projects were originally authorized and funded in the FY2010 appropriations law ( P.L. 111-80 ). The enacted appropriation provides $28 million, the same amount as FY2018. \nThe child nutrition programs and WIC were up for reauthorization in 2016, but it was not completed. Many provisions of the operating law nominally expired at the end of FY2015, but nearly all operations continued via funding provided in appropriations laws since that time, including the enacted FY2018 appropriation. The enacted appropriation also continued to extend, through September 30, 2019, two expiring provisions: mandatory funding for an Information Clearinghouse and food safety audits. (See the Appendix for information about the child nutrition programs during the partial government shutdown.)\n\n\t\t\tChild Nutrition Programs: General Provisions\n\nOne general provision in the enacted FY2019 appropriation included additional funding for child nutrition programs: \nFarm to School Grants. Section 754 of the enacted appropriation provides $5 million for competitive grants to assist schools and nonprofit entities in establishing farm-to-school programs. The same amount was provided in FY2018. This is in addition to $5 million in permanent mandatory funding (provided annually by Section 18 of the Richard B. Russell National School Lunch Act), for a total of $10 million available in FY2019.\nFY2019 general provisions also included policy provisions : \nProcessed Poultry from China. The enacted appropriation includes a policy provision (\u00a7749) to prevent any processed poultry imported from China from being included in the National School Lunch Program, School Breakfast Program, Child and Adult Care Food Program, and Summer Food Service Program. This policy has been included in enacted appropriations laws since FY2015. Paid Lunch Pricing . For school year 2019-2020, Section 760 of the enacted appropriation changes federal policy on the pricing of paid (full-price) meals. Included in the 2010 child nutrition reauthorization, and first implemented in the 2011-2012 school year, this policy required schools annually to review their revenue from paid lunches and to determine, using a calculation specified in law and regulation, whether paid prices had to be increased. The purpose of the calculation was to ensure that federal funding intended for F\/RP meals was not instead subsidizing full-price meals. For school year 2019-2020, the enacted appropriation requires a smaller subset of schools\u2014only those with a negative balance in their nonprofit school food service account as of December 31, 2018\u2014to be subject to this calculation and potentially to be required to raise prices. The same provision was included in the FY2018 enacted appropriation for school year 2018-2019. Vegetables in School Breakfasts. Section 768 of the enacted appropriation increases the frequency with which starchy vegetables can be substituted for fruits in the School Breakfast Program. Under current regulations, schools are allowed to substitute vegetables for the required servings of fruits (at least one cup daily, and at least five cups weekly) in school breakfasts. The regulations also specify that, \"the first two cups per week of any such substitution must be from the dark green, red\/orange, beans and peas (legumes) or 'Other vegetables' subgroups.\" This excludes the starchy vegetable subgroup, which includes corn, plantains, and white potatoes. The enacted appropriation specifies that FY2019 funds cannot be used to enforce this requirement, thereby allowing schools to substitute any type of vegetables for any or all of the required daily and weekly servings of fruits. Child Nutrition Program Commodities. Section 775 of the enacted appropriation changes the calculation of commodity assistance in child nutrition programs. Under current law, commodity assistance in child nutrition programs must comprise at least 12% of total funding provided under Sections 4 and 11 (reimbursements for school lunches) and Section 6 (commodity assistance) of the Richard B. Russell National School Lunch Act. Section 775 eliminates the inclusion of bonus commodities in this calculation as of September 30, 2018, thereby ensuring that only appropriated funds inform the required level of commodity assistance. \n\n\t\tWIC Program24\n\nAlthough WIC is a discretionary funded program, since the late 1990s the practice of the appropriations committees has been to provide enough funds for WIC to serve all projected participants.\nThe enacted FY2019 appropriation provides $6.075 billion for WIC; however, the law also rescinds available carryover funds from past years. This funding level is $175 million less than the FY2018 appropriation. The enacted appropriation also includes set-asides for WIC breastfeeding peer counselors and related activities (\"not less than $60 million\") and infrastructure ($19.0 million). The peer counselor set-aside is equal to FY2018 levels. The infrastructure set-aside is an increase of $5 million from FY2018, and further sets aside $5 million for telehealth competitive grants to increase WIC access as specified in the law. \nThe enacted law (\u00a7723) rescinds $500 million in prior-year (or carryover) WIC funds. The House-reported and Senate-passed bills also would have rescinded carryover funds: H.R. 5961 (\u00a7723) would have rescinded $300 million; H.R. 6147 (\u00a7724) would have rescinded $400 million. \n\n\t\tCommodity Assistance Program\n\nThe Commodity Assistance Program budget account supports several discretionary programs and activities: (1) Commodity Supplemental Food Program (CSFP), (2) funding for TEFAP administrative and distribution costs, (3) the WIC Farmers' Market Nutrition Program (FMNP), and (4) special Pacific Island assistance for nuclear-test-affected zones in the Pacific (the Marshall Islands) and areas affected by natural disasters.\nThe enacted appropriation provides over $322 million for this account, no change from FY2018. Within the account,\nCSFP receives just below $223 million (a decrease of approximately $15 million or 6.8%); TEFAP Administrative Costs receives nearly $110 million\u2014this includes $79.6 million in FY2019 funding (+$15.2 million compared to FY2018) as well as a transfer of $30.0 million in prior-year (carryover) CSFP funds; in addition to this discretionary TEFAP funding, the law allows the conversion of up to 15% of TEFAP entitlement commodity funding (included in the SNAP account discussed above) to administrative and distribution costs; and WIC FMNP receives $18.5 million, the same level as FY2018.\n\n\t\tNutrition Programs Administration\n\nThis budget account funds federal administration of all the USDA domestic food assistance program areas noted previously; special projects for improving the integrity and quality of these programs; and the Center for Nutrition Policy and Promotion, which provides nutrition education and information to consumers (including various dietary guides). \nThe enacted appropriation provides nearly $165 million for this account, an increase of approximately $11 million from FY2018. As in FY2018 and prior years, the law sets aside $2 million for the fellowship programs administered by the Congressional Hunger Center. \n\n\tOther Nutrition Funding Support\n\nDomestic food assistance programs also receive funds from sources other than appropriations:\nIn addition to appropriated funds from the child nutrition account for commodity foods (which provides over $1.4 billion), USDA purchases commodity foods for the child nutrition programs using \"Section 32\" funds\u2014a permanent appropriation. For FY2019, the enacted appropriation specifies that up to $485 million from Section 32 is to be available for child nutrition entitlement commodities, compared to $465 million in FY2018. The Fresh Fruit and Vegetable Program (FFVP) for selected elementary schools nationwide is financed with permanent, mandatory funding from Section 32. The underlying law (Section 19 of the Richard B. Russell National School Lunch Act) provides funds at the beginning of every school year (July). For FY2019, there is $171.5 million available for FFVP, which is consistent with the FY2018 base amount adjusted for inflation. The Food Service Management Institute (technical assistance to child nutrition providers, also known as the Institute of Child Nutrition) is funded through a permanent annual appropriation of $5 million. The Senior Farmers' Market Nutrition program receives nearly $21 million of mandatory funding per year (FY2002-FY2023) outside of the regular appropriations process.\n\n\t\tAppendix. USDA-FNS Programs during the FY2019 Partial Government Shutdown\n\nUSDA was one of the departments affected by a lapse in FY2019 funding and the resulting 35-day partial government shutdown (during parts of December 2018 and January 2019). \nMost of USDA's Food and Nutrition Service (FNS) programs, whether mandatory or discretionary, rely on funding provided in appropriations acts. As a result, the lapse in FY2019 appropriations required the execution of contingency plans, including staff furloughs, and at times the operating status of programs was in flux.\nFNS program operations during a government shutdown vary based on the different programs' available resources, determined by factors such as contingency or carryover funds and terms of the expired appropriations acts as well as USDA's decisionmaking. Beginning in late December 2018, FNS released program-specific memoranda to states and program operators describing the status of different nutrition assistance programs during the funding lapse. \nIn addition to the impact on programs' funding discussed below, furloughs of FNS staff during this time period may have affected program operations (for example, the availability of technical assistance) on a case-by-case basis. \nThis appendix summarizes some of the key issues and impacts on the SNAP, Child Nutrition, and WIC programs during this partial government shutdown. Further detail can be found in the FNS documents referenced above. It is important to note that because circumstances during a lapse in appropriations and executive-branch decisionmaking can vary, operations during this partial shutdown are not necessarily how a future shutdown would proceed.\nSNAP Benefits\nStates issue SNAP benefits on a monthly basis. As in the FY2019 appropriations law, the FY2018 appropriations law ( P.L. 115-141 ) provided one year of SNAP funding as well as a contingency fund of $3 billion that can be spent in FY2018 or FY2019. The $3 billion is less than the cost of one month of SNAP benefits, so the contingency fund alone would not fund a month of SNAP benefits in the case of a lapse of funding.\nAt the start of the partial shutdown, when a continuing resolution ( P.L. 115-298 ) expired after December 21, 2018, December 2018 benefits had already been provided. In addition, during the shutdown period, a provision of the continuing resolution allowed for payments to be made 30 days after the continuing resolution's expiration; this allowed states to issue January 2019 benefits. On January 8, 2019, USDA interpreted the provision to authorize issuance of February 2019 benefits as well, so long as states conducted early issuance\u2014before January 20, 2019. \nBy the end of the partial shutdown, recipients had received their December 2018, January 2019, and February 2019 benefits. However, at the beginning of the shutdown, it was not clear that benefits would be provided for these months. USDA-FNS provided a series of memoranda to states during the shutdown that included answers to frequently asked questions.\nChild Nutrition and WIC\nUnlike SNAP, the appropriations language for the child nutrition programs (National School Lunch Program and others) and WIC accounts provides funding that can be obligated over a two-year period. WIC also has a contingency fund. In addition, the child nutrition programs may have more flexibility to continue operating during a shutdown because federal funds are generally provided retroactively (on a reimbursement basis).\nDuring the FY2019 lapse in funding, the Administration had carryover and contingency funds to maintain program operations. This includes FY2018 appropriations that are available for spending through FY2019 and contingency funds (in the case of WIC). Programs with this source of funding potentially available are those with two-year funding from the Child Nutrition Programs account and the WIC account. How long these operations could continue would depend on (1) the funding lapse's duration and (2) the amount of carryover or contingency funding available. \nUltimately, for child nutrition and WIC programs,\nUSDA continued operating the child nutrition programs \"with funding provided under the terms and conditions of the prior continuing resolution [P.L. 115-245]\"; USDA stated that the programs had enough funding to continue operating at least through March 2019 if the shutdown were to continue; and USDA continued WIC and WIC FMNP operations using funding that had already been allocated to states and, for WIC, prior-year carryover funding.","output":null}
{"id":"gao_GAO-19-583T","pid":"gao_GAO-19-583T_0","input":"\tBackground\n\nSelected agencies\u2019 funding for university STEM research. The five  federal agencies included in our preliminary analysis provide billions of  dollars annually for university research in STEM fields, with NIH providing  more than the other four agencies combined. Table 1 details the total  amount of research funding provided to universities by each agency in  fiscal year 2017.\nSexual harassment. As defined in the National Academies of Sciences,  Engineering, and Medicine (NASEM) 2018 report, sexual harassment  encompasses three types of behavior:\nSexual coercion: Favorable treatment conditioned on sexual activity.\nUnwanted sexual attention: Verbal or physical unwelcome sexual  advances, which can include assault.\nGender harassment: Sexist hostility and crude behavior.\nThe most common form of sexual harassment is gender harassment,  which generally involves hostility, exclusion, or other discrimination based  on a person\u2019s gender. The 2018 report found that sexual harassment in  academia is significantly more common among female students in  engineering and medical majors than in non-STEM fields. According to  the report, at least five factors create the conditions under which sexual  harassment is likely to occur in STEM programs and departments in  academia:\nPerceived tolerance for sexual harassment\nEnvironments where men outnumber women and leadership is male\nEnvironments in which the power structure of an organization is  hierarchical with strong dependencies on those at higher levels or in  which people are geographically isolated  Increased focus on symbolic compliance with Title IX\nUninformed leadership on campus  Title IX of the Education Amendments of 1972. Title IX of the  Education Amendments of 1972 is the primary federal law that addresses  sex discrimination in all federally funded grant programs at educational  institutions. Under Title IX, federal agencies that award grants to  educational institutions have enforcement responsibilities to ensure such  institutions do not discriminate based on sex. Enforcement  responsibilities include issuing regulations, conducting periodic  compliance reviews of funding recipients, and investigating timely written  complaints of sex discrimination against recipients. DOJ and the Department of Education have other responsibilities for administering  Title IX. DOJ is designated by Executive Order No. 12250 to coordinate  Title IX compliance across federal agencies, including information  sharing.\nFederal grant awards and grant life cycle. In general, federal agencies  administer grants through a common administrative life cycle: pre-award,  award, implementation, and closeout. During the pre-award stage, most  of the agencies we reviewed require grantees to submit an \u201cassurance of  compliance\u201d form as part of their grant application to attest compliance  with anti-discrimination laws, including Title IX. For the award stage, the  federal agency awarding the grant enters into an agreement with  grantees stipulating the terms and conditions for the use of grant funds.  During the implementation stage, among other things, the federal agency  manages and oversees the grant, including any Title IX compliance  reviews. A Title IX compliance review is an agency\u2019s assessment of  whether a grantee is complying with the law. Federal agencies may  conduct these reviews onsite at an institution (grantee) or via a desk  audit. In the closeout stage, the awarding federal agency and grantee  bring the grant to its conclusion, once all the work associated with the  grant agreement is complete, the grant end date has arrived, or both.\nAmong the federal agencies we reviewed, different offices handle various  aspects of grant compliance. Generally, each agency\u2019s civil rights or  diversity office conducts Title IX compliance reviews, develops policies  and procedures for grantees, and investigates allegations and complaints  involving university researchers supported by their agency\u2019s federal  STEM grants. The office that awards grants generally creates and  modifies grant terms and conditions.\n\n\tResources to Address Sexual Harassment Complaints Vary\n\nOur preliminary analysis indicates that the selected federal agencies\u2019 staff  and budget available to address sexual harassment complaints from  individuals at grantee universities varies according to the duties and  funding for the primary agency offices responsible for addressing the  complaints, as well as with the number of complaints received from  grantees.\nDuties and funding for offices responsible for addressing  complaints. Our preliminary analysis shows that all five agencies (DOE,  HHS, NASA, NSF, and USDA-NIFA) primarily address sexual  harassment complaints through their civil rights or diversity offices.  However, these offices are responsible for more than just addressing  complaints and preventing sexual harassment at grantee universities;  they also oversee a number of civil rights, diversity and inclusion efforts  for the entire agency. Moreover, most of these offices also address  internal employee sexual harassment complaints and other discrimination  issues. For example, HHS officials described how staff in their Office for  Civil Rights at headquarters and eight regional offices conduct  compliance reviews and investigate all complaints alleging sexual  harassment and other forms of discrimination against recipients of HHS  federal financial assistance, including recipients of NIH grants. USDA- NIFA said their civil rights and diversity office staff are not always  available when sexual harassment issues arise because they have other  duties and also cover other discrimination issues. In addition, some  agencies noted challenges in ensuring adequate staffing levels. For  example, USDA-NIFA officials cited the need to fill vacant positions in  their civil rights office, and NSF officials described a need to find staff with  expertise in this complicated, specialized area.\nAll five agencies fund their civil rights and diversity offices separately from  their STEM research funding, and there is little relationship between the  two budgets. For more information on selected agencies\u2019 civil rights and diversity office staffing and budgets planned for fiscal year 2019, see  table 2.\nNumber of complaints received. Our preliminary analysis of sexual  harassment complaint information indicates that four of the five selected  agencies received three or fewer complaints from individuals at grantee  universities from fiscal year 2015 through 2019. See table 3.\nOfficials from DOE told us that because they receive so few sexual  harassment complaints from individuals at grantee universities, they have  enough resources to address those that are reported to their civil rights or  diversity offices. In addition, officials from HHS told us that because they  receive so few complaints, their civil rights office has used other oversight  mechanisms, like Title IX compliance reviews, to examine whether sexual  harassment is occurring at universities receiving HHS funds, including  funds from NIH. However, as agencies continue to strengthen grantee  policies or requirements, it may affect the number of complaints an  agency receives from individuals at grantee universities, as well as the  amount of resources an agency needs to address them. For example,  NSF officials described how the number of sexual harassment complaints  they receive has increased since the agency implemented new grant  terms and conditions that require university grantees to report any sexual  harassment findings involving a Principal Investigator or co-Principal  Investigator for NSF-funded research. NSF officials also described an  increased number of questions and calls about how to report incidents,  requests for training and presentations, and meetings with program  officers, awardee representatives and other stakeholders, among other  items.\n\n\tAgencies Have Different Sexual Harassment Prevention Policies and Mechanisms for Communicating Them to Grantees\n\nBased on our preliminary review, all five of the selected agencies have  established and communicated their own sexual harassment prevention  policies to grantees within the last 2 fiscal years, but agency  communication mechanisms and the content of these grantee policies  vary.\nSpecifically, our preliminary analysis shows that NASA, NIH, and NSF  communicate their policies on sexual harassment in multiple forms, such  as grantee policy manuals, best practices documents, and online FAQs.  The result is that grantees receive a relatively high level of detail about  preventing sexual harassment and mechanisms for reporting complaints.  In contrast, Cabinet agencies DOE and USDA-NIFA provide fewer forms  of guidance, either through their website or agency director and  Secretary-level policy statements and documents, which focus more  generally on the broader category of sex discrimination or provide  different levels of information on sexual harassment prevention policies  for grantees. See table 4 for more information.\nRegarding the content of the policies, our preliminary analysis shows that  DOE, NIH, NSF, and USDA-NIFA updated their definitions of behaviors or  actions that qualify as sexual harassment in their grantee policies and  procedures, and NASA is in the process of doing so. The definitions are  more specific than previous definitions; for example, they include  descriptions of gender harassment, the most common form of sexual  harassment. The increased specificity may make clear the behaviors or  actions grantees are expected to address in their efforts to prevent sexual  harassment. The agencies continue to develop and revise policies and  communication mechanisms for grantees.\nAlso, NSF and NASA have modified, or are taking steps to modify their  grant terms and conditions to strengthen requirements for university  grantees to report on findings of sexual harassment to the funding  agency. Officials from both agencies told us these modifications will  help hold grantees accountable for reporting sexual harassment; the NSF  Director states on the agency\u2019s website that these changes are \u201cintended  to provide targeted, serious consequences for harassers\u201d while also  providing \u201ctools to make harassment stop without disturbing others\u2019  careers and lives.\u201d The requirement also supports the NASEM 2018  report recommendation for institutions to be transparent about reporting  sexual harassment findings, which is intended to foster a culture and  climate that does not tolerate sexual harassment at universities.  Officials from cabinet agencies DOE, NIH (a component of HHS), and  USDA-NIFA stated they would need to go through formal rulemaking  processes to alter their grant terms and conditions in a similar manner.\nIn addition, our preliminary analysis shows that two of the five selected  agencies are taking steps to evaluate the effectiveness of their sexual  harassment prevention policies and procedures for grantees. NSF  officials told us that they are in the process of determining how best to  evaluate the effectiveness of the new sexual harassment reporting  requirements and how the requirements have affected grantees.  Similarly, DOE is in the process of comparing its policies and procedures  against other federal agencies\u2019, according to officials. To date, the other  three agencies have not yet evaluated the effectiveness of their policies,  but officials at these agencies told us that they focus on ensuring  grantees comply with Title IX regulations as a way to measure the effect  of their policies. For example, NASA established a goal to promote  compliance and encourage best practices among grantees, and the  agency measures progress towards this goal through verifying grantee  compliance with Title IX. USDA-NIFA officials are also in the process of  creating a tool to provide a comprehensive blueprint for civil rights  compliance\u2014including Title IX compliance\u2014and are planning to  implement the tool in fiscal year 2020. We will continue to examine and  assess the selected agencies\u2019 sexual harassment prevention policies for  university grantees and steps they are taking to evaluate them in our  ongoing work.\n\n\tAgencies Have Taken Some Steps to Share Information and Collaborate\n\nBased on our preliminary review, all five selected agencies have taken  some steps to promote information sharing and collaboration among  agencies on Title IX compliance reviews through DOJ\u2019s Title IX STEM  working group. According to officials, the group discusses strategies for  conducting joint Title IX compliance reviews to leverage limited agency  resources and share best practices. For example, DOE and NSF have  conducted three joint compliance reviews, and NASA and NSF told us  that they are in the process of conducting a joint review. These joint  reviews can be helpful, as the selected agencies conduct a small number  of compliance reviews (two to four) annually relative to the number of  university grantees who must comply with Title IX.\nDespite this collaboration, all five selected agencies reported challenges  in obtaining and sharing information. For example, all five selected  agencies told us they rarely discuss sexual harassment cases at DOJ\u2019s  Title IX STEM working group meetings unless they are directly related to  an ongoing or planned compliance review. In addition, DOE, NASA, NIH,  and NSF stated they rarely learn about instances of sexual harassment  from voluntary reporting from universities or other federal agencies and  instead must rely on other sources, such as news reports. This situation  may change at NSF and NASA, which have taken steps to modify their  grant terms and conditions to require reporting of sexual harassment  findings by grantees. Challenges in obtaining and sharing information on  sexual harassment cases may increase the risk of a situation known as  \u201cpass the harasser,\u201d in which a researcher with substantiated findings of  sexual harassment obtains employment at another university or grants  from another funding agency without the university or funding agency  being aware of the researcher\u2019s history.\nOfficials from all five selected agencies noted a willingness to participate  in an interagency working group to address the culture of sexual  harassment in STEM research that moves beyond conducting Title IX  compliance reviews. The White House\u2019s Office of Science and  Technology Policy (OSTP) has taken steps to establish an interagency  working group. In May 2019, OSTP established a joint committee under  the National Science and Technology Council to address challenges in  the research environment. OSTP, NIH, NSF, DOE, and the National  Institute of Standards and Technology Directors were selected as joint  committee chairs to engage with the academic and science community  for policymaking insight and to convene interagency efforts. According to  DOE officials, the committee will address several priorities, including the  development of policies and procedures across the federal government  regarding sexual harassment in the research environment. Three of the  five selected agencies (NSF, NASA, and DOE) stated OSTP would be the  appropriate entity to establish uniform sexual harassment policy  guidelines to help provide consistency across the federal government.  NSF and NASA officials suggested that DOJ or the Department of  Education would be the appropriate agencies to collaborate with OSTP  on the ongoing monitoring of sexual harassment policy guidelines.\nAll five selected agencies reported taking collaborative steps with  universities and federal agencies to address the culture and climate for women in STEM. For example, in 2019, NIH established a working group  with university experts to collaborate with other federal agencies to  assess the current state of sexual harassment allegation investigation,  reporting, remediation, and disciplinary procedures at NIH-funded  organizations and advise on oversight, accountability, and reporting  measures for grantees, among other things. In addition, all five agencies  provided examples of collaborative efforts that would help address the  culture of sexual harassment in STEM research. For example, NASA  officials told us that it would be helpful to conduct joint meetings with  other university grantees across agencies to discuss sexual harassment  in science. Lastly, efforts to improve information sharing and collaboration  across agencies beyond conducting Title IX compliance reviews are  consistent with findings in the 2018 NASEM report, which states,  \u201cadherence to legal requirements is necessary but not sufficient to drive  the change needed to address sexual harassment.\u201d We will continue to  examine and assess selected agencies\u2019 Title IX reviews and efforts to  collaborate and share information in our ongoing work.\nIn closing, I note that we are continuing our ongoing work on this topic.  Sexual harassment is not only degrading to individual researchers, it  undermines the quality and fairness of our nation\u2019s research enterprise. It  is therefore important that federal agencies ensure their grantees  effectively prevent and address sexual harassment in STEM research.  We look forward to continuing our work to determine whether additional  federal actions may be warranted to promote this objective.\nChairwoman Johnson, Ranking Member Lucas, 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.\n\n\tGAO Contact and Staff Acknowledgments\n\nIf you or your staff have any questions about this testimony, please  contact John Neumann, Managing Director, Science, Technology  Assessment, and Analytics, at (202) 512-6888 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. Key contributors  to this testimony include Rob Marek (Assistant Director), Michelle St.  Pierre (Assistant Director), Kristy Kennedy (Analyst-In-Charge), Nora  Adkins, Caitlin Cusati, Nkenge Gibson, Amanda Postiglione, Janay Sam,  and Ben Shouse.\nThis 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.","output":null}
{"id":"crs_R46308","pid":"crs_R46308_0","input":"\tIntroduction\n\nAccording to a 2019 study, 2 million Americans lack access to running water, indoor plumbing, or wastewater services. Many of the communities with inadequate water supply infrastructure are in rural areas or on tribal lands. Over time, Congress has authorized projects and programs through various federal agencies to address rural water supply needs. Since 1980, Congress has authorized the Bureau of Reclamation (Reclamation), among other federal agencies, to develop municipal and industrial (M&I) water supply projects in rural areas and on tribal lands. \nReclamation was established to implement the Reclamation Act of 1902, which authorized the construction of water works to provide water for irrigation in arid western states. Reclamation owns and manages 491 dams and 338 reservoirs, which are capable of storing a combined 140 million acre-feet of water. Reclamation has incorporated M&I water resource projects into larger projects that serve various other authorized purposes (e.g., irrigation, power). Reclamation-funded M&I water deliveries total approximately 10 trillion gallons of water per year. As part of Reclamation's M&I responsibilities, Congress has expressly authorized the agency to undertake the design and construction of rural water supply projects intended to deliver potable water supplies to defined rural communities.\nFrom 1980 through 2009, Congress authorized Reclamation to undertake the design and construction, and in some cases the operations and maintenance (O&M), of specific projects intended to deliver potable water supplies to rural communities in western Reclamation states. These projects were largely located in North Dakota, South Dakota, Montana, and New Mexico. The rural communities include tribal reservations and nontribal rural communities with nonexistent, substandard, or declining water supply or water quality. Many rural water projects are large in scope\u00e2\u0080\u0094taking water from one location and moving it long distances to tie to existing systems. M&I portions of Reclamation water supply facilities typically require 100% repayment of construction costs to the federal treasury with interest. Congress also has authorized rural water projects that receive funding from the federal government for some or all costs on a nonreimbursable basis (i.e., a de facto grant). For example, the federal government pays up to 100% of the cost of tribal rural water supply projects, including O&M. For nontribal rural water supply projects, the federal cost share for current projects ranges from 75% to 80%.\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) created the Rural Water Supply Program, a structured program for developing and recommending rural water supply projects. This program was to replace the previous process of authorizing projects individually\u00e2\u0080\u0094often without the level of analysis and review (e.g., feasibility studies) consistent with Reclamation's other projects. Under the Rural Water Supply Program, Congress authorized Reclamation to work with rural communities and tribes to identify M&I water needs and options to address such needs through appraisal investigations and feasibility studies. Congress would then consider feasibility studies recommended by the Administration before authorizing specific projects for construction in legislation. Ultimately, Congress did not authorize any projects for construction through this process, and the authority for the program expired in 2016. \nReclamation continues to construct rural water projects (and to provide O&M assistance for some tribal components) that were authorized and initiated outside of the Rural Water Supply Program. In 2012, Reclamation developed prioritization criteria for budgeting these projects: \ninclusion of tribal components amount of financial resources committed urgency and severity of need financial need and potential economic impact regional and watershed approach water, energy, and other priority objectives \nAccording to Reclamation, the criteria aim to reflect both the priorities identified in the statutes that authorized individual projects and the goals of the Rural Water Supply Act of 2006.\nFor FY2020, Congress appropriated $145.1 million for construction and O&M at seven authorized rural water projects, which was $117.4 million above the Administration's FY2020 budget request. As of early 2020, Reclamation reported that $1.2 billion was still needed to construct authorized, ongoing rural water projects. For FY2021, the Administration requested $30.3 million for Reclamation rural water activities, of which $8.1 million is for construction.\nThis report provides an overview of Reclamation rural water projects, including completed and ongoing rural projects and efforts under Reclamation's Rural Water Supply Program. The report also discusses considerations for Congress (e.g., funding prioritization, potential nexus with other federal programs) and presents recent legislation relating to authorizing additional projects and reauthorizing the Rural Water Supply Program. \n\n\tRural Water Projects\n\nCongress has funded water supply projects in rural areas for more than four decades. Reclamation first became involved in these efforts beginning with authorization of the WEB Rural Water Supply Project in 1980 ( P.L. 96-355 ). Since that time, Congress has authorized Reclamation to fund the construction of several other rural water supply projects (see Table 1 ). These projects have individual authorizations and generally aim to provide water exclusively for M&I water uses in rural areas\u00e2\u0080\u0094a departure from the historical mission of providing water for irrigation, with M&I water use as an incidental project purpose. According to a U.S. Government Accountability Office (GAO) report, Reclamation became involved in such projects because communities proposed projects directly to Congress and, in response, Congress created specific authorizations for these rural water supply projects, with Reclamation overseeing funding and construction. In addition to projects authorized only in Reclamation states, Congress specifically authorized Reclamation's involvement in the Lewis and Clark Rural Water Supply Project located in South Dakota, Iowa, and Minnesota.\nReclamation reported that, prior to authorization, some rural water projects did not go through the level of analysis and review that is consistent with Reclamation's other projects and did not meet the economic, environmental, and design standards that are required to determine the feasibility of federal water resources development projects. In these instances, following authorization, Reclamation was to complete the analysis that was necessary to execute the project while adhering to the project configuration and designs specified by the authorizing statutes and in accordance with other laws (e.g., Clean Water Act [33 U.S.C. \u00c2\u00a7\u00c2\u00a71251-1387], National Environmental Policy Act [42 U.S.C. \u00c2\u00a74321 et seq.]). Critics have sometimes expressed concerns over this approach\u00e2\u0080\u0094specifically, whether the authorized project would have emerged as the most cost-effective preferred alternative had a feasibility study been performed prior to authorization. \nEach rural water project authorization required that the cost ceilings authorized in the legislation be indexed to adjust for inflation to include the rising cost of materials and labor, which was estimated to be 4% annually. The result of these indexing requirements is that the overall cost of authorized rural water projects has risen and continues to rise due in part to actual federal appropriations for projects falling short of the optimal funding scenarios that were assumed under planning projections. As of early 2020, Reclamation reported that $1.2 billion was needed to construct authorized, ongoing rural water projects.\nFor FY2021, the Administration's budget proposal requested $30.3 million: $8.1 million for ongoing construction at four authorized rural water projects and $22.2 million for O&M of tribal systems (e.g., $14.5 million for the Mni Wiconi Project, $7.7 million for the Garrison Diversion Unit M&I, and $20,000 for the Mid-Dakota Rural Water System). The FY2021 request is $114.8 million less than FY2020 enacted funding of $145.1 million. The FY2021 request continues a trend since FY2014 in which the President's budget requested reduced funding for rural water projects from prior-year enacted levels. Reclamation also has emphasized its authority to accept nonfederal contributions in excess of cost-sharing requirements as one way to expedite projects in the absence of increased federal funding. In the FY2021 budget request, Reclamation noted that nonfederal parties have the ability to move forward with important investments in water resources infrastructure by contributing amounts in excess of minimum contributions. \n\n\t\tRural Water Projects Under Construction in FY2020\n\nIn FY2020, Reclamation funded $125.4 million in construction work at five projects ( Table 2 ). Reclamation's FY2020 budget request included $8.0 million in construction for four projects, but Congress provided $117.4 million in appropriations above the President's budget request. The Administration distributed the funds above the request among five authorized projects, as described in Reclamation's additional funding spend plan. The following briefly describes the projects under construction in FY2020 based on Reclamation budget documents.\n\n\t\t\tGarrison Diversion Unit of the Pick-Sloan Missouri Basin Program\n\nThe Garrison Diversion Unit of the Pick-Sloan Missouri-Basin Program was authorized in 1965 (P.L. 89-108) and was amended in 1986 by the Garrison Diversion Unit Reformulation Act ( P.L. 99-294 ) to include rural water services. Garrison Diversion Unit water supply facilities are associated with Garrison Dam of the Pick-Sloan Missouri Basin Program. They are located in eight counties in the central and eastern part of North Dakota and serve four tribal reservations (Spirit Lake, Fort Berthold, Turtle Mountain, and Standing Rock Indian Reservations). The multipurpose project principally provides tribal and nontribal M&I water, along with fish and wildlife, recreation, and flood control benefits. \n\n\t\t\tFort Peck Reservation\/Dry Prairie Rural Water System\n\nThe Fort Peck Reservation Rural Water System Act of 2000 ( P.L. 106-382 ), as amended, authorized rural water projects in northeastern Montana for the Fort Peck Reservation, serving the Assiniboine and Sioux Tribes, and for the Dry Prairie Rural Water Authority, serving towns outside of the reservation. The total service area population is around 25,000 people; rural water use is also available for commercial users and livestock. Currently, groundwater from shallow alluvial aquifers is the primary water source for the municipal systems, but groundwater quality is generally poor. The regional rural water project is to provide for a single water treatment plant located on the Missouri River, which is to distribute up to 13.6 million gallons of treated water per day through 3,200 miles of pipeline. \n\n\t\t\tLewis and Clark Rural Water System\n\nThe Lewis and Clark Rural Water System Act of 2000 (Division B, Title IV of P.L. 106-246 ) authorized the Lewis and Clark Rural Water System to serve over 300,000 people in southeast South Dakota, southwest Minnesota, and northwest Iowa. The project aims to address concerns regarding low water quality, contamination, and insufficient supplies of existing drinking water sources throughout the project area. The water source for the Lewis and Clark Rural Water System is the sand and gravel aquifers of the Missouri River near Vermillion, SD. The project is to collect, treat, and distribute water through a network of wells, pipelines, pump stations, and storage reservoirs to each of 15 municipalities (including the city of Sioux Falls) and five rural systems. As of February 2020, completed facilities delivered water to the first 14 of 20 members, serving more than 200,000 individuals in Iowa, Minnesota, and South Dakota.\n\n\t\t\tRocky Boy's\/North Central Montana Rural Water System\n\nThe Rocky Boy's\/North Central Montana Regional Water System Act of 2002 (Title IX of P.L. 107-331 ) authorized a rural water system to serve the Rocky Boy's Indian Reservation (Chippewa Cree Tribe) and surrounding communities in northern Montana. The system is designed to serve a total projected population of 43,000 (14,000 on reservation and 29,000 off reservation) by providing infrastructure to ensure existing water systems within the project service area comply with federal Safe Drinking Water Act (42 U.S.C. \u00c2\u00a7\u00c2\u00a7300f-300j-26) regulations. A core pipeline is to provide potable water from Tiber Reservoir to the Rocky Boy's Reservation, and non-core pipelines are to serve 21 surrounding towns and rural water districts. A $20 million trust fund established with Bureau of Indian Affairs appropriations is to fund O&M and replacement for the core and on-reservation systems initially; eventually, water users are expected to entirely fund the project. Reclamation states that the current authorization is not adequate to cover the project.\n\n\t\t\tEastern New Mexico Water Supply\n\nSection 9103 of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ) authorized the Eastern New Mexico Water Supply project to deliver water from Ute Reservoir on the Canadian River to eight member communities. The use of Ute Reservoir water aims to provide long-term water supply and reduce the eight communities' dependence on groundwater in the Ogallala Aquifer. Current funding is for planning, design, and construction of interim projects to deliver groundwater to the communities before treated surface water is delivered from the Ute Reservoir Pipeline.\n\n\tRural Water Supply Act of 2006\n\nThe Rural Water Supply Act of 2006 (Title I of P.L. 109-451 ) authorized the Rural Water Supply Program and directed the Secretary of the Interior to undertake certain activities to implement the program. Specifically, the act directed Reclamation to conduct appraisal investigations and feasibility studies (or to ensure that nonfederal entities conducted such studies) and to recommend proposed projects to Congress for construction authorization and subsequent funding.\nIn 2008, Reclamation published an interim final rule (43 C.F.R. \u00c2\u00a7404) that established operating criteria for the program and defined the criteria for the prioritization, eligibility, and evaluation of appraisal investigations and feasibility studies, in accordance with the act. To be eligible under the rule, a rural community must have a population under 50,000. The rule prioritized domestic, residential, and municipal uses and prohibited the use of water for commercial irrigation purposes. Interested entities (e.g., Reclamation states and western tribes) may request that either (1) Reclamation complete an appraisal investigation or feasibility study or (2) Reclamation provide financial assistance so the entity can conduct an appraisal investigation or feasibility study. \nReclamation began to implement the Rural Water Supply Program in FY2010 on a pilot basis, providing assistance to nonfederal entities to conduct appraisal investigations and feasibility studies. Between FY2009 and FY2012, Congress provided Reclamation a total of $7.9 million for the program. After FY2012, Reclamation no longer requested funding for the program and Congress did not appropriate funds for it. Overall, Reclamation reported using this authority to study approximately 22 projects to varying extents (see Appendix ). Twelve were located in the Reclamation's Great Plains region, five in the Upper Colorado region, four in the Lower Colorado region, and one in the Pacific Northwest region. Of these, Reclamation finalized and approved two feasibility reports: the Musselshell-Judith Rural Water System Feasibility Report (Montana) and the Payson-Cragin Reservoir Water Supply Project Feasibility Report (Arizona). Reclamation did not recommend these or any other projects for authorization, and Congress did not authorize any projects. In justifying its lack of construction recommendations, Reclamation pointed to existing rural water construction obligations, which it argued precluded recommendation of new projects with completed feasibility studies. \nThe authority for the Rural Water Supply Program expired at the end of FY2016 and has not been renewed. Members of Congress have introduced legislation in the 116 th Congress that would reauthorize both the Rural Water Supply Program and particular projects and studies previously considered through the expired program (see \" Legislation in the 116th Congress \").\n\n\tIssues for Congress\n\nCongress continues to fund construction and O&M (only required for tribal components) of authorized rural water projects; however, since the FY2016 expiration of the Rural Water Supply Program, Reclamation has for the most part ceased activities relating to new project study and authorization. Congress may consider conducting oversight or legislating changes to Reclamation's rural water activities, including those related to existing or new program and project authorizations, funding prioritization criteria, and Reclamation's role in supporting rural water projects. \n\n\t\tAddressing Ongoing Rural Water Needs\n\nThe Rural Water Supply Act of 2006 required the Secretary of the Interior to assess the demand for new rural water supply projects in Reclamation states. In FY2009, Reclamation estimated that identified needs for potable water supply systems in rural areas ranged from $5 billion to $8 billion for nontribal needs; in the same year, it estimated approximately $1.2 billion for specific tribal water supply projects. However, the Administration has not recommended, and Congress has not authorized, any new Reclamation rural water projects since 2009. Additionally, because authorization of Reclamation's Rural Water Supply Program lapsed at the end of FY2016, Reclamation lacks a structured program for developing and recommending rural water supply projects. \n\n\t\t\tLegislation in the 116th Congress\n\nIn the 116 th Congress, House and Senate companion bills H.R. 967 and S. 334 , both titled the Clean Water for Rural Communities Act, would authorize $5 million for a feasibility study for the Dry Redwater Rural Water System and $56.7 million (2014 price levels) for construction of the Musselshell-Judith Rural Water System. As noted, a feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program, but the Administration did not recommend the project to Congress for authorization. \nCongress also is considering legislation to reauthorize the Rural Water Supply Program through FY2026. In the 116 th Congress, both the Water Justice Act ( H.R. 4033 ) and the Securing Access for the Central Valley and Enhancing (SAVE) Water Resources Act ( H.R. 2473 ) would reauthorize the existing program. \nCongress may consider other legislative proposals to address the demand for rural water assistance in the West. For example, the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would require the Secretary of the Interior to establish a grant program to provide financial assistance to disadvantaged communities of less than 60,000 residents that have experienced a significant decline in quantity or quality of drinking water. The grants could fund technical assistance, initial operating and capital costs for edible facilities, and up to 25% of such facilities' O&M. Other legislative proposals would address rural water needs by amending authorities to specific water technology and programs. For example, the Western Water Security Act of 2019 ( H.R. 4891 ) would amend the Water Desalination Act of 1996, as amended ( P.L. 104-298 ; 42 U.S.C. \u00c2\u00a710301 note), to add a classification for rural desalination projects with a higher federal cost share than desalination projects serving more than 40,000 individuals.\n\n\t\tFunding of Current and Future Projects\n\nIn early 2020, Reclamation stated that $1.2 billion was needed to complete authorized rural water projects under construction by the agency. In addition, Reclamation has previously estimated nontribal rural water supply needs in excess of $5 billion, and some observers have reported that assistance for communities is needed to address these needs. Some stakeholders have requested continued and increased funding for Reclamation rural water projects. In the 115 th Congress, representatives of the National Water Resources Association and the Family Farm Alliance asked Congress to compel Reclamation and the Office of Management and Budget to implement the Rural Water Supply Program and investigate opportunities to develop loan and loan guarantee programs that can help fund new water infrastructure projects.\nOver the years, Reclamation has provided its views regarding funding for rural water projects. In general, Reclamation has testified that rural water projects must compete with a long list of other priorities, including aging infrastructure, environmental compliance and restoration actions, and dam safety. During the consideration of authorizing existing rural water projects, Reclamation stated that long-standing agency policy was that local sponsors, particularly those that are nontribal, should reimburse Reclamation for 100% of the costs incurred for rural water supply from multipurpose projects. Reclamation notes in its budget requests to Congress that constrained federal budgets do not preclude nonfederal sponsors' ability to move forward with rural water projects by funding in excess of the minimum nonfederal contributions. Reclamation has recommended that tribes, where possible, and other project beneficiaries be responsible for the O&M expenses of their rural water projects. \nCongress has appropriated funds for rural water projects on a nonreimbursable basis (i.e., as de facto grants). In some cases, local and tribal sponsors do not have funds or have not prioritized funds to increase their funding contributions. Should Congress continue to support rural water projects through Reclamation, Congress may consider various options. These might include\nContinue to provide Reclamation annual appropriations for the agency to allocate funds to individually authorized rural water projects based on established agency criteria. Establish mandatory funding for Reclamation to allocate funds to individually authorized rural water projects based on established agency criteria. For example, the Authorized Rural Water Projects Completion Act ( S. 1556 ) in the 115 th Congress would have created a Reclamation Rural Water Construction Account to receive $80 million annually that otherwise would be deposited into the Reclamation Fund. Funds in the Reclamation Rural Water Construction Account, in addition to amounts appropriated for rural water projects, would be available for the construction of authorized rural water projects. Provide grant funding through a competitive process for nonfederal sponsors to support local projects, such as the grant program the Disadvantaged Community Drinking Water Assistance Act ( H.R. 5347 ) would establish for communities with fewer than 60,000 residents. Direct appropriations to individually authorized rural water projects. \n\n\t\tOther Rural Water Options\n\nAs GAO noted in a 2007 report, numerous federal entities provide funding for water supply and wastewater projects. In addition to Reclamation (which funds only water supply projects), the U.S. Department of Agriculture (USDA), Environmental Protection Agency (EPA), Army Corps of Engineers (USACE), Department of Housing and Urban Development (HUD), and Department of Commerce (DOC) all provide funding for both water supply and wastewater projects. USDA, EPA, HUD, and DOC have formal, nationwide programs with standardized eligibility criteria and processes under which communities compete for funding. In contrast, Reclamation and USACE fund water projects in defined geographic locations under explicit congressional authorizations. According to GAO, Congress has chosen Reclamation to fill a void for projects that are larger and more complex than other rural water projects and that do not meet the criteria of other rural water programs.\nSome might argue that these projects would be better accomplished via other existing federal water quality or water supply programs. However, as GAO has observed, as designed, some of Reclamation's authorized rural water projects do not fit criteria of other agency's programs due to their cost and regional focus; thus, project proponents have looked to Reclamation for funding. For example, Reclamation may assist rural areas with populations in excess of 10,000 residents that may not be eligible for funding under other programs. Reclamation rural water projects also may serve more than one community (i.e., a regional area, as opposed to a single area).\nReclamation developed its Rural Water Supply Program with the intent to complement, rather than duplicate, the efforts of the other agencies' programs and activities. In creating the program, Reclamation signed memoranda of understanding and related documents with other agencies to coordinate efforts. Reclamation has stated that it participates in a variety of broad coordination activities among agencies related to ongoing authorized projects. With the expiration of the Rural Water Supply Program, this formal coordination between Reclamation and other agencies' programs is no longer required.\n\n\t\t\tAppendix. Rural Water Supply Program Appraisal Investigations and Feasibility Studies\n\nThe Bureau of Reclamation (Reclamation) provided the Congressional Research Service with a list of appraisal investigations and feasibility studies conducted for potential projects under the Rural Water Supply Program. Before the program authorization expired in FY2016, 22 appraisal investigations were conducted, with nine recommendations for a feasibility study. Five feasibility studies were conducted. Reclamation did not recommend any projects for construction funding, although two studies found feasible alternatives for rural water supply. Reclamation issued concluding reports for appraisal investigations and feasibility studies of projects that were not recommended for construction funding. Reclamation provided a range of reasons for issuing concluding reports: studies being incomplete, no found feasible alternatives, lack of funding, and program expiration. According to Reclamation, some concluding reports were not issued due to a lack of time or resources. In these cases, Reclamation considered the appraisal reports as concluding reports for the purposes of the Rural Water Supply Program. A feasibility report for the Musselshell-Judith Rural Water System was completed through Reclamation's Rural Water Supply Program. Legislation introduced in the 116 th congress, the Clean Water for Rural Communities Act ( H.R. 967 and S. 334 ), would authorize the Central Montana Musselshell-Judith Rural Water System.","output":null}